How to Spot a Real Estate Mentor Who's About to Sink You

Mike DeHaan: [0:01] What's going on, guys? Welcome to collecting keys. I'm your host, Mike DeHaan, here with Dylan Cook today. Dan is in Mexico, floating around in a pool, drinking margaritas, striking up conversations with strangers like he does when he's had a

Dylan Koch: [0:15] couple drinks. Sounds like a damn thing.

Mike DeHaan: [0:17] Totally, dude. He kinda has, like, that gift of gab, you know, where he just kinda... Like, he enjoys talking to, like, random people. You know? And then he's, like... Can actually, like, make friends with, like, random people. I just don't care enough. I don't know. Like, it depends on the situation entirely. But if I'm just sitting in, a hotel pool bar, I'm not gonna talk to some random person I'm gonna see again. I just don't care.

Dylan Koch: [0:41] I would need a couple of liquid encouragement. I would need a lot of

Mike DeHaan: [0:44] liquid And like, if they talk to me first, I'm happy to talk with them. I'm like never going to strike up that conversation though.

Dylan Koch: [0:50] Yeah. Last time I was on a vacation, I think I did the... Like, we were in Florida or something and I saw something at the Cincinnati Bengals hat. Like, that's how conversation started.

Mike DeHaan: [0:57] Oh, there

Dylan Koch: [0:57] you go. Yeah.

Mike DeHaan: [0:58] To be fair, so I've done that. So me and my wife and we went to South Africa in 2022. We land in Cape Town. Literally, the first person I see in the Cape Town Airport is somebody wearing a Gonzaga basketball Jersey. And I was like, that is weird. So I had to talk to them. You know? I chatted with them for a little bit. But same thing.

Dylan Koch: [1:16] You know,

Mike DeHaan: [1:16] we had small talk in the customs line at the airport. They never saw them again.

Dylan Koch: [1:19] Exactly. Yeah.

Mike DeHaan: [1:20] But sure enough, they they were from here. You know, they flew in on a different flight in a different route, and they just happened to be from the same town as me, which is pretty wild.

Dylan Koch: [1:28] Are you... I mean, this is a related topic, I guess. My wife and I haven't taken really a a vacation vacation, basically, since our our kid has been born. They're almost... And she's almost two. And then plus, like, being in the business, you're always busy, etcetera. So last... I mean, like, we have so many Amex points from the... Doing the rehabs and stuff. We booked a five night, seven... Like, seven ish day vacation on the beach somewhere. It's gonna be really nice. And it's like, now we have something to look forward to, I guess. But at the same time, like, I know when that time comes, I'm gonna be a little bit stressed out because I'm gonna be like, hey, got shit I have to do.

Mike DeHaan: [2:00] But Well, the business side's always tough. You know, depending on who you talk to, some people will say, well, that's just because you're not delegated enough. I mean, you can build a lot of systems around it. I'm personally somebody that likes to integrate work with my life, you know. So like some of my best memories honestly are while I'm traveling and like doing deals and doing business at the same time. I've told this story before, but, like, one of the cooler things that I've done was I signed with a mobile notary to sell a flip on a property while I was on a cruise in the Nile River in Egypt. Right?

Dylan Koch: [2:36] That's pretty badass.

Mike DeHaan: [2:36] So like that's pretty cool. Or like how many sales calls I've taken, like walking around streets in like random places, I always think is pretty cool. Honestly too, I will say it makes you more interesting to the prospect if you can answer. And they're like, oh, they're just kinda back. I like, oh, sorry, man. I'm in Tokyo right now. And they're like, what? You're instantly a more memorable business connection to that person.

Dylan Koch: [2:59] That's very true. I've never even thought about it that way.

Mike DeHaan: [3:01] Yeah. Do ever read that book Blue Fishing that was popular like five years ago?

Dylan Koch: [3:05] Yes, actually. I did.

Mike DeHaan: [3:06] So he has like a whole thing where he talk... A lot of that is about how you become more interesting as a person in business. And one of the things that he said he would do, which I think is actually a pretty cool idea. I'm not quite narcissistic enough to do this. But he said that if he ever stayed at like a very nice hotel, what he would do is he would take like the little paper notepads that were like in those hotels that would say like, oh, know, Marriott Paris or whatever. And then he would do follow-up letters to people where he would hand write them on those and stick them in like an envelope. So they basically got like a handwritten note that looks like it came from the Marriott in Paris. That's hilarious. And so it stands out more than just like a standard piece of paper. Those little things matter. Right? Or, like, there's this other podcaster. I can't remember his name. I guess I listened to a guy a long time ago. But what he used to do is if there were people that he regularly saw in, like, the service industry, whether it was, like, waiters or different things, he would always... In, like, addition to standard gratuity or or, like, if it was, like, a valet or whatever, century, he would give them $2 bills. Oh. Because it's weird. Yeah. Right?

Mike DeHaan: [4:09] And it kinda, like, stands out. So, like, if he had, like, a waste all the time, he would, like, give her her thing, and then you also put a $2 bill in the track. He's a $2 bill guy. And he said that actually led to like a shocking number of business connections because he would, you know, he lives in New York, so he'd hang out where like rich people hang out, you know? Yeah. And so that he like kind of got like a reputation for doing this because they would all see like the same service people.

Dylan Koch: [4:29] I'm gonna go to my bank now get $2 bills.

Mike DeHaan: [4:31] Right. Totally. But, you know, like, little stuff like that or... When it comes to travel, though, you just have to decide what your boundaries are beforehand. Yeah. And then just commit to them. Because I think where it's tough is if you don't plan for it, you don't commit to it, then you kind of... It's like a little mental load.

Dylan Koch: [4:45] Right.

Mike DeHaan: [4:46] But, also, I don't know how how, like, comfortable and first you are with traveling either.

Dylan Koch: [4:50] Well, this will be the first time, like, we're gonna travel with our daughter, and so we'll see how that goes.

Mike DeHaan: [4:54] Oh, like, period. Yeah. So

Dylan Koch: [4:56] I mean, like, anything that's longer than four hours.

Mike DeHaan: [4:59] Yeah. So She been on a plane before? No. Oh, so that'll be interesting.

Dylan Koch: [5:03] Yeah. Man, you

Mike DeHaan: [5:04] missed out on all the freebies where she gets to, like, ride in your lap. She's gonna need her own seat.

Dylan Koch: [5:08] I'm like, the airplane ticket said under two, they still can do that. So I'm like, I'm doing it. Like, we'll just trade them off between me and my wife.

Mike DeHaan: [5:14] Oh, you probably got, well, like, three months left. She's... Isn't she she September?

Dylan Koch: [5:17] Yeah.

Mike DeHaan: [5:17] Yeah. So, yeah, take advantage while you can. Just different. And then with Dan, his kids are older, so it's like a whole other thing. But, well, I have some gossip that I think

Dylan Koch: [5:26] Let's get into

Mike DeHaan: [5:27] would be good for the show. And so kinda like I was leading to the beginning of the show, we will have, you know, things that we've said. We've been doing this show now since October 2021. So as of this recording, what's that, like, four years and seven months? A long time. So it'd be like episode four ninety or whatever. I lost track. I don't know. Our producer puts some numbers on things. But, you know, there's old stuff that will come up periodically. And one of the most frequently quoted things is we did this YouTube video and this episode a while ago. I mean, it was about basically this whole thing with Pace Morby and this, like, whole interaction that I had with him on social media. And where he did this other podcast. He's like, if anybody doesn't agree with me, just go ahead and DM me on Instagram. And the story behind it was I was literally on a plane. This is his podcast. And I was like, I'm paying for Wi Fi just to DM this guy right now. And so I did that. And then I had this whole exchange where I was just questioning him about the stuff that he was promoting, and his entire response was, well, if you come to my community, I'll have a thousand people tell you about why you're incorrect. And he never took me up on it.

Mike DeHaan: [6:31] I said, absolutely. Invite me. I would love to speak to these people. Never did it. She was all talk. And so we made, like, a whole thing about this. And, you know, I basically called him a whole bunch of probably unnecessarily, maybe mean names on the on the show. Because, like... Because that's, like, our only YouTube video that's really got a lot of traction. And it comes up like shocking amount. There's that that one and then one where I talked about going to Alex Remosi's workshop the first time. Oh, yeah. Those two videos come up a ton. And so anyways, I was on my computer last night just doing some catch up work. It's like 08:15. I get this email And the... Speaking of standing out, this is a interesting way to do it. Legit email, it just says, give me a call in the subject line. And that person said, I have some information for you. You need to know. I promise I'm not a weirdo. I'd call you, but I can't find your phone number. And I was like, come on. That's kinda suspect. Like, what is this? But it got my attention. And so I clicked into it. I looked at the person. They're a broker over in Hawaii, a real estate agent. I'm not gonna say their name or anything else specific about them.

Mike DeHaan: [7:31] So I responded back, and I'm like, I'm not sure if you have the correct person or if there's some kind of, like, marketing ploy, like, your deal is. And they said, it's not a marketing ploy. I said, I saw your video on Pace Morby. I sold him a property here with one of my clients, and his student defaulted. It's going to get real with the SEC very soon.

Dylan Koch: [7:49] Wow.

Mike DeHaan: [7:50] And I replied back to him, bummer. I'm not surprised by that. I've heard quite a few stories and whispers of big lawsuit for a while. But since he's continuing on his road trip and being so audacious, I imagine the threats can't be too serious. Or maybe he's just a big enough narcissist that he doesn't care. And she said, I'm a regular broker. I repped this lead, and I met him personally. He's pretty normal, actually. And then they put this idiot in charge of the entire transaction who stole the funds, and the investors are about to get real. And so I kind of asked for more information on that. And basically, it kinda ended up going... I went back for this person for about over an hour on email. And he said that they paid themselves out, five of the top people, including PACE, immediately upon escrow. Once closed, a payment was never made. I was shocked that it turned to that quickly. We set the sellers up with a deed of lieu for closure, so they are covered. But from that, everything's kind of out of my control, and they are pursuing legal action with all this stuff. So, essentially, what happened is they did, like, the whole thing where Pace goes and advertises, hey, you know, bring me a deal. I'll get you paid out. I'm just gonna make this much on it.

Mike DeHaan: [8:58] It sounds like they did that. They made their money and bounced. And literally never went as far as like to have the first payment being made. And the person basically just like stole the house. All the higher ups made their money, and now there's, a whole thing. And this is a third party person. You know, they could have a vendetta I don't know about. But the fact that they went as far as to, like, track me down on an email that isn't, like, completely public and reach out to me to send this to me, I found very, very interesting. And I'm so riveted to just know what the ultimate fall is gonna be. Because we've been saying that something's gonna happen for a while. Yeah. With, like, that whole, like, sub two movement. Like, there's so much crooked stuff. There's been so many whispers. We've talked to so many people in the space that say they're like, no back. And he's like, oh, man. Stuff's getting, like, really bad. But then they continue to, like, double down on, like, the road trip. And now he's like, here's a disabled lady that I'm helping buy a home in San Antonio. I'm like, what the Could

Dylan Koch: [9:46] you imagine the discovery for this would be? By having to go through all of the content, all of the bullshit, that'd be a lot. It could very well turn, like, class action because they do this all over the country.

Mike DeHaan: [9:59] I know. And it's incessant. It's everywhere. Don't know what it's gonna look like and, like, how vast it can possibly go and, like, how much tie they have, like, subbed you as, like, as an organization to all of these people. Because, like, I think that if you're providing, like, education, quote, unquote, and then people are actually doing stuff, it's pretty easy to have removal from other people's actions. When you are getting paid per transaction, which is also kind of in their thing, like, all along is they have, like, their own title and escrow company that basically does everything legit. So now you're getting your fingers involved in every deal that goes through your community, quote, unquote. That's where it gets herded really, really fast because you are fully endorsing this behavior. You know? And even if it's like a small amount, even if 99% of them are good, 1% of them are issues, even like half a percent of them are issues, that's gonna be tens of millions of dollars with transactions, if not more.

Dylan Koch: [10:56] I think this was... Like, PACE was a a nature of, like, the bull market in real estate back And in that time now that the tides have turned, people are kinda getting caught with their hand in the cookie jar, and they're trying to figure out ways to save their own ass.

Mike DeHaan: [11:09] Of course.

Dylan Koch: [11:09] And like, unfortunately, this is what it comes down to.

Mike DeHaan: [11:12] We're seeing that with all the gurus. You know? It's just like, you know, we talked about Brandon last week, and he's so heavy into his education stuff right now. Primarily, because he's trying to bail himself out from all these syndications that have gone sideways.

Dylan Koch: [11:23] One thing that's what I've noticed, and this is just like me making a weird observation is like, if you just look at his content, whether that... I don't have TikTok, but like most of like Instagram, what his content used to be to what it is now, it's it's more vulgar. I think he like even said the f word in a in a thing that... That's just not...

Mike DeHaan: [11:39] Brandon did?

Dylan Koch: [11:40] Yeah. Either him or someone like in it in his thing, dude. I was like, this is not his MO. Like, at least it... Than it used to be. Right? Yeah. So you can... I don't know if he's outsourcing it or what, but it's just like, you can see the patterns changing and not for the better.

Mike DeHaan: [11:53] Yeah. That is interesting. Yeah. Mean, he... One of his little reels of the day talked about like, here's how you raise money. I'm like, oh, bro. Don't do that. Like, you can't be doing that. You know? Like, you literally just lost a bunch of people's money that you raised. To your point about the bull market, there's a lot of people that are in that camp. It feels like the, I don't know, the world's slowest implosion.

Dylan Koch: [12:14] Yeah.

Mike DeHaan: [12:14] It's kinda like... You ever seen like those slow motion videos of like the crushing machines?

Dylan Koch: [12:19] Yes. Yeah.

Mike DeHaan: [12:19] They'll put like something kinda firm underneath there and it's real slow and all of a sudden just goes and it just like Yep. Snaps down into nothing. I feel like it's exactly what it's gonna be like.

Dylan Koch: [12:28] Yeah. And then we don't even know like the downstream effects of some of that. No. And I think the overall message here is just like, you should have good enough gut instincts or if something sounds too good to be true, it probably is. And yes, know that's an old adage, but like, I would remember trying to like understand what he was doing and just like something in the back of my head was like, this this doesn't seem right.

Mike DeHaan: [12:48] Yeah. And also just like understanding, like, general morals. This has always been one of the challenges that I had when we had a wholesale business is the ethics and morals around wholesaling are very, very gray. And as we expanded more into that space with the show and we got more operators, there became two very clear sets of personalities. There are the business owners, and and this is specifically in the wholesale space, but I'm sure it exists everywhere. The business owners that their view of success is exclusively based off their top line revenue and how much money they're making. Right? Yes. Not even the profit. It's always a top line. So a lot of them don't even take home that much money, but they talk about the top line a lot. The other people will talk about the sustainability of it and the success rate of it. Right? And at that core, if you're sustainable and you're successful with it, that's not really possible if you don't leave a trail behind you that is a relatively positive impact for people. And that can be both your sellers. That can be your buyers. They're buying good deals. Right? Your sellers feel like they're in a better place and they move on. Your title companies like to work with you because you're used to work with.

Mike DeHaan: [13:54] Your lenders are happy to give you loans because you pay your debts and you don't default on stuff just because all of your cash went into marketing. Right? That is the other side is the more ethical piece is like, what is your impact in your network versus like, here's how much money I made. I don't really owe shit to anybody else.

Dylan Koch: [14:11] When I first started this business, Mike, I had a very big personal dilemma of being known as a wholesaler.

Mike DeHaan: [14:17] It's hard. It's so hard.

Dylan Koch: [14:18] And then ultimately one day, was like, hey, I can do my business the way I wanna do business. And yes, will I leave money on the table? Yeah, I will. But like, that's okay. Like, I'm making enough money.

Mike DeHaan: [14:27] Hell yeah. I mean, I remember people when I first started out, they referred to me as an equity pirate. Right? We were like stealing the equity from these people. And I kind of liked that. Dan and I actually joked about making shirts that said like equity pirate on it. Of course. But there is a valid point, but it's like, that business especially, there really is a lot of people that don't have a better option. And also too, I can't tell you how many people that we had that really were happy to work with us. They fully understood that they were giving away equity on the property, and that was the cost of doing business. But they would move out of the house with a massive thank you because they had this headache that they were embarrassed about. They didn't know how to deal with. They didn't have the capacity physically, financially, whatever it is to deal with it. And it did solve a problem.

Dylan Koch: [15:14] Yeah. Yep. And some of it is marketing, some of it is... I guess the point I'm trying to get across that a lot of I think wholesalers go over is there is a difference between having sales skills and deception.

Mike DeHaan: [15:25] For sure.

Dylan Koch: [15:25] Right? I think a lot of... In the people in the off market business will cross that line if it means that they're making 5 extra dollars from grandma.

Mike DeHaan: [15:33] Dude, tons of people will. You know? Like... And everyone... Where it really gets interesting with people is I will say 95% of... More than that. I'll say 99% of the people in the world... Not in the world. And, you know, I don't know. Just in the space. 99% of people... I think it's bad people in the world too. Well, honestly think that they have good ethics because they don't know that they don't yet because they've never been up against a wall. Right? Where you actually learn what kind of ethics you have is how you act when you are in a position where you have to do something shady in your own best interest. And if it's something that you you make the decision to only act in your own best interest, sorry. You don't have good ethics.

Dylan Koch: [16:11] And you can't tell yourself, it'll just be this one time. You can't you can't get

Mike DeHaan: [16:14] Can't down

Dylan Koch: [16:14] do it. That slippery slope.

Mike DeHaan: [16:16] You know? And Dan Dan and I have ended relationships for stuff like that because we would have these business associates that we'd get a little bit hairy, and they would always preach, you know, oh, I would do things the right way. But all of sudden, it's like, hey. You know, we gotta stick it to this old lady. And Dan and I are like, just let the $3,000 go. It doesn't matter. I was like, no. Like, I I can't lose that money. Like, I need to force her to do this. Right? Or they they lean into it too hard, and you're like, cool. You just showed your honest views on things. You know? And there's that that old Maya Angelou quote, which is of my favorites, which is when somebody shows you who they really are, don't make them show you a second time. Yeah. And when somebody does that with you in business, that is the only sign that you need to stop doing business with that person immediately.

Dylan Koch: [16:58] Here's a good example. And I, you know, I won't name drop anybody, but I know of a group that they'll get a house under contract, usually prior to seeing it, right? They'll get lock it up first. They'll do their inspection period, they're very upfront about that. But then no matter what that comes back, whether they're making 5 or 50, they'll try to price drop after the inspection, even if they already have decided they're making 50 k. And I'm like, I understand the logic, right? Like, oh, we didn't know what we were getting into when we... Before we walked in, so we have to come down 5 to 10 k. I can understand the But at the same time, if you're making 50 k and you know this person is walking away with, call it, I don't know, five to 10, do you really need to do that?

Mike DeHaan: [17:38] No. You don't. I mean, that is people go even further. We actually had one of our main title companies to work with here stop working with wholesalers because a freaking pattern they were seeing was like the wholesaler would make like 40 or $50, and the seller would have to bring money to closing.

Dylan Koch: [17:54] Yeah. That's awful.

Mike DeHaan: [17:56] You know?

Dylan Koch: [17:56] I can honestly say I've never ever had a closing like that.

Mike DeHaan: [17:59] No. God, no. Never. Yeah. I I wouldn't even consider it. We had one that was almost like that. And Dan and I, we literally did a... It was like a $16,000 price adjustment. And it's funny. Their their amount of closing was actually only like $6, but they were planning to move into this mobile home that they had bought for like $10. And they're like, oh, well, can we rent the house back while we do this? Like, we don't know where the $10,000 is gonna come from. So we just gave them that as well, so they could actually have proceeds to move on. You know? And a, it was better for us because then they actually had somewhere to go.

Dylan Koch: [18:29] Right.

Mike DeHaan: [18:29] Right? B, it allowed them to actually move on with their life instead of being in limbo again, which is the whole reason they called us in the first place because they were sort of stuck and not knowing what to do. And so to bring this back to like the Pace Morby stuff, where that real big conflict of interest lives, is you have him that is out there talking about, you know, getting people who can't afford houses and houses, you know, financial education stuff. Like, here's how you get stuff without any money. At the end of the day, the main conflict of interest is his only incentive is to get the deal done where he's gonna get paid through his title company. He's gonna get paid the wholesale fee he's gonna charge you, the... Like, or whatever other fees he charges you. Then as soon as it's done, he walks away. Now the seller, if it isn't set upright, is sitting in a situation where it could be defaulted on. Right? The buyer potentially bought a property that actually sucks, and they don't know any better because they just listened to like their guru. But he made his money, you know? He might even know about it. For him at this point, it's so systematized. He could be doing like a 100 of these a month, thousand of a month.

Mike DeHaan: [19:27] And he would just be like, Oh, cool. Money's coming in. I have no idea.

Dylan Koch: [19:30] Yeah. Yeah. Exactly. I mean, the other flip side of this is the sellers who... Yeah. I shouldn't say just sellers. Like, for example, right now we have a tenant who's older and like, I've always given them like the... Like, she's given me the sob story. And so she's got behind before, she'd catch up, etcetera. Well, now I'm owed like $4,500 and I know she's been lying to me. I'm like, okay. Now you're getting evicted and I'm gonna come after the money that you owe me. So like, there's two ends of the spectrum. Right?

Mike DeHaan: [19:59] Yeah. Totally. What it'll ultimately lead to? I don't know. And same with like people that are raising money. You know, the conflict of interest, they get their acquisition fee, their fund management fee, their sales fee, everything else. All of sudden they're collecting.

Dylan Koch: [20:13] There's a lot of fees in the syndication space.

Mike DeHaan: [20:16] There's tons.

Dylan Koch: [20:16] But you have to a point where it's like, it could tally to be 5% to 6% of the AUM.

Mike DeHaan: [20:21] Yeah.

Dylan Koch: [20:21] Like, that's a lot. That is lot of money for zero performance.

Mike DeHaan: [20:27] That's the concern, right? Is on the large syndication space, there's been a lot of pushback on those funds that were doing things on zero performance or where they would collect money over, like, the length of time of the loan for, like, management or product management or property management, whatever it is, regardless of if things actually moved forward.

Dylan Koch: [20:47] Yeah.

Mike DeHaan: [20:47] Right? And so I've seen pro formas like that where they said they'll collect x amount per month of the deal size, not even, the cash flows, but, like, the actual money that was raised for property management, like every month, it'll be a couple percent per year. I'm like, if you're doing a $10,000,000 raise, that can be 200, dollars 300,000 a year that they're collecting. Yeah. To do nothing.

Dylan Koch: [21:08] And yes, like my understanding is the fund admin fees are supposed to go to overhead, but I mean, I guess the GP could do whatever they want. Yeah. Supposed to. Right. Exactly.

Mike DeHaan: [21:17] That's my gossip. I said, I think it's it's always so interesting when stuff kinda comes back around like that, especially because like it was one of those things I kind of forgot about, you know, and then to have this person like hit me up like that. Like be so intentional about it.

Dylan Koch: [21:28] So this... You might've said it. That transaction was recent though?

Mike DeHaan: [21:31] I believe so. Yeah. Yeah. Didn't give me dates or anything, but my guess is what happened is this agent was a part of this deal. They went sideways. They went down a spiral of like looking up things about Pace, came across our video, which does show up as one of the few anti Pace Morby videos because he has such a cult following and ended up leading her to reach out.

Dylan Koch: [21:58] Okay. We'll see how that develops. Well, ongoing series on the collecting keys podcast.

Mike DeHaan: [22:03] Yeah. Who knows? Maybe we'll get hit up about this one again in two years.

Dylan Koch: [22:07] A lot of stuff feels like it's happening in just like the... Not just the economy and not just in the stock market, but just like overall, and, you know, at the war, etc, etc. With and the big part of this is like rates continue to kind of, you know, inch along, right? And all the durations to two, ten, twenty, thirty. And so I'm wondering, the thirty year just hit went above 5% for the first time since 2007. So literally twenty years since the great financial crisis.

Mike DeHaan: [22:35] Okay.

Dylan Koch: [22:36] Has that affected your guys' lending at all? Because I know it has affected, like, if you're just a conventional borrower and, like, you're gonna get your primary or a conventional loan.

Mike DeHaan: [22:45] So one of the big things that affects... We actually had a meeting with one of our DSCR investors yesterday. On the on the hard money side, it doesn't affect anything because that's purely just based

Dylan Koch: [22:54] off of the

Mike DeHaan: [22:54] short term yield.

Dylan Koch: [22:55] Yep. We had

Mike DeHaan: [22:56] a meeting with one of our DSCR investors yesterday. And what really affects the DSCR rates more so is the inflation number that came out.

Dylan Koch: [23:06] Okay. That was higher yesterday too.

Mike DeHaan: [23:08] Yeah. I know. And so that that actually crushed rates pretty bad. Typically where the ten year that... I don't know how ten year and inflation and stuff are linked. But the ten year is kind of different because ultimately what happens with DSCR loans is they are securitized and they are sold essentially as security that's like a bond. Right? But instead of being a government bond, it is a bond based off of the real estate assets that are in there. But the biggest thing that those bonds are compared to is inflation, right, in terms of figuring out the actual nominal rate of return. So when inflation goes up, typically, the DSCR rates will go up as well because because

Dylan Koch: [23:45] they wanna maintain the spread.

Mike DeHaan: [23:46] They wanna maintain the spread to be the same. Yeah.

Dylan Koch: [23:48] So even with the CPI, core inflation, PPI, some of the inflation metrics, quarterly, you guys are probably like getting adjustments on the DSCR side. Yeah. We are for sure.

Mike DeHaan: [23:59] And one of the reasons it isn't as tied to the ten year anymore is because the backing of that asset, you know, the bond versus the securitized DSCRs, is it's now like a different thing. And the trend has been towards people not believing in the US government as much because there's this huge default risk and all these other things. And... But they are still believing in, American small business owners and American real estate. And so there's a lot of appetite for DSCR. And it's really has, like, decoupled from any of the the federal bond stuff that people can buy instead.

Dylan Koch: [24:36] The catch 22 here is there is no greater trade, I think, right now. Like, at least higher confidence is there will continue to be debasement of the US dollar. And what do do when you hold US dollars is you would like to own hard assets. Real estate being one of them, high quality stocks, commodities, etcetera, infrastructure, etcetera. At the same time, the debt that's on some of that stuff, like thirty year things are are if you are the lender for thirty years would not be the great trade in that matter because you're locking in a payment for thirty years that you know ten, twenty, thirty years from now is gonna have less purchasing power then than it does today. And so I mean, that's just the advantage of real estate in general and locking in thirty year fixed debt.

Mike DeHaan: [25:19] Yeah, totally. Like the things get retraded as you go down the line. And so there's always so many different buyers. As like the pay down gets more extensive, like that becomes a lower risk thing. And so there's there's all kinds of different ways that people trade it as it goes. But... Yeah. I mean, what do you think this means from like a larger, like economic view? Because the the things are so decoupled right now is you have that stuff getting high. We have consumers trending being low.

Dylan Koch: [25:43] Well, Kevin Wash is coming in, right, Mike? And like, I think his biggest struggle is like, okay, we're having these higher inflation prints. But when inflation tends to rise, that means you would raise interest rates to kind of combat the inflation. However, the Bessent, Trump, all them want lower interest rates. So will he really remain nonpartisan for that? I don't know. So but they're in like the stagflationary environment, which kind of means like you have higher unemployment. So like the economy is getting weaker and you have inflation problems. It's like the worst of both worlds, right? So I don't really know the best path forward.

Mike DeHaan: [26:17] Yeah.

Dylan Koch: [26:17] Other than what people do is financial repression, which means that they'll probably, we talked about this last week, they'll continue to print money, they'll continue to depace the currency, which... And then you have to try to do that in a minimal way that doesn't offset inflation too much.

Mike DeHaan: [26:30] Yeah. Why do you think they want lower interest rates? Do think just for, like, votes so it's, a better headline? Do think there's actually, like, a reason behind it?

Dylan Koch: [26:38] I think they know lower interest rates will help stimulate the economy, which will then help with the reelection.

Mike DeHaan: [26:43] Will it though?

Dylan Koch: [26:44] I do think if you were to... Let's say that if you were gonna go to a lot of investors and say that you can... Who have bought in the past recently that they can get a new home. No. I shouldn't say investors. Let's say you can get, like, primary residence people down to increase the housing supply or even people who wanna refinance who don't have the two to 3% rates.

Mike DeHaan: [27:03] Well, the thing is though, just because they lower interest, doesn't mean that mortgage rates are gonna lower.

Dylan Koch: [27:07] Like, if you were to put a a graph over interest rates in like the ten year, there is a pretty tight correlation. Like, yes, it might not be a medium It

Mike DeHaan: [27:15] has been, but Fannie Freddie also stopped buying loans, what, in '24?

Dylan Koch: [27:19] Something around there.

Mike DeHaan: [27:20] So it's gonna get further and further away. And just if they they ask for the interest rates, that doesn't mean that, you know, all of a sudden they're gonna start buying mortgages again.

Dylan Koch: [27:30] Well, what else what else is good in lower interest rate environments? It's usually stocks. Right? And so like, and this is kind of like the wealth effect. Right? If people feel richer, they're more likely to spend. We're a consumption based economy. Therefore, it'd be good for GDP, which is good for headlines.

Mike DeHaan: [27:44] Yeah. I don't know. It's tough. You know, if you say it'll be good for business, different things. I just don't understand like how it would be. Because also too, if you're trying to, like, get money from investors or banks or different things, but always the stocks are just constantly on fire. Why would they go and they wouldn't invest with you at that point? I mean, we already deal with this all the time, like, with, you know, when we raise money for our stuff, it's like a fixed rate is cool. It's like, but, oh, I'm up 38 on fucking Nvidia right now.

Dylan Koch: [28:09] I mean, totally. And that's a valid thing. But, like, that just comes down to the individual person you're trying to raise money from. For Like, what's their personal life situation? And, like, okay. Can I interest you in some diversification away from a 100% of stock portfolio?

Mike DeHaan: [28:20] Yeah. Yeah. I mean, people feel like they can't lose. You know, it is hard to do that. That's why I feel like there has to be, like, a a big crash or correction coming is because we are in that phase when you look at, like, an overall investment standpoint. It feels very similar to, like, 2021, early twenty two real estate when everyone feels like they're the smartest person in the room and they can't lose in the market. And that's when stuff gets weird. Right?

Dylan Koch: [28:44] I mean, dude, the action lately... I mean, obviously, I wasn't trading anything, like, during the two thousands. But, like, some of the historical analogies I've seen just from people I follow, like, on x are kinda crazy.

Mike DeHaan: [28:55] Mhmm.

Dylan Koch: [28:55] Let's put some data around it. Like, the the Schiller PEs, the price to earnings ratio, It's like a ten year average. Right now, it's at 42. Mhmm. The highest ever was 44, and that was during the 2000.com bubble.

Mike DeHaan: [29:07] Okay. So we're basically there.

Dylan Koch: [29:09] Yeah. And then we talked about breath one time before in the show, which... So out of the S and P five hundred, it hit an all time high yesterday or two days ago, but 9% of the companies inside the S and P five hundred made new all time lows.

Mike DeHaan: [29:23] Yeah. Interesting. So there's a so there's a huge spread between the

Dylan Koch: [29:26] Huge spread and it's very, very top heavy. Yeah. Meaning that it is very concentrated in a few amount of stocks. Again, in that... Hold on. There's... I put some data behind that too. Actually, that 9% number is an all time record in the history of the stock market.

Mike DeHaan: [29:39] Yeah. But like in that... But is that a signal there just being like more money that's like circulating? Right?

Dylan Koch: [29:44] Well, that's a percentage based metric. So you wouldn't think so.

Mike DeHaan: [29:46] Yeah.

Dylan Koch: [29:47] And and then I don't know, man. And just like we talked about on the show, like, there is a huge, huge, huge discrepancy between the haves and the have nots right now. The University of Michigan survey just came out, like, with the worst sentiment of all time while the S and P 500 is hitting all time highs.

Mike DeHaan: [30:02] Yeah. I mean, it's... Do we know what percentage of, like, own most of the stocks? I'm sure that's something that we can find.

Dylan Koch: [30:10] Yeah. But I'm sure it's, like, the top 10%.

Mike DeHaan: [30:13] Yeah. Oh, and, like, the vast majority of them, it has to be. And that's different as well because I think traditionally, when there's been like a stock market correction, it's kinda dispersed across more people. And so what happens is it starts to correct. You have all these people that see their paper wealth disappearing. And so what they do is they jump in and they sell and they do all the same soap can, like, chase itself down. But if you have so many people that are, like, so rich that if they lose 30% of their portfolio, they're still worth a $100,000,000, they don't give a fuck. Like, they'll just hang out.

Dylan Koch: [30:41] The wealthiest 10% of American households own approximately 87 to 93% of all United States stock market wealth.

Mike DeHaan: [30:49] That's crazy.

Dylan Koch: [30:50] By contrast, the bottom 50% of earners hold roughly 1% of total US equities, Yahoo Finance.

Mike DeHaan: [30:58] And so the rest of it is dispersed. Man, so that's nuts. So like, what's the total I was like, market value of that's trillions of dollars. Yeah. And so it's... And and 92% of it is owned by 10% of the households.

Dylan Koch: [31:10] I I mean, they said 87 to 93, so just call it 90 for the middle. But, yeah, that is actually... I didn't think it'd be that skewed.

Mike DeHaan: [31:17] So that's like the thing that's so different, right? It's like, you have essentially these people that are just playing inside baseball with their own money.

Dylan Koch: [31:24] The top 1%, if I could put it, hold over 16,000,000,000,000 in stocks.

Mike DeHaan: [31:27] Wow. Yeah, that's crazy.

Dylan Koch: [31:29] I mean, there will be, at some point, who the fuck knows when, but, like, a mean reversion to this.

Mike DeHaan: [31:36] This is how you get to, like, freaking sci fi movies where we no longer have a government. You just have, like, the different companies that basically rule everything. They'll have the Anthropic army going to war with the freaking

Dylan Koch: [31:47] Chat g... Sam All.

Mike DeHaan: [31:48] Chat... Yeah. Yeah. The the open AI company or whatever. Like, NVIDIA will have its own armed forces to protect its data centers. That's literally like where all this shit heads. I don't understand how it does it. But that's like not that far removed from if you go back to, like, imperialism times, and you have, like, the East India trading company that was basically this massive force that would just, like, take over nations for trade. You know? And they were a privately owned company.

Dylan Koch: [32:15] Yeah. Yeah. I mean, I think we should have a discussion sometime. Not now. But like Mike's maybe solutions to some of these. And whereas like... Or because I don't

Mike DeHaan: [32:25] have a solution because I think it's too far gone. You know what's so funny is there's like all these Control or delete. Yeah. Like there's so many people that have been against socialism for so long. Basically, we are now just going to the complete opposite end where it's antisocialism, where they're worried about socialism because the wealth is gonna be distributed across too many people. Now the wealth is gonna be just so confined on like a few people that it doesn't really matter. Like like like, that you can't fix it. I don't really know where you go from there when it gets to that point because they have all the resources and they have all the levers to do everything. The only way that it changes is if they mutually agree or like there's like a... Somebody that gets overthrown within the cool kids club.

Dylan Koch: [33:01] Well, no. I think I think you'll just see more of like the Mondami type get voted into larger and larger cities. I think that'll trend that will continue.

Mike DeHaan: [33:07] But it doesn't matter. Votes in political position don't matter if, like, they're not the ones that are actually pulling the strings.

Dylan Koch: [33:13] I'm trying to think of a historical analogy. And so, like Yeah. When FDR came in, like, during the great depression

Mike DeHaan: [33:19] Mhmm.

Dylan Koch: [33:19] And, like, he... The only way he was gonna get reelected is if, like, they created all these social entitlement programs, which is when a lot of this stuff got formed. Yeah. I don't know. I think you're gonna see more of a trend to that than not in the next decade.

Mike DeHaan: [33:32] So one of the reasons it's really changed now is because the world's gotten so much smaller. Because of the Internet. Right? Because of the ability to travel different things. And so what'll happen is like, let's say that a US president comes in and goes, I'm gonna crash down on all the corporations that now control everything. Anthropocry will go, you know who's not gonna do that? China. They'll just leave.

Dylan Koch: [33:51] Yeah. That's very valid.

Mike DeHaan: [33:53] They don't even have to leave their island that they live on in the fucking Caribbean. They can just run all their operations through China remotely. You know, it doesn't matter because, like, they won't have the same legislation there because they don't care. As when FDR came in, like, world was very small. At that point, if you wanted to get across the ocean, didn't matter how rich you were. It was an endeavor.

Dylan Koch: [34:11] That... I mean, that's fast.

Mike DeHaan: [34:12] If you were poor, it wasn't even an option.

Dylan Koch: [34:14] If you were

Mike DeHaan: [34:15] rich, it was a thirty day thing to go on the, you know, freaking Titanic two. You hope it doesn't sink. Right? That was what it did. I mean... And that wasn't even that long ago. So, like, when my dad, he had owned a travel company for most of his life. He used to fly back and forth from England where he was born down to New Zealand where he moved as a young man. In order to make that trip from England to New Zealand, which is about as far as you can possibly get. Right? Like, currently to do that, you take two jets. You go through, like, Doha or Dubai, and it's like a twelve hour flight, like a fourteen hour flight. Back in, like, the sixties and seventies when he was doing that, dude, it was like an Indiana Jones map. You know, like, where you're zoomed out and you're basically, like, jumping to all the places. It'd be like an 18 leg trip to get anywhere.

Dylan Koch: [34:56] Jesus. You know? And that's Must have really like New Zealand.

Mike DeHaan: [35:00] Yeah. Totally. Well, that was also what you did back then. You know? Or, like, he has a story about when his first daughter was born born in The UK, and him and and his wife at the time and daughter were gonna go back to New Zealand. They got on a boat in England for a month to get back down to New Zealand. Now people call that a cruise. They call that just like the travel portion. You know? That's like long for, like, a cruise. That... That's what they did. You know? And and so, like, going back to FBR, like, that didn't exist. And so these people that wanted to play business, they had to follow by the politician's rules. Now they don't because they can just change who their politician is.

Dylan Koch: [35:37] I agree with everything that you're saying. Yeah. But there... There's got... I don't know, man. I refuse to believe that this is just like all hope is lost and something else will happen. There are nothing... It'll all continue to get worse from here. Right? Like...

Mike DeHaan: [35:47] I think that the reason I'm such a doomer with this kind of stuff is because it's funny. I made a joke earlier about how some people are... There are bad people in the world. Most people are good. I think that most of the people that get into those extreme positions, most of them are past the point of having good intentions externally. I think that they might internally for their own self gain, for their company, for things like that. But we don't really see these companies doing these things for the betterment of all mankind. Because if they were, they wouldn't have their entire objective be around, how can I make it so that people no longer work and so that we just, like, automate everything? Because that is the absolute epitome of repressing humans' ability to have value as a species. Yeah. You know?

Dylan Koch: [36:31] Yeah. I'm all I'm all for the anti data center movements going around here too.

Mike DeHaan: [36:35] Like But that's why I'm a doomer because those are the people that are driving everything, and they do not have the best interest of humans at at heart

Dylan Koch: [36:42] because What is your opinion on Elon Musk?

Mike DeHaan: [36:45] You know, I like... I don't hate Elon.

Dylan Koch: [36:47] He is a weird man.

Mike DeHaan: [36:48] On Elon Musk is he is such an amazing case study that no matter how much money you have, if you're still a loser, no one wants to hang out with you.

Dylan Koch: [36:59] I like his I don't give a fuck personality, whether that's a... His true personality or not.

Mike DeHaan: [37:04] But That's his coping mechanism because he's literally the richest person that's ever existed, and he still doesn't have any friends. Like, honestly. That's my opinion on him. He's like the biggest freaking dork. No one wants to say it. He didn't even get invited to Epstein Islands. Stephen Hawking did, and he didn't.

Dylan Koch: [37:23] Yeah. He's just that's why. He has a crook grudge. He was jealous. You know? And he was he was buttered

Mike DeHaan: [37:27] about it. Yeah. He was buttered about it too. To me, any of those emails are real, which are probably fake. I don't know. Where are

Dylan Koch: [37:32] we on this one, man? Where are you where are we going from here?

Mike DeHaan: [37:36] I don't know. Dan will be back next week. He'll have a whole different opinion.

Dylan Koch: [37:39] Oh, yeah. We... This would have been a great discussion for Dan. He would have went up the railing about half an hour ago.

Mike DeHaan: [37:43] Oh, I know. I already know where Dan would be on it, where he just hates the government in period anyway. And his whole position is to take care of himself, which I fully respect, and just make sure that he can abstain from this as much as possible, which I think at this point is pretty much all you can do.

Dylan Koch: [37:57] Yeah. I mean, if there is a takeaway, get your own family wealthy and then be in a position where if you wanna help other people, you can.

Mike DeHaan: [38:02] Yeah. Exactly. I mean, well, I also think there's a a big lean towards, like, local community. I think that if people focus too big on a, like, national or... I'm not gonna say, like, international. Just like a national level on things, it's always going to be, like, feel like a lost cause, but you can always make impacts in your local community if that is something that you wanna do. And I think just focus on that. There we go. Positive spin to end.

Dylan Koch: [38:27] That... That's a good one.

Mike DeHaan: [38:28] So right on. Well, everybody, thanks for listening. If you have any more dirt on Pace Morby, I would love to hear it. You go ahead and DM me on Instagram, Mike underscore invests or Dylan at Dylan underscore does underscore deals. And, yeah, if you have other deals that went sideways with them or more little tidbits on this impending SEC thing that I've been hearing about for a while, I am dying to know. I can't do anything about it. I'm just so nosy.

Dylan Koch: [38:50] Don't be afraid to to... I I think people feel dumb if they lose money

Mike DeHaan: [38:54] Of course.

Dylan Koch: [38:54] And so they don't reach out for that reason, or, like, they don't advertise for that reason. Like, don't let that be the hindrance of No. Of speaking truth to it.

Mike DeHaan: [39:01] So No. If you have, like, valid wrongdoings with somebody, you should absolutely speak about that. You don't need to protect people that are doing bad stuff because guess what? They're gonna go and do bad things to other people as well. Exactly. Cool. Right on. Thanks, everybody. Talk to you guys next time.

Dylan Koch: [39:13] See you.

Mike DeHaan: [39:14] This episode is sponsored by Sir Lenzelot LLC, also known as SLA Capital, which, if you didn't know, is Dan and I's private lending company. So, yes, we are sponsoring our own show, but what you're gonna do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper, than pretty much every other company out there. So whatever big company you've been working with, bring us their term sheets, and I guarantee that we can probably beat it. We have the same connections they do. We just don't have all the overhead and middlemen. So you wanna come and check us out, go to slacapital.com/keys, and I will know that you came from the show. And by seeing that you came from here, when you get the closing, you will save $500 on your first loan with us. So slacapital.com/keys, we would love to fund your next deal. 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.