How to Structure a Seller Leaseback (So It Doesn't Destroy You)

Mike DeHaan: [0:00] This is a great example of, like, a red flag stuff that comes up from a stupid borrower.

Dan Austin: [0:06] Well Was this right side up?

Mike DeHaan: [0:08] Just to make it more like idiocracy. As of yesterday, I did see that Trump was endorsing Jake Paul for office. I see people were sitting up there giving a speech with the sweatiest pits I've ever seen in this big ass suit. I'm like, that means there's something wrong with it.

Dan Austin: [0:23] Jake Paul or Trump?

Mike DeHaan: [0:24] Jake Paul.

Dylan Koch: [0:25] Oh, no. I thought you had Trump. Trump was 40 he made me my commute 20, forty minutes yesterday because he was in Cincinnati. Oh, really?

Dan Austin: [0:31] Yeah. Did you go say hi to him?

Dylan Koch: [0:33] No. I did not. They they shut down all the major interstates. Like, you can't go fucking anywhere.

Mike DeHaan: [0:38] Yeah. But they didn't shut down the roof lines, and that's the real problem. What's going on, guys? Welcome to collecting keys. I'm Mike DeHaan here with my cohost, Dan Austin and Dylan Cook. Hey, yo. Here to talk about some business investing and probably conspiracy theories today. So, Dan, what did you hear about on your conspiracy theory podcast?

Dan Austin: [0:57] It's not a conspiracy theory. It's just an outright lie. So I was I was listening to a podcast casually, and they had a border patrol guy on there.

Mike DeHaan: [1:04] Casually instead of seriously, where you're sitting with your notebook? I was just like, yeah.

Dan Austin: [1:08] I wasn't, like, intentionally listening to it. I was sitting there, it came on on my reel. It was like a pod not on my reel, my, you know, where auto plays podcast, which I don't it's a podcast I don't usually listen to. Popped up, they had a border patrol agent on there and the guy was talking about it. And it's a the guy that's the host is a retired military guy. And he's like, I saw this statistic from the Trump administration that there's been zero since they came into office or their whole once this whole, like, border patrol thing came into, like, there's been zero confirmed illegal crossings. And they just said it they said that. And I was like, that sounds ridiculous. And the guy's like, that's not possible.

Mike DeHaan: [1:41] Literally not possible.

Dan Austin: [1:42] Zero. Well, you could just stop confirming them. Yeah. Like, you can't use that you can't use that statistic. You can't. Zero?

Mike DeHaan: [1:49] That's the MO whenever there's like a big sort of thing like that. Just like with COVID where they're like, woah. You know, these areas where they didn't have vaccines, like there's no COVID anymore. Like, yeah, they've stopped fucking testing for it. Stopped reporting it. You didn't have to report it in these certain places where they chose not to. So absolutely, that's the statistic you're gonna see.

Dan Austin: [2:06] Well, statistics tell what you want them to say. Like when they're talking about how Minnesota had like, what, I don't know, hundreds of percent increase in autism once you could get benefits for autism. Like that seems like unlikely.

Mike DeHaan: [2:17] Well, so on that sort of side of things, you know, I grew up very involved with a lot of those- Autistic. Autistic. Yeah. Yeah. Autistic. I was Like we talked about before I played EverQuest, so I was definitely autistic. But no, because my brother's special needs. And so I grew up kind of like in that world where a lot of those conversations were common. And the thing that has always sort of stuck with me as I went through from like when my brother was younger, we just called him retarded.

Dan Austin: [2:46] He's retarded.

Mike DeHaan: [2:47] We have like a diagnosis form. I've seen it. And it just says like Daniel's diagnosis is he's retarded.

Dan Austin: [2:53] What they used to call Down syndrome people, Mongolian idiots. That's horrible. But That's what they used to call them.

Mike DeHaan: [2:59] But then all of a sudden we were in college, like we are moving away from that. That's fine. And then like the autism spectrum started growing. There's all these kids that are now, like, more autistic. There's there's more autistic kids than there ever were before. But the reason is because they expanded what that actually means. What autism means. Yes. You know? And, like, who falls into that? And now that's why you have, like, all these, like, Gen z freaking influencers who are like, here's life with autism. I'm like, no. You're just a fucking nerd.

Dan Austin: [3:23] Yeah. One thing that pisses me off, and I've heard this recently by from some people, is like, oh, yeah. My kid is they're on the spectrum. I'm like, no. You're just a really shitty parent. You aren't teaching them social skills.

Mike DeHaan: [3:34] Yeah. Well, I think that's part of it.

Dan Austin: [3:35] You can't just say they're on the spectrum because they're not doing what you want them to do.

Mike DeHaan: [3:38] But there's also a nature nurture thing. Right? Like, there's some kids that are just more shy. They don't make friends as easily. Right? They don't wanna go and, like, do the wild stuff that some of other kids do. They do just wanna, like, kinda sit by themselves, and that's fine. Valid. That's valid. Yeah.

Dylan Koch: [3:51] What's funny I'm gonna tie this off with the story is last week when I was a hero, I was on a golf trip in Alabama, and we were all playing

Dan Austin: [3:57] Oh, is that why you couldn't record with us? You're just Correct. Having fun? Yes.

Dylan Koch: [4:00] But anyway, we're on this, like, near the end of the round on the sixteenth hole, And we're all playing pretty shitty. And then a train, like, literally drove by on the tracks. And then we all hit great shots after we saw this year. We're like we're like, oh, yeah. Yeah. We're on this. Yeah. It's like, oh, this is what we needed.

Dan Austin: [4:16] That actually checks out. From a diagnosis standpoint, that

Dylan Koch: [4:18] checks

Dan Austin: [4:18] checks

Dylan Koch: [4:18] out. Yeah. I mean, I think that's the question number two when they ask you. Do you like trains?

Dan Austin: [4:23] Yeah. Exactly. Do you like trains?

Mike DeHaan: [4:25] Yeah. Yeah. Well, I've I've seen that poll go around as like a joke on Twitter and stuff. It's like like, honestly, I hope autism keeps rising because we really do need to have a better train system

Dan Austin: [4:35] in this country. Yeah. Seriously, dude. Yeah. It's valid.

Mike DeHaan: [4:38] So You know, it's not always trains. For my brother, it was airplanes.

Dan Austin: [4:40] Yeah. He is an airplane guy.

Mike DeHaan: [4:42] He can tell you anything about an airplane. You can, like, look at it. He knows, like, the model. He can, like, see it in the sky, and he'll be like, oh, that's a, you know, three thirty. Like, he'll know everything about it.

Dylan Koch: [4:50] Wow. Crazy.

Mike DeHaan: [4:51] But, you know, doesn't really apply to anything useful in life when you have learning disabilities.

Dan Austin: [4:56] I was at this bar down in San Diego he would love because the roof is all glass and it's right in line with the airport because they everything really is in San Diego, like, flies over. And it had one of those reader boards, like the plastic flaps change really fast and makes that noise. And it has the flight number and destination or where it came from on the board every time one flies over.

Mike DeHaan: [5:16] I would like that. That sounds freaking sweet.

Dan Austin: [5:18] It's pretty cool. You get, like, a dope ass cocktail, and you're like, oh, shit. They're coming from Anchorage.

Mike DeHaan: [5:23] That's weird. Dude. And all of a sudden, you're like, you're on there, like, making bets on, like, what the next plane's gonna be, what airline, where it's gonna be coming from. I'm getting into really

Dan Austin: [5:31] good stuff. Yeah. That would be actually god. Okay. Yeah. Let's go.

Mike DeHaan: [5:34] Let's go. Yeah. That's that's that we're gonna have KeyesCon twenty twenty six. Let's do it. Have a San Diego exclusively so we can go there.

Dan Austin: [5:40] Like a poker game. You have an ante. To come, you have to put 5,000 in the pot.

Mike DeHaan: [5:43] I like it.

Dylan Koch: [5:44] Cool. A good idea.

Dan Austin: [5:46] That's just a start, and then you stop that money to bet.

Mike DeHaan: [5:48] That's smart, danks. Then we can charge a 25% management fee for

Dan Austin: [5:51] it. Exactly. A bookie fee.

Dylan Koch: [5:54] And then KeyScot is paid for.

Dan Austin: [5:56] There you go.

Mike DeHaan: [5:57] I mean, that is really the ticket. Right? As you get the guys that have, like, the big guru things, and they're like, you know what? I really wanna go to Puerto Rico. We're gonna have an event there and charge people $7,000. I'm gonna pay Brandon Turner or someone to come speak, and I'm just gonna get a free trip to Puerto Rico.

Dan Austin: [6:12] Yeah. I have the idea we gotta do. We can go out to get all, like, the guru gurus. The guru gurus. We put on this, kinda like a Fyre Festival thing. Like, set that up for them, get them all out to Puerto Rico. All the guys. You guys can just pick one. That's the douchebag that's gonna be there. We're gonna have all of them in the same room. And then we're just gonna just drop the bomb. Like, sorry, guys. You're gonna have to live in these tents and eat Styrofoam.

Mike DeHaan: [6:34] Yeah. For all of them. That's a great idea. Yeah. Just get

Dan Austin: [6:37] them there, and then have them, like, have to go to Porta Potties and and have no event there and just totally punk them all, take their money.

Mike DeHaan: [6:42] If we did that, but it's like surprise survivor. So there's, like, cameras and stuff out there. Then half of them will be into it.

Dan Austin: [6:48] Probably. Right? Yeah. They probably would be.

Mike DeHaan: [6:49] Whoever wins, you're gonna get a million dollars.

Dan Austin: [6:51] I mean, how awesome would that be? That you got Pace Morby out there on his livestream talking about this place, and we're

Mike DeHaan: [6:56] like, we're out on

Dan Austin: [6:58] the boat just like the fire fest, bow on the boat, drinking, having a good time while they're out there suffering.

Mike DeHaan: [7:02] That would be such a fascinating, like, social experiment to get all, like, the professional b sers out to, like, do some kind of, like, reality game show like that.

Dylan Koch: [7:10] Make it the Hunger Games, and I'll watch.

Dan Austin: [7:12] Oh, good.

Mike DeHaan: [7:12] Golly. Jeez. Goddamn. You wanna see Pace and fucking investor girl, Brit, like, trying to kill each other? That sounds nuts. Give him bows, bone marrow. I don't know. I'm trying to think. Chris Krohn, he'd probably be the one that wins. He's like a fit dude.

Dan Austin: [7:27] He'd be savage, dude. He's a dude that would just go, like, buck wild. Yeah. To me, he seems like he's on the verge of, like, doing something extreme all the time. Like Totally. Hurt somebody else, kill somebody, rob somebody. Like, he just seems like yeah. He's an intense dude. I don't

Dylan Koch: [7:43] even know who this is. So Really? Good on them. Yeah. No idea.

Mike DeHaan: [7:46] Yeah. He's kind of like washed out a little bit. He was super big during like '21 and '22 about how he made all this money buying all these properties. And then you essentially found out that most of it was a lie just like all the rest of them. But he's Yeah.

Dan Austin: [7:59] He was he was constantly walking around a construction site talking about how he's adding a $25,000 addition to his house.

Mike DeHaan: [8:04] Yeah. Or a

Dan Austin: [8:05] 25,000 square foot addition to his house. And I'm pretty sure it was just a construction site in Utah where he lives.

Mike DeHaan: [8:10] Yeah. But now now he has kinda long hair, he talks about God a lot. So, you he's know, he's in a good place.

Dan Austin: [8:15] Wow. He has made the transition.

Dylan Koch: [8:16] He did the one eighty. Yeah. One with the one eighty.

Mike DeHaan: [8:18] He's always been like that.

Dan Austin: [8:19] What do think? I think it's just one degree off. I don't think it's a one eighty. I think it's just like one degree off for some of these guys. Like, they're like, oh, oh, now this is my bath.

Mike DeHaan: [8:26] Oh god. They're like, oh, no. People aren't trusting me anymore. This will fix it.

Dylan Koch: [8:29] Yeah. Oh, here. That's a good transition, Mike. Let's about trust, which does play into a question I had for you guys.

Mike DeHaan: [8:35] Yeah. Because I actually like this question that you brought up. We have faced this situation a couple times.

Dylan Koch: [8:39] Yeah. So I got the opportunity on a on a lead that, basically, he's willing to sell his house in a good area at his mortgage value plus a couple grand. But the kicker is he wants to stay in the house, rent it back from us indefinitely.

Mike DeHaan: [8:55] Mhmm.

Dylan Koch: [8:55] And like, ARB is probably high twos, maybe low threes. We're talking $4,045,000 dollar purchase price, and then renting it back at like $7.50 a month, which is way below market, obviously.

Mike DeHaan: [9:06] Yeah.

Dylan Koch: [9:06] And there are some lingering CapEx issues. He probably needs a furnace. Probably needs a roof. And so do you do the deal or not? It's kind of the question. Yeah. He's 77 years old. That's

Mike DeHaan: [9:16] Yeah. 77 years old. He's an older guy. So what's your what's your inclination? And then I'll tell you about the couple situations that we had.

Dylan Koch: [9:21] Well, obviously, mean, from a numbers perspective, I mean, even if it breaks even, even for the time that he is alive, let's say that's even twenty years. He lives in '97. Like, you're gonna be sitting on mountains of equity. Right? So probably financially still makes sense to do that. And you could, even if you bought it 40 k outright, you could do a refi at a super low LTV, get all your money out, etcetera. But it's it's almost seems like preserved incentives where you're just hoping this guy dies.

Dan Austin: [9:47] Correct. Yeah. That's a weird thing.

Dylan Koch: [9:49] That's the ethical thing on this, like, what happens after that?

Mike DeHaan: [9:52] So that's where we always kind of we had this there's two specific situations I can remember where we had this. One of them was very similar. Older guy, owner occupant. Remember that split level out in Perry District, Dan? This guy? So it was a while ago, but exactly the same situation. Dude's, like, in his late seventies. He claimed to have all these health issues. He's like, I just wanna basically sell this thing. He's like, I don't wanna have to make a payment anymore. So he wasn't actually gonna pay rent, which was also different. But he was willing to give it to us for, a steal. And he's like, just let me stay here. He's like, Isaac, you don't even have to fix things. I'll just do it. He's like, I just wanna stay here till I die. So that was one situation. The other one we had, which a little bit dicier, was a guy who his so his mom lived in the house. K? And technically owned the house, but he was, like, the full time caregiver. Right? And he wanted to basically cash out the house and the sale. The thing was a pretty big fixer upper, and then she was gonna stay there. And then, you know, she was gonna sell it, like, 50¢ and a dollar kind of thing. One of the big reasons we opted not to was because, basically, what happens is it puts you in a situation where you are whether you admit it to yourself or not, you are hoping for the death of another human being.

Mike DeHaan: [11:07] Right? Because it is in your best financial interest. You know, even if you say like, oh, no. I'm not gonna be like that. Yes. You are.

Dan Austin: [11:12] I mean, there's a lot of people that hope for their parents to die just so they get their inheritance. So, I mean, it's not, you know, that bad. It's a random person.

Mike DeHaan: [11:18] Yeah. So that's like just kind of it's a bad place to be. And then also too, there are a lot of sort of legal complexities. I don't know about Ohio, but in Washington so you're talking about all these CapEx issues. What happens if this dude, like, dies in the house and, like, for us up here, we don't discover it? You know, the neighbors are like, no one's seen Jerry in a while. And, like, the police go, and now there's this house that is in shambles that we own on paper that he lives in. Right? That opens up a whole can of worms. Then also too, there is kind of the dilemma with some of these CapEx items that are currently existing. What happens if more of them occur that are more extreme? What happens if you have a windstorm like we just had last night and blows the roof off the house? Are you not gonna pay $20 to put a new roof on this thing?

Dylan Koch: [12:06] I mean, I can tell you that I I would. But You

Mike DeHaan: [12:09] would. Yeah. Right? But it creates these different challenges because what are the expectations and where does that line start and stop? You know, what if it didn't blow the roof off, but just ripped off a bunch of shingles and now there's a little water drip in there? Are you gonna spend $20 to put a new roof on it? That's a problem. I don't know. So there's like all these little things that can kind of come up that make it sort of hairy. Right? Because at the same time That's interrupting.

Dan Austin: [12:31] Didn't we do this on somebody where can't remember how we did this and it wasn't the same situation, but or maybe we just started doing this. We never had executed it. Is when you do a lease like this, like with a person is you write in that they have to maintain the property.

Mike DeHaan: [12:45] Yeah. So you can. But at the end of the day

Dan Austin: [12:47] Which there's some, there's some legalities with that. So you have to figure that out.

Dylan Koch: [12:51] They those kind of people have kind of like already given up. You can't really take their word for it.

Dan Austin: [12:55] Well, yeah. But they can't call you and be like, for repairing. You'd be like, no, I'm not going to.

Mike DeHaan: [12:59] Yeah. But then that's something that's the same ethical dilemma is they gonna have some now 86 year old dude. You're like, yeah, sorry, dude. You gotta figure it out.

Dylan Koch: [13:06] Yeah. Mow the fucking lawn.

Mike DeHaan: [13:07] Yeah. Like I

Dan Austin: [13:09] mean, not to that point, but you know how it goes. What happens with some of these folks, and I'm not saying this person's like that, is the minute you sign that contract, they call them like, hey, by the way, the toilet's clogged. Right. Oh, by the way, the sink's clogged. All the shit that they deferred, they want you to do all of a sudden right now. And you're like, okay, Come on, dude.

Dylan Koch: [13:25] Yeah. Yeah. And it's how big is the tooth worth the squeeze. Right? Like, if it was you know, that's the other part. Here's the other thing. He agreed to pay $7.50 a month. He's already in foreclosure, and I'm pretty sure his payment's less than that.

Mike DeHaan: [13:36] Yeah. There you go. Yeah. And you're only gonna give him a little bit above the 40 gas. He's looking for a bailout, you know, and he's gonna want a freebie. Also, to to your point with this, why don't you stop paying? You have to evict this person. Have you had to evict somebody from their own house yet in your business?

Dylan Koch: [13:49] Yes.

Mike DeHaan: [13:49] Yeah. That sucks ass. Yeah. So we so we had to do that once, and it is not a good experience.

Dylan Koch: [13:54] No. It's not fun. No. It's not. Well, I guess it was a it was a post closing thing. They didn't get out when they were supposed to. But, yeah, same thing.

Mike DeHaan: [14:00] You need to look at the big picture as well. So you need to evict this guy from his own house, and then you got you go to court. And what they see in the paper trail is that you bought this house for realistically 25¢ on the dollar, and the dude was already in pre foreclosure. You knew he couldn't pay the payment that you were expecting, and now you're gonna try to kick him out. Regardless of, like, the lease situation, you're probably gonna lose that in court.

Dylan Koch: [14:24] Yeah. Yeah. No. I I had no qualms there. So all to say is, like, I'm trying to work something out with him to honestly pay him more. Like Yeah. Let's just make

Mike DeHaan: [14:31] it clean.

Dylan Koch: [14:32] Like, I'll I'll pay him more. There'll still be a discount to us, but then, like, let's find you other housing. That's the way I'm trying to go about it. So

Mike DeHaan: [14:39] Yeah. I'm trying to think of, like, there's there's different ways, like, around it, whether you have without you having to come out the money or have that kind of, like, commitment. I mean, it is tricky. Because, like, if all he wants is, like, a little bit of money, you could do, like, maybe a something like a first right of refusal or, like, some kind of, like, future purchase option or something where basically you're gonna give him, like, those companies that used to be around where they would make you sign like a listing agreement. They give you $10, but then when you sell the house, you have to use them. Basically, do something like that where like you give him say like $10,000, but then he has to agree to sell the house at a certain price in the future.

Dylan Koch: [15:13] At a certain rate, so he can stay there. Yeah. But then if he gets foreclosed on, then you're fucked.

Mike DeHaan: [15:17] Totally. You're not not in first position on it.

Dylan Koch: [15:19] Yeah. Right. So I don't know. I mean, don't the lead's definitely not dead. Right? Like, I'm gonna figure something out.

Mike DeHaan: [15:25] Yeah. Also too, mean, 7070 is not that old. Like, he is, but he could live for another twenty years.

Dylan Koch: [15:30] Yeah. Yeah. Right. By all means, I think he's in relatively good health, I mean, from just talking to him. So yeah. It it's tricky. It's like one of those things when, you know, and you're in this business, you look for deals that have large spreads, but then you're kind of combating some of the, like, the ethical things and, like, what's the right thing to do with in the name of money. So Yeah.

Mike DeHaan: [15:52] And at the end of the day, how much money is your soul worth if that stuff does get weird? You know? And that is something that you need to answer for yourself. So yeah. I don't know. In my mind, if he really is that tight and he's gonna lose the house, you could probably just buy it from him. He'll have to move, offer him moving assistance. Yeah. Yeah.

Dylan Koch: [16:09] We've done that before too.

Mike DeHaan: [16:11] Throw him away your rentals.

Dylan Koch: [16:12] Yeah. That's but I know he can't pay. That's the problem.

Mike DeHaan: [16:15] Well, yeah, you you'll know he can pay when you give him a $100,000.

Dylan Koch: [16:18] Yeah. I guess that's true.

Mike DeHaan: [16:20] He has to not blow that money. But if you're worried about it, just put it in an escrow account. Say you're gonna you're gonna give him one of your rentals, you're gonna put the first twelve months of rent into an escrow account. He's gonna pay there.

Dylan Koch: [16:29] It's not a bad idea.

Mike DeHaan: [16:30] Yeah. Yeah.

Dan Austin: [16:31] Yeah. Because he's gotta pay you regardless, which is like park it there. I mean, I think if I was to do it, you could think about it as a way of like, oh, he's gonna I just got away from the die. Also, you're doing him a huge favor too by doing this. You're helping a guy die on his own terms.

Dylan Koch: [16:44] Well, worst way is that it goes to foreclosure because then he will get kicked out from somebody.

Dan Austin: [16:48] Right. Exactly. And so now he, I mean, and obviously if he doesn't pay you, you would have to evict him, which would be unfortunate. But with that all being said, is like, you do put x amount into a escrow account, I don't know, you would have to create like an account somewhere else. Don't think an escrow company would hold it long term. Like if you created like a at trust your bank or whatever, where like, I don't know. It would be hard to say because there's a good chance the guy will live another five years. Probably more. Who knows? Ten. Seventy sevens to do, like, fifty seven.

Dylan Koch: [17:18] I know. Depending your Brian Johnson or whoever that longevity guy is. Yeah. Magic Johnson. He

Mike DeHaan: [17:25] has AIDS. He just lives forever.

Dan Austin: [17:27] Not anymore, dude. He bought he bought them out. He bought

Mike DeHaan: [17:29] the AIDS out. He bought the AIDS.

Dan Austin: [17:31] He paid for them. He paid for the AIDS to go away.

Mike DeHaan: [17:33] That's the old South Park joke.

Dylan Koch: [17:35] Can you make that the intro of the show, please?

Mike DeHaan: [17:40] Bought the aids. Bought the aids out. Yeah. It's the old South Park jokes. That's the cure for aids is just injecting liquid cash into

Dylan Koch: [17:45] your van. Right. Yeah. I don't know. Like, this business lately has been pounding my head against the wall frustrating just with other shit. We had a condo yesterday that was supposed to sell today, and then we got the mutual release last night because the condo is over 50% rentals, and so it can't go conventional. And they had a conventional loan, which to me also means that I'm gonna be screwed for any other buyer that wants to go conventional. So now it's pretty everyone basically, it has to be a a rental person that buys it. And so is this one that you already bought? Yeah. Like, we're on the tail end of it.

Mike DeHaan: [18:21] Yeah. You're gonna have your own freaking Glen Road. That's what we had. We owned it for four years. Yeah.

Dan Austin: [18:28] Don't mess around with condos, man. Just don't do it.

Dylan Koch: [18:30] It's so annoying. Just

Dan Austin: [18:32] stop just stop, Dylan.

Mike DeHaan: [18:33] Don't do it. The one that we had to own forever was because of an insurance issue. It's Usually insurance issues.

Dylan Koch: [18:38] Mhmm.

Mike DeHaan: [18:39] Or bay basically, the insurance owned by the HOA wasn't enough to cover the replacement cost of the building. Mhmm. Or the sorry. It wasn't wasn't enough to cover the loan size for what the value is worth because the insurance was only for the replacement cost of the building.

Dylan Koch: [18:52] Right. Right. It wasn't insurance on this owner. Was the owner occupied percentage and also just cash reserves was the other thing I pointed out. But I even I gave them the person who was buying it was making it a rental. They're just using conventional loans. So I gave them chances number. I was thinking maybe they can make work something out. Because if a DSCR wouldn't have that same regulation. Right? Depends.

Dan Austin: [19:09] Yeah. Depends on a lot.

Dylan Koch: [19:10] Oh, you guys are just speaking like true lenders now.

Mike DeHaan: [19:13] I mean, they

Dan Austin: [19:13] can do non warrantable condos, but it also depends from DSCR provider to DSCR provider. Some of them will be like, yeah, we'll do non warrantable if it's this, or some people will do non warrantable if this. And like, sometimes it's case by case. Like we had one where it was like, the guy's gonna own a 100% of it. And they're like, well, we're we don't mind that. But if you own if you own 50 or 49, they're like, ah, I don't really like that.

Dylan Koch: [19:33] Yeah. Mhmm. Had I a chance to buy a whole condo complex once. '24.

Mike DeHaan: [19:37] Don't do it. Don't do it. You'll get fucked.

Dylan Koch: [19:39] Yeah. Didn't. The math didn't worked.

Mike DeHaan: [19:41] But Yeah. Pretty much the only way that I think that would make sense is if it was like like a specific niche.

Dan Austin: [19:47] So it's priced like an apartment maybe, and you could change the zoning of it. I don't know.

Dylan Koch: [19:51] I looked at it that way too. But

Mike DeHaan: [19:53] Yeah. Or like if you were gonna convert it to an apartment because like also too, if you own all of it, then other people will have issues getting loans. So like what we've seen in situations around here, there's one apartment complex that was like that. They're like the same person owned like a bunch of them. And basically, the only way and we actually we had the opportunity to buy this one. We wholesaled it because we read in the fine print. Good thing. Yeah. That guy was freaking crazy. This was like this dude had like Is that Bob? Yeah. That was Bob. This was like well, this was a he was a bad dude. Like, he had a tenant He was a bad person. That, like, lived in the property. I went to walk in with Bob. This tenant's, like screaming bloody murder, like, fuck you. You're a piece of shit. All this sort of stuff. Anyway

Dan Austin: [20:32] And Mike's like, hey. What's going on with that p trap?

Mike DeHaan: [20:34] Yeah. And he's talking about how how Bob's like how Bob like raped her and all this sort of stuff. It was super bad. And then all of a sudden, the attendant's like, oh, yeah. No. We're good. Yeah. Just sell it. I don't care. And we're pretty certain that Bob paid her some hush money to keep her mouth shut about all the atrocities that he had committed. And essentially, where it came down the track was she used to work for him as like an assistant. And this dude was a creep and had a history of doing bad stuff with his staff. You know, this whole thing went down. But anyway, back to the condo and what the issue was with it. Because of the way the ownership structure was with the whole building, the condos could only be bought in cash. They were not financeable. And that was very, very clear in the CC and Rs was that they didn't even explore financing options. And we chose to pass the next one. Like, it was like a $150,000 condo. And I was like, who's gonna buy that? Right. This piece of shit condo in this part after a $150. But you know what? To our lesson, the people that we wholesale it to, they gotta buy it like immediately. And I was shocked. I could not believe it. But that was a gamble I was not willing to take.

Dylan Koch: [21:37] Yeah. I mean, that's the other thing. And, like, you bring up a good point there. I guess two things. One, I'm going back to there's actually an agent who lost your license because I think she was hooking up with someone and, like, when she'd go take people to random people's houses.

Mike DeHaan: [21:49] Oh, nice. Yeah. I

Dylan Koch: [21:49] mean, second thing was For her. Yeah. Where's it going with that?

Dan Austin: [21:54] I don't know. Sexual assault.

Mike DeHaan: [21:56] Yeah. I mean I mean, just if she's what? She's bringing her squeeze? That's not assault.

Dylan Koch: [22:01] No. No. I remember now. I know. I remember now. It's completely unrelated. I had a deal, and I was like, I couldn't find a buyer for it. I'm like, someone there's gotta be a buyer. The numbers, like, somewhat work. And I sent it to a buddy of mine who must have a much better buyer's list than I do. He sold it for $12 more than I was asking. Nice.

Mike DeHaan: [22:18] Nice.

Dylan Koch: [22:19] And then so, like, we're gonna split the fee. I guess my point in this is, like, there's buyers out there. You probably just don't know who they are, and that is still half of this business because don't just assume that you know all the buyers in the market. I never heard of this guy.

Mike DeHaan: [22:32] I will tell you what. I guarantee you that most people don't know the buyers in their market because the vast majority of the loans that we do are not wholesale deals. Interesting. They are people that are buying stuff off the MLS. Right? A lot of them, like, we literally will have people that they have 20 flips on their tracker they send us. And in our little doc template that goes out that requires a different name, we'll have to sign a contract, they'll be like, I don't know what that is. They've never bought a wholesale deal before, but they've done a ton of flips over the last three or four years. That's crazy. Right? And so there's a lot of those people out there. It's actually been very, very eye opening. I would say at this point, probably less than 10% of our hard money loans are wholesale deals.

Dylan Koch: [23:12] Is there red flags from a lender's perspective if you see a big assignment fee on the HUD? Yes. Yeah. I've ran into that a couple times.

Mike DeHaan: [23:19] It typically depends on the situation. I mean, like because because some of it's just like, why is it that big? You know, we are off from the other side, so we understand that sometimes that happens. But what we need to make sure is that the buyer actually did proper due diligence on the deal. Right? And that they aren't just like being told whatever by the wholesaler because the wholesaler has a $100,000 assignment

Dylan Koch: [23:40] for you on

Mike DeHaan: [23:40] the line.

Dylan Koch: [23:41] Right. Right. Does the deal actually pencil even with that being in there?

Dan Austin: [23:45] Yeah. What's your statement of work look like? Does that what the property actually needs to have done? We need third party photos, all that stuff.

Mike DeHaan: [23:51] Yeah. And a lot of hedge funds that we sell the debt to, they will cap at like 15% being the max assignment fee. But there is flex on that if the deal does fundamentally make sense and the due diligence is appropriate. Yeah. What we don't like is when we get the the flipper that's like kind of a spaz, they have mediocre credit. They're like, yeah, I'm buying this from a wholesaler. It's like a $50,000 fee and a $200,000 purchase, you know, and they send us like eight pictures and, you know, their credit's like shit. I'm like, yeah. I'm probably not gonna do that one because of the assignment fee. Like, it's not helping. But also the borrower's not necessarily helping either. So it all depends.

Dylan Koch: [24:28] Depends. That's the lender answer. Yeah.

Mike DeHaan: [24:31] It just depends.

Dylan Koch: [24:32] I guess I don't know. You don't have to answer this if you just don't want to, but fair housing is a big thing, especially like lending and renting. Right? So if something comes in, is it full discretion like, no, don't wanna do this loan, like, from you guys? Or is there certain boxes Yeah.

Dan Austin: [24:45] We could do. Yeah. We could say no to anybody.

Mike DeHaan: [24:46] We're all business purpose. We can just say like, I don't like your face and your driver's license. I'm giving you lot.

Dylan Koch: [24:52] Okay. Yeah. Okay. That's that was more my question.

Mike DeHaan: [24:55] We can't say that, but like You're freaking ugly. Yeah. There's all kinds of reasons we can reject stuff.

Dan Austin: [25:01] Yeah. We don't have to collect their, like, race or anything like So it's not yeah.

Mike DeHaan: [25:06] Yeah. That disclosure that you have to do for, like, conventional debt, don't do any of that for fixed or DSCR

Dylan Koch: [25:11] Yeah. Right. Okay.

Mike DeHaan: [25:12] It's fully open. I mean, we we have one of our investors that's a smaller investor that we haven't worked much that is definitely kind of racist because we had a couple of borrowers that we did loans for that were people of color. And they asked for things that they have never asked for with our our white borrowers. And I'm like, I feel kinda dirty, like, doing your bidding on this because I don't fully agree with these questions. So that it was just what they do down the line. Some people like abuse that privilege or the fact that they, you know, don't have to do fair fair housing laws.

Dylan Koch: [25:46] When you take your real estate license, they go through all of the fair housing stuff at like, beat it into your head, like the red lining and all. And like, with loans is a big one too. Think what I forget the name of what it's called. But Yeah. Didn't know if it's so applicable.

Mike DeHaan: [25:58] Yeah. With ours, they don't do that. But yeah. So to your point, you're beating your head off the wall. Well, just, you know, every business is kinda like that. There's always your there's always the variation.

Dylan Koch: [26:08] I know. I know. It just feels like it's been harder lately than, you know, since I started almost.

Dan Austin: [26:13] Yeah. So It probably has been. Everything seems to be harder these days no matter what business you're in.

Mike DeHaan: [26:18] I know.

Dylan Koch: [26:18] We sent out the latest direct mail, and like, it was to the point where I'm like, did I do something wrong? Just like how low the Yeah. Still got like

Dan Austin: [26:25] response was.

Dylan Koch: [26:26] So the number of contracts and deals ended up being pretty close to the same, but the number of leads was much, much lower.

Mike DeHaan: [26:33] Interesting. Well, so I I would say that that makes sense for the industry. Like, that's what we were seeing over the last several years was our cost per lead would go up immensely, but the cost per deal would stay kind of the same. Yeah. Like, it would it would increase, like, a little bit, but not a lot.

Dylan Koch: [26:49] That's pretty on par. What's your

Mike DeHaan: [26:51] what's your kid doing over there, Dan? Knock on your door? He found

Dan Austin: [26:54] out that I'm home, and he's homesick. And so I'm like, oh, damn it. How did he

Mike DeHaan: [26:57] find me? Well, he's in he's in the place where you are every day.

Dan Austin: [27:01] I know. That's true.

Mike DeHaan: [27:02] Yeah. So but You can bring him in if you want. So you wanna have an opinion on fair housing laws?

Dan Austin: [27:07] Oh, he definitely has an opinion on that because, like, if Superman can't come in and smash your shit, he doesn't want it.

Mike DeHaan: [27:13] I mean, that that's, like, classic, you know, two year old boy behavior right there.

Dan Austin: [27:17] Oh, dude. He loves it, man. Yeah. So Let let me go tell him to stop.

Mike DeHaan: [27:21] You guys keep talking. You

Dylan Koch: [27:24] have a drum set in there? Jesus.

Mike DeHaan: [27:26] I think he's knocking on the door. Yeah. But yeah. So I mean, every every business is like that, though. We have our own situations. Some of these borrowers, dude. Like, and we get the same sort of nonsensical stuff. We had this one that was supposed to close tomorrow. We've been trying to get all the documents for this guy for, like, six weeks, and stuff isn't adding up. And there's, like, always this, like, weird stuff they're gonna do. And then finally, we all got it sort of, like, figured out. And he was like, I'm really confused to why this took you guys so long to close this one. And, like, all of us are like, are you serious right now?

Dylan Koch: [27:56] Did you? That's that's it's hard not to clap back.

Mike DeHaan: [27:58] I know. I know. Yeah. Fortunately, it was with Jeremy. That was our new sales guy that had that conversation. He's a nice guy. If it had been like Chance, Chance would have chewed his ass. But talking about your boy down in Florida, Dan, who wanted to know why we take so long.

Dan Austin: [28:10] Oh, yeah. So the the latest on that is he paid the taxes Oh, god. Before closing for the seller, so it didn't go into foreclosure. And so but then the title company gave us a false fake receipt saying that they had received it

Dylan Koch: [28:25] Sure.

Dan Austin: [28:25] As I thought. Well, then the sellers put $23,000 of EMD down on behalf of the buyer.

Dylan Koch: [28:31] Wait, what?

Dan Austin: [28:32] And then send us an EMD receipt. And then at closing, they get that back. I'm like, what is going on? That was right. That's why I was late to come to recording. Cause I was listening to this through our team. I was like, I don't understand. I was like, why wouldn't he just pay the tax? They pay the taxes then.

Mike DeHaan: [28:47] Let's just reject this loan. This guy's a fucking weirdo. Yeah. I'm going to. He can go and do some more. Okay. So like, to the point of the wholesale fee, Dylan, this is a great example of like a red flag stuff that comes up from a stupid borrower. Because this deal, it's a wholesale that some wholesaler closed on from the seller like six months ago. Right? And now he's trying to sell it to this guy off market.

Dylan Koch: [29:09] Should have sold already. It'd be my Should

Mike DeHaan: [29:11] have sold. And he apparently was gonna go into a foreclosure due to not paying the taxes. Mhmm. So like there's all these people that are like motivated in a way that is not inherently correct. And like the numbers in the deal are fundamentally fine. But the problem is if you look at the profit that this first guy's making, it's quite a lot. So like he bought it for I think for $1.10, Didn't pay the taxes. This dude's buying it for $1.85. Right? Significant. The ARV is, $3.50. It's a healthy deal. 35 k rent out. It's, you know, there's a lot of trash in there, whatever. But everyone's involved is dumb. Then we're saying this to the processing team this morning. It's like, understand that the relationship has to continue with this person after the deal closed. We have to deal with them for the next twelve months when they're calling all of you going, I don't understand why my draw didn't come through. It's like, because you didn't do the process. You just, like, texted some random number that you thought was you know, it's probably one of our LOs was like, can I get $12? I'm like, no. You can't.

Dan Austin: [30:06] Yep.

Mike DeHaan: [30:06] But so that's if it's something that's not bad, we can just choose not to be busy with them. And that's

Dan Austin: [30:10] what we're about to do.

Dylan Koch: [30:11] That ties in. I bought a deal yesterday. First time I did this, that it was in Ohio, you can do post foreclosure redemption periods. Usually, they're thirty to forty five days. I don't know if other states have this. So we went through foreclosure. We bought it back after the foreclosure, and the biggest selling point was this woman is her home for been her home for thirty years. Good part of town. She wants to stay until the middle of June. So I got it for a good discount. But to your point, if she was like batshit crazy, I would've been a much harder, like, okay, let's do this. But she has her head on straight. She understands the process. She understands if she gets out early, that's good for everybody because we have like this profit thing at the back end. So like, that's another reason of just like the continuous relationship I was comfortable doing. And if not, I would like, I don't know.

Dan Austin: [30:57] I always like into general life rule, and I've turned down plenty of like opportunities personally in different ways. But a good general life is like, even if it's a great deal or a great opportunity, who are you doing business with? And if that person you're doing business with is not a good person ethically, they don't have a good IQ maybe, you know, like they're stupid.

Dylan Koch: [31:17] So why are you with Mike? Well, I'm kidding. Yeah.

Dan Austin: [31:21] He checked a few other boxes for me.

Mike DeHaan: [31:22] It's because I really like trains. Strong strong hands.

Dan Austin: [31:26] Real strong hands.

Mike DeHaan: [31:26] Real strong hands.

Dan Austin: [31:27] Yeah. Anyways, like, that person, like, matters. Even if they're a smart person good at doing the deal, but there's something wrong with their ethics, their morals in the deal on paper is just spectacular. Even though that money's like sitting there and you're like, oh, I could make so much money on this. If that other person you're partnering with or doing business with is not good, it's not worth doing business.

Dylan Koch: [31:45] When you're doing those interviews or even like, let's say you're screening a tenant, they're on their best behavior at the beginning. Right? So if you get red flags at the beginning, you know what's gonna bundle up in a couple of weeks or months.

Dan Austin: [31:56] I have a specific rule with tenants. If their first message to me is how they're hurting and that they really need this opportunity, I just screen them for that. They give me a whole Facebook message live, like 30 lines of like, well, I just lost my job, but know I'm this, I'm that, or my last landlord did this to me. You know, they just have all these sob stories. I'm like, sorry, that's like your problems cannot become my problems.

Mike DeHaan: [32:18] Yeah. Well, it's the same with business partnerships. Right? If they come around and like, well, the last person, you know, I had a business partner, they kind of screwed me over. These things didn't go well. So he's like, cool. Go figure that shit out first Yeah. Then come talk to me. Yeah.

Dan Austin: [32:31] Exactly. Till that's not a thing.

Mike DeHaan: [32:33] Yeah. We I mean, we just had that on a loan. It was actually one of your buddy Scott's wholesale deals that we ended up rejecting because the kid that was buying it, he had all this experience, quote unquote, but at the at the very get go, he lied about his credit. He lied about his liquidity. Right? And then it turns out that he had this quote, unquote business partnership with this person that like stole all his money and did all this kind of stuff. I'm like, I don't care because you started off with lying. If he had started out and been like, hey, here's like the full situation. My liquidity isn't awesome. Here's the money that's gonna be coming in. Here's what my experience is. Totally different because now you're a reasonable person.

Dan Austin: [33:08] Yeah. In fact, the liquidity came in wasn't even enough to close the loan. It's like, why would you lie about that? Like, we're gonna know you don't have money to come to the closing table. So many people you would be surprised how many people come to buy a house that actually don't have the money to repair it once they close it or even close it for that matter.

Mike DeHaan: [33:22] Dude, we've had people come in and they're like, their first bank savings they send in are like $12. Yeah. I'm like, don't even send me that one. And now it looks bad.

Dan Austin: [33:29] We've had negative.

Mike DeHaan: [33:30] Negative. Yeah. We've had negative. Yeah. Just just like just skip that one.

Dan Austin: [33:33] Go

Mike DeHaan: [33:33] Yeah. Like, find another account. Yeah. You know, like, I know it says we want all of your accounts, but don't send the one that has $12. Because that's the first one I open. I'm like, goddamn it.

Dylan Koch: [33:42] Here's advice to people listening, and my condense should cut their ears off. But when a lender asks for shit, give them the bare minimum until they accept it. Because the more you start digging, like, the worse it can get.

Dan Austin: [33:54] Like And

Mike DeHaan: [33:55] give them give them the stuff that you would want them to see. Yep. Because, like, to your point, like, if if you have a stakeout with $12, but don't see that one, you only send us the one that has the $50 in it, great. I don't care about the other one.

Dylan Koch: [34:06] Yep.

Mike DeHaan: [34:06] I don't

Dylan Koch: [34:06] need the other one. Hold on. What happened on a listing where the we had this is a, like, a first time home buyer. They had the inspection. The lender was asking for an updates from them, not from the me, the who was helping them, who was the realtor, which I hardly ever do realtor stuff. And he long story short is the buyers ended up telling the lender that there's a radon problem at the house. I'm like, you should have never said anything about the inspection. We've got it fixed. They would never have known. It would have been all fine. But then now they needed to retest it afterwards to prove that it was okay. Just like this whole mess.

Mike DeHaan: [34:39] Same thing. Just don't answer questions. Don't provide info. Yeah. Yeah. Alright, everybody. Well, thanks for listening. Again, still waiting for us Namewrecks. Come on, guys. Trying to rebrand this thing. Message me on Instagram, Mike underscore invests, since we move away from the real estate a little bit. You have a few ideas, you're but gonna end up with something that you're all gonna complain about. That's what will happen. We'll choose a new name, and people are gonna be like, I don't like that one. Yeah. And I'm like, you had your chance

Dan Austin: [35:03] to chance.

Mike DeHaan: [35:04] Participate, and you chose not to.

Dan Austin: [35:06] So Give us a name.

Mike DeHaan: [35:08] Either way, hit me up on Instagram, Mike underscore Invest. And thanks for listening, everybody. Talk you guys next week.

Dan Austin: [35:12] See y'all.

Dylan Koch: [35:12] See

Mike DeHaan: [35:13] you. 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 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, 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.

Mike DeHaan: [36:19] Choose to follow and send us a DM to let us know what you think of the show.