The Biggest Mistake Flippers Make When a Deal Goes Bad

Mike DeHaan: [0:00] Whereas if you bring cash like that, that's for sure illegal. But there was also those companies I haven't seen any of these for in a while, I guess, right out of the industry now, that would go and they would pay someone, like, $300 or $500 if they signed a first right of refusal on their property. Whatever happened to those companies?

Dylan Koch: [0:15] Yeah. Well, hopefully, got litigated against those.

Mike DeHaan: [0:18] Because that's, like, super, super sketchy. Because they would target the same people as us, and they'd say, hey. We're gonna give you zero value. But when you ultimately do have to sell that house, we're gonna take all of your profit. Yeah. And it sucks to be you. What's going on, guys? Welcome to collecting keys. I'm your host, Mike DeHaan here with Dan Austin and Dylan Cook. Show before Christmas. It's always a funny time in real estate, I feel like, around this time of year because sometimes it's super slow, but also then you'll get, like, really frantic stuff that happens because everyone's trying to get closed before the holidays if they are trying to do anything.

Dan Austin: [0:51] There's nothing funny about it, dude. People are losing their homes right now because they can't sell them.

Mike DeHaan: [0:55] Yeah. I mean, that is definitely a thing that is happening.

Dan Austin: [0:58] I hope it's not happening. Yeah. I was thinking more of flippers, not consumers.

Mike DeHaan: [1:02] Well, yeah. I mean, some of that, but like we are seeing that with some of the consumers. Although a lot of the headlines have been around the people that have been unable to sell, they're taking homes off the market as opposed to like fire selling because there is that. Yeah. Nobody's fire selling. Not really. Not unless they really have a major reason to.

Dan Austin: [1:17] Even some people that should.

Mike DeHaan: [1:19] I know.

Dan Austin: [1:20] Like some of the folks that we talk to on the lending side, some of the flippers where they're like trying to get into rental properties or I'll just instead of taking a quick loss on or a small loss, I'm gonna turn this into a rental property and make a big loss over a long period of time. It's like But a bad deal,

Dylan Koch: [1:37] you say you have a rental property owner now.

Dan Austin: [1:39] Yeah. You can just throw in a bunch of paper equity on your on your balance sheet too. You're like, overinflate that.

Mike DeHaan: [1:44] So you're so right. And I don't know why if this is a thing of, like, denial that people do or they don't understand how to look like the big picture. Because we have case after case of this right now of people that are, you know, good flippers. Like, they they flip a lot of houses. They know what they're doing, and then they get, like, the one they can't sell. And they go, well, I'm gonna make it a rental, but I'm still gonna try to sell it, like, next year, like, the year after. So what they end up doing is they refinance into a DSCR loan that's at, like, a 9% interest because they want no prepayment penalty. They don't wanna bring anything to close. They, like, want it basically as lean as possible. Their credit sucks because they've been living off of maxed out Lowe's credit cards on all their rehabs for the last little while. Right? So they get a loan that's not that much cheaper than their hard money, and they're gonna try to sell it again anyway. Just if you have the lower offer, just take it. Sure. You're gonna lose $20 right now, but you're gonna lose 35 when you sell it in April.

Dan Austin: [2:40] Yeah. Because you usually don't have any cash flow to cover any of your expenses either, and you're gonna pay longer. You're gonna pay more property taxes, more more insurance.

Mike DeHaan: [2:47] And not only that, you're paying all this money to get into the DSCR loan, right, to do the refinance.

Dylan Koch: [2:51] Yep. Couple grand.

Mike DeHaan: [2:52] That costs money, but people seem to ignore that because it comes out of like the quote unquote equity that they have. Right? It just gets wrapped into the loan. It's like, oh, it doesn't cost me anything. Actually, it does. It costs you a lot.

Dylan Koch: [3:03] Yeah. I actually I mean, a good case study of this personally was I refi ed a piece of property and I was going to then sell it on a land contract to somebody else. That land contract guy lasted one payment. Nice. I wish I would just would have sold it. But now I'm kind of like, well, fuck. I don't really want to sell it now because I just did exactly what Mike described. So, you know, I don't know what I'm gonna do.

Dan Austin: [3:24] But Damn it, dude. Did you kick the guy out?

Dylan Koch: [3:26] Not yet. We're in the process of That

Dan Austin: [3:29] sucks. You idiot. Yeah.

Mike DeHaan: [3:30] I think the stunk cost bias is a really big issue that people tend to have in real estate because stuff does take a while. But, like, realistically, though, if I look back at the losses Dan and haven't had too many losses, just a couple. But if I look at them, we knew that they were gonna happen way before they finally did. Right? And you'd always try to, like, find a way to get out of it or to change the destiny, you know, that you were you had already set up for yourself. You just gotta admit it.

Dan Austin: [3:56] Anytime shit gets weird, you're gonna lose.

Mike DeHaan: [3:57] For sure. Well, I will say what is, like, the worst sort of situation to be in and what really, really just, like, hurts is when you're, like, mid rehab and you have a property that's, like, not sellable and you already know you're gonna lose and you have to keep paying for more shit, that really sucks.

Dylan Koch: [4:13] Yeah. Yeah. It's like, when do you draw the line? Do you actually try to finish a rehab until you can save, or do you just cut your losses and say, I know what I'm actually gonna lose at this point is. Yeah. Right?

Mike DeHaan: [4:23] Yeah. And that's a hard thing to do. Because if you go to the streets and you're bleeding, people are gonna know that and they're gonna really get taken to the cleaners with that.

Dan Austin: [4:31] You're gonna get beat up.

Dylan Koch: [4:32] The longer that you own a property, the more times the shit can go wrong. I know. Especially now with the winter, we had a property where the bottom half is vacant because it's still going through rehab, but they have any heat to it. So they didn't, luckily, but the pipes could freeze. So that could cause other problems. So now it's just another mental thing too that you have to keep track of. Like, Oh, I need to make sure this isn't happening. And it's just The more that you do at one time, unless you have the pieces in place, takes it up a lot of mental headspace and get convoluted pretty quick.

Mike DeHaan: [5:01] Yeah. I think that if you are somebody that is an active acquirer of properties, you know, you're actively flipping properties, you're buying like several houses a month. If you have like the dud, just eat it. Just get your money back. Move on to the next one. And it sucks. It'll hurt your pride. You'll have a good story you can tell people later. Just focus on that piece instead.

Dylan Koch: [5:20] Yeah. You can start with that. I lost all of it in 2025.

Mike DeHaan: [5:25] Yeah. As you tell the story on different things, like the amount that you lost just gets bigger and bigger and bigger over time until one point in one of the stories, you're a junkie for some reason. You'd like you came from a really nice family, but for this particular show, you're gonna talk about your addiction problems. So

Dan Austin: [5:40] What if you don't have money to bring to the table?

Mike DeHaan: [5:44] That's a great question.

Dan Austin: [5:45] When you sell it.

Mike DeHaan: [5:46] Yeah. And so that is something that can happen, right, where you're so far underwater on your loan or on the property that you have to bring money to pay it off. Like, what do you do? So this is one of the big reasons I'm super against, like, interest reserves as a lender, but also as a borrower too. Like, yeah, it's nice to not have to make a monthly payment, but also you can get into a situation where you are now underwater on the deal. You have no equity because the interest has just been added onto your loan principal over and over and over again for a period of time. And then you get to the closing table. You finally sold it. You're gonna lose, and you have to bring $25 to closing. Your option is now either to pay all the payments that you pushed off when you're in probably a worse situation than you were before, or b, destroy your hard money lending relationship and tell them, hey. Sorry, guys. You're fucked and giving you the house back. If it's a, like, individual, I guess you upset that person. That's whatever. If it's an institution, they're gonna foreclose. They can put that shit on your credit. You're not gonna get a loan ever again. Like, Wally's for the next seven years. You're completely screwed. Right?

Dan Austin: [6:43] I bet some guys will give them a loan.

Mike DeHaan: [6:45] Yeah. PMC, fucking crooks. As long as you're an illegal immigrant and you have no money, then they'll definitely give you a loan so they can take your house back.

Dan Austin: [6:52] I mean, I don't know

Dylan Koch: [6:53] if you

Mike DeHaan: [6:53] can say that out loud. I cannot that's what they do. I know.

Dan Austin: [6:57] I just said, don't know if you can say

Mike DeHaan: [6:58] that out loud. Yeah. Oh, yeah. Even better, you know what they do? Pacific Mortgage Company in Spokane. They will sell them the property for way too high of a price that they own to the new investor that's from a different country that has no idea what they're doing. They will give them the loan at a 100% for the fees that are basically maxed out to the highest possible nursery rates, have them pay all this money upfront plus make these payments, and then they take the property back and sell it to the next schmuck. That's what they do. And they're criminals.

Dylan Koch: [7:24] There you go. What a great business model.

Mike DeHaan: [7:27] And fuck those guys. They are the worst people in the industry, and there's a whole ring of them here. And I will gladly list them off my name and go punch them each in the face if I receive

Dylan Koch: [7:36] Well, good. We got Mike heated.

Dan Austin: [7:38] I mean, I'm not gonna go that far.

Mike DeHaan: [7:40] Yeah. It's true. I'm not gonna insult anybody. I'll take that.

Dan Austin: [7:42] But that

Mike DeHaan: [7:43] was a little tense. But I will I will definitely talk trash about them because, dude, they've screwed over a lot of people.

Dylan Koch: [7:48] Well, we've seen even in the off market business since you guys are retired. We've had a lot of deals lately, especially I know they're underwater. They have to short sale. There's no way for us to make it work. If they go to market, they'll be lucky to break even. So a lot of these places or transactions took place 2021, 2022, some in 2023. And it's like they got stretched at the beginning and now the market hasn't been in their favor since then.

Mike DeHaan: [8:14] Yeah, I mean, that is the nature of it. And the real answer is what you have to do is negotiate with the lender, you have to let the property go.

Dylan Koch: [8:20] Yeah. Yep. You US Bank, that's who I'll throw under the bus. They've been notorious for being off there. Mean, obviously, they're a huge bank, but like, they're always terrible to deal with.

Dan Austin: [8:27] They are not good to deal with. I can attest to that.

Dylan Koch: [8:29] Foreclosures, I mean, this is a data point that we can touch on regarding a similar subject. Was like November 2025 was up 20% higher than November 2024.

Dan Austin: [8:39] Foreclosures of single families?

Dylan Koch: [8:40] Foreclosures, like nationwide foreclosure. But most like this says, according to Adam, the data provider, highest in Delaware, South Carolina, New Jersey, and Florida.

Dan Austin: [8:52] That doesn't surprise me.

Dylan Koch: [8:53] That's kind of like yeah. That's kind of sporadic, though.

Dan Austin: [8:54] Jersey surprises me a little bit because they were such a good market in the beginning of the year, comparatively speaking to the rest of the country. Is there a trend line here? What is that in terms of the long term trend lines?

Dylan Koch: [9:05] Well, I mean, it's kind of gradually gone up since 2022, 2023, but that you know, the slope of that line is the biggest between the last year.

Dan Austin: [9:14] I feel like that doesn't count. Maybe like a ten year time horizon.

Mike DeHaan: [9:17] Maybe. I don't know.

Dan Austin: [9:18] Anything between 2020 and 2022 just doesn't count. Yeah. As far as a long term dataset.

Dylan Koch: [9:24] Well, it's hard to base things off of people who got 3% rates.

Dan Austin: [9:29] You can't base any trend lines off the highest peak point and the lowest peak point.

Mike DeHaan: [9:32] Those have to average out, right?

Dylan Koch: [9:34] I mean, I agree. I think it is kind of empirical to say, Hey, the people who even bought at 3% rates are struggling.

Dan Austin: [9:40] Oh, right.

Mike DeHaan: [9:41] Yeah. That's fair. Well, I mean, a big part of that is because they're now the tax increases have come, the insurance increases have come. Like, the actual cost of owning the house has increased a lot. Right. You know? And back then, they were still getting people approved for these houses on like a shoestring level, right? Where it's like, well, your debt to income is $17 there. You know? You're barely gonna make it. Like, don't go and buy too many groceries this week or you're not gonna qualify.

Dan Austin: [10:04] Right. And I think the story with that is, like, that's an extreme way to buy properties and maybe having low interest rates isn't the best way. It's not a balanced market. Like 0% interest rates is not like a balanced market. And so everything's going to pull back to the long term trend lines because you're going to have super high values because of low interest rates and all that shit shakes back out. And guess what? High values come with higher taxes. Guess that comes with higher insurance premiums. In a time that insurance is wacky anyways, all costs are going up because of that 0% interest rate environment. Right? The reason why insurance is going up is partially due to weather events like in these places like Florida, but also because the cost of rebuilding structures has gone up because inflation has been driven up by a long term service and interest rate environment.

Mike DeHaan: [10:49] I mean, that's a big part of it. And also too, a lot of those insurance companies, they hold a lot of their reserves in commercial real estate assets that have plummeted in value.

Dylan Koch: [10:55] Yeah, they have to mark to market it, their balance sheet looks awful, which I don't think they have to. I don't think they have to until it actually trades hands.

Dan Austin: [11:03] Yeah. I think a big driver is like, the two big drivers are the actual drivers or the weather events in these certain areas are driving costs up. Inflation just is what it is. It hurts everybody.

Mike DeHaan: [11:15] Yeah. And I mean, there is also a piece where people have to pay for it so they can kind of have whatever they want, up to a certain level.

Dylan Koch: [11:21] Mike, with you being, I think the audience members know this, I guess a little bit more left wing than most real estate investors. What's your opinion on regulations around development, around building new housing? That's a very broad question.

Mike DeHaan: [11:35] Yeah, that's super broad, right? Because there's the multiple pieces of that. Because there's the actual land piece of it, which is one question. There's the actual building piece, is where you talk about density and those kinds of things, I think is very, very different.

Dylan Koch: [11:48] Density and my biggest thing when I think of this because I see this locally is people claim quote unquote affordable housing and they get these tax credits and stuff, but they just build shit boxes.

Mike DeHaan: [11:57] They build shit boxes. Yeah.

Dylan Koch: [11:59] And and they're still I wouldn't call them affordable. Like, they're still at market rents. So I don't know.

Mike DeHaan: [12:03] Well, the problem is is kind of to Dan's point, the cost to build everything is so high. Cost of debt is is relatively high as well. Now it's not fruitful to build affordable housing. Agreed. That's not even an opinion. That's a mathematical fact.

Dan Austin: [12:19] Wait. It is fruitful for the people building it. Let's be honest there. When you say affordable when you use affordable housing term.

Dylan Koch: [12:26] They're getting, like, tax credits and stuff, like, you know, some off the books stuff. But if you just said a straight

Mike DeHaan: [12:30] P and L, I

Dylan Koch: [12:31] don't think it is. Like, you have to build it 200 square foot. Yeah. If you look

Mike DeHaan: [12:34] at straight P and L

Dan Austin: [12:35] When you say housing that's affordable to all Americans, I guess that's what I would

Mike DeHaan: [12:39] Yeah. Well, because that's where the main gap is in in housing, right, is the lower income group. Because, like, that's what they mean when they talk about affordable housing.

Dan Austin: [12:46] Yeah. But, like, those people that are building the affordable housing are making a shit ton of money doing it.

Mike DeHaan: [12:51] Are they?

Dan Austin: [12:51] Because they are building it.

Mike DeHaan: [12:52] Yeah. You're talking about the builders, not the owners. Yeah. Like, the contractors building it.

Dan Austin: [12:56] Yeah. No. Because the owners don't get to own it, dude. It's the government owning affordable housing. Right? Well, that's the idea. Right? And then they somehow maybe turn it over in some scenarios. But, yeah, when I think of, like, the affordable housing, like, actual affordable housing that's not getting token you know, the token term, but, like, houses that working Americans that may be asset limited can actually afford to live in and pay their own way. It doesn't exist unless you are a billion dollar hedge fund, and you have the ability to do that because they are building them cheap enough. But guess what? They can drive the costs up to where it's not affordable for Americans to own that home long term.

Dylan Koch: [13:31] I mean, there are so many homes in Cincinnati that are brick, Cape Cod, three bed, one, one and a half baths, 1,200 square feet, one car garage underneath. There's literally neighborhoods for all these things. No one is building those anywhere. It's all stick. It's all wood construction. They're two story, but they're fifteen and sixteen hundred square feet.

Dan Austin: [13:51] Ugly, ugly shitbox. Ugly.

Dylan Koch: [13:54] Yeah. It's just a rectangle with a driveway in the front. I just like, they still sell for, I know, a new build here, $303.50 in a certain neighborhood.

Dan Austin: [14:02] Yeah. Same here. 400 here.

Mike DeHaan: [14:04] So I think that's the difference is if you look at first time I bought in Spokane back in, I guess, 2017 was a spec home, like a cheaply built spec home. I bought it for $200,000.

Dan Austin: [14:14] That's crazy. That's such a good price.

Mike DeHaan: [14:17] Which is crazy. Right? I sold that same house two years ago for 530,000.

Dylan Koch: [14:22] Oh my god. That's awesome.

Mike DeHaan: [14:23] I bought it literally for yeah. It was 205,000. I sold it for 530 from 2017 to 2023 when I bought it.

Dylan Koch: [14:30] Were you married then? Well, I guess when you sold it.

Mike DeHaan: [14:33] When I sold it, yes.

Dylan Koch: [14:34] Because then you get the whole cap gains

Mike DeHaan: [14:36] for free.

Dylan Koch: [14:36] Is that my question?

Mike DeHaan: [14:37] Yeah. So so the thing doubled in value essentially. So now they are building the similar style houses to the one that I I did, but they are on lots that are slightly smaller, and the house are basically butted up against each other. We have, a big yard and stuff.

Dylan Koch: [14:52] Yeah.

Mike DeHaan: [14:52] And that same house now is going off the comps of mine that just sold. And so now that new build starter home that was the affordable home is at that $500,000

Dylan Koch: [15:00] price point here. Yep.

Mike DeHaan: [15:01] Right? But I get it's a cheaply constructed house. Like, I remember being in that thing. And like when we would open the garage, dude, because it was a split level, so we were upstairs. You'd open the garage and it would wake up anybody that was sleeping in the house because it was so freaking loud coming through the floor.

Dan Austin: [15:16] So loud.

Dylan Koch: [15:16] Yep. No insulation really anywhere besides the exterior. Yeah. It's these two by fours.

Dan Austin: [15:21] Bare minimum construction standard.

Mike DeHaan: [15:23] Yeah. If we were in our, like, our upstairs kitchen and, like, the neighbors outside on their patio having a conversation, you could hear

Dylan Koch: [15:29] that. Right.

Mike DeHaan: [15:30] That's sort of how poorly it was, and, like, the heat and everything was weird. But it's all like but that's now a $500,000 house. That was the affordable housing seven years ago.

Dylan Koch: [15:38] Every developer I've ever talked to, though, they want density right now. They want these lot sizes that are, you know, super tight so they can build more houses in one geographical footprint. It's really hard to get, you know, half acre, acre new build. Those are luxury homes.

Mike DeHaan: [15:52] Yeah. Which I think is fine. You asked my opinion on that. I think that's what we should be going is more density apartments, things like that. The problem is they have to be built in a way that, a, it isn't like people just taking advantage of the government, like Dan said, where they're like, they're the contractor that just also happens to be the mayor's kid. They're building this thing for 180% or more probably 300% what it actually costs to build. And so it takes a bunch of extra money. And then also too, if they are going to have it be like open market for things where like it's not subsidized rentals, the young couple that moved there, they may both have two starter jobs, they can't afford to buy a home or whatever. One of the issues with a lot of these places is they tend to, like, put them in the parts of town that no one wants to be in. Mhmm. Right? So, like, they're in, the super, like, shitty parts. They're trying to create density within the town, which I think is fine. It's just you need to actually look at, like, the big picture. You can't just say, like, well, we have this lot downtown. Let's build this starter home apartment complex, but it also happens to be across the street from the homeless shelter and, like, by where all the meth ants live.

Dan Austin: [16:56] I think that's a twofold development decision by the city. Why do they let a homeless shelter exist down there anyways? Spokane, I don't know how it is in other downtowns, but Spokane has a particularly bad standard around allowing that because you're right. It's a problem. And then they're like, we're gonna make tax incentives for developers to build in the worst part of town right across from the shelter.

Mike DeHaan: [17:13] I know. It's an issue. And I I think it's managing expectations for people as well. There's also a lot of people that feel entitled when they become an adult and they're starting money that they're like, I wanna have my own house with space and, you know, I wanna have like half an acre or an acre or whatever. Yeah. Like it's like you don't you don't get that shit when you're 20

Dan Austin: [17:30] Not anymore you don't. In the seventies.

Dylan Koch: [17:32] This is the boomers that hear. We didn't have, you know, flat screen TVs. We had one TV in the house, and, like, it was we had a family of six and twelve hundred square feet and all this kind of stuff, which I see I there is a little bit of an argument to that, but

Mike DeHaan: [17:43] For sure.

Dylan Koch: [17:44] It is different now.

Dan Austin: [17:45] The way I logic that argument is like how I try to, like, see both sides of it is that there is a lot more things for discretionary spending today than there were in the sixties, seventies, and even Yeah. Is. Way more. I mean, you're paying to get your shit delivered to your house for food, for groceries, all this stuff. You have all these other things that just did not exist.

Mike DeHaan: [18:05] I wouldn't even say discretionary spending. Right? There's a lot more, like, mandatory things. Like a cell phone bill is a good example. Right? Or Wi Fi. Yep. Those are things that you need to have to function in modern society.

Dan Austin: [18:16] I'm gonna go back to my old man thing of, like, how many people are walking around $45 Stanley cups to drink water out of? That just was not a trend or or even exist. That didn't even exist until, like, ten years ago.

Mike DeHaan: [18:29] You know what I mean? Like Didn't even drink water ten years ago. I'm pretty sure I went I went through college, and the only time I I drank water was when I was hungover. I was at the gym.

Dylan Koch: [18:36] Yeah. Yeah. That's it.

Dan Austin: [18:38] I told Mike. But back to your point too, Mike, with that, there's a lot the capitalism, this is where it does hurt, right, is everything is more subscription based. Right? So you do have Internet. You do have self-service. I mean, they're converting cars as they can into a subscription based now. You know what I mean? Not the lease itself, but the technology that's in the car, you can pay monthly for it. Like, oh, you wanna be able to unlock your car today? It's $1.99.

Mike DeHaan: [18:59] Yeah. I forget which car brand it was, but in order to use, like, the remote start feature, it was a monthly subscription you had to pay.

Dan Austin: [19:06] That's my mother-in-law's Kia, and I know it's like that. She has, like, the the Kia with all the with all, like, the high end stuff in it.

Dylan Koch: [19:12] Kia used to be, a monthly subscription not to get stolen.

Dan Austin: [19:15] I know. Right? Yeah. Right?

Mike DeHaan: [19:17] Yeah. Yeah. Every now and then, like, the the mafia just comes to, are you paying your subscription? Yeah.

Dylan Koch: [19:21] Yeah. We

Mike DeHaan: [19:22] don't take your car to Yeah.

Dan Austin: [19:23] I'm gonna break your kneecap.

Dylan Koch: [19:24] The Tesla example, this is like Austin, Texas, right? Because everyone like puts the Zillow map up. It's like, look, they overbuilt and now people are giving away their rents for free. You get two months free concessions. And then they counter that as New York where they have all the rent controls and stuff. I'm not asking for an answer here, but I think that is the difference of opinion it's good to talk about.

Mike DeHaan: [19:43] Fundamentally, I dislike, and just my personal opinion, is I dislike the American standard of everything becoming sprawl. And stuff just gets further and further and further away from the city center. And that's how they do affordable housing is they build like another cookie cutter neighborhood, another cookie cutter number. And there's, you know, cities all over the country that like that is the entire thing. Right? Even like LA. LA doesn't really have a downtown. It's basically just like sprawl for as long as the eye can see.

Dan Austin: [20:08] LA is nuts.

Dylan Koch: [20:09] And I would say

Mike DeHaan: [20:10] if things around for a while, start to develop their little like subcultures. But I do think in smaller towns, which is most cities in America, that tends to detract from the actual culture that can exist there. Yeah. And instead what it does is it creates these micro cultures around things like people's churches, neighborhood HOAs, all these sort of things, which in my mind is not like a healthy way to have like a country and a society because it creates an echo chamber that's based off of like literally people that are within a 100 yards of you or like a mile of you.

Dylan Koch: [20:44] Yeah.

Mike DeHaan: [20:44] I don't personally think that that's a great way for any country to sort of be set up if you want any sort of uniformity. Right? Or you want any sort of you want people to commingle.

Dan Austin: [20:55] So if everybody, like, thought the exact same way is what you're saying because they lived in the same city?

Mike DeHaan: [21:01] Well, no. I'm saying that's what happens is people end up in, like, their own little blocks where everyone does think exactly the same way. Right?

Dan Austin: [21:08] Yeah. I think that's gonna happen anyways because if you think about it, just think about the political spectrum. Like, if you go to any major densely populated city, this is my theory, is they're typically blue. Right? Like, even if in a red state, you'll see a populated city is blue. And because when you live in a tightly packed area, you have to rely on infrastructure and government more than you do in a more rural area, more sprawled area. Because you have to because you have if the sewer backs up, you're fucked. Like, everybody there is fucked. So they have to rely more on government, which typically would be a more democratic view. Right? More government, more infrastructure, more community around supporting us. And so I think the argument for me would be is you would have less diversity if you had to be that way because then everybody's living together as opposed to in different cities or different areas. I agree in a sense with you on the urban sprawl thing. I just don't agree on the ideology piece of it.

Mike DeHaan: [21:59] Yeah. I mean, it's always tough to say. Because if you look at, like, the larger like, the most blended cities, places like New York City, like, the prime example where everything is so densely packed, you don't see a lot of the same issues around I

Dan Austin: [22:11] mean, murder each other there.

Mike DeHaan: [22:12] People murder each other, but that's also because you're on top of each other. They go fucking crazy. Exactly.

Dan Austin: [22:17] Well, it's easy pickings is what it is. Right?

Mike DeHaan: [22:19] But I don't know. I think fundamentally, I don't like the sprawl. I also think that it creates a lower

Dan Austin: [22:23] I think it reduces culture is what it does.

Mike DeHaan: [22:25] It reduces culture, and there there is, like, less opportunity to, I would say, like work like a decent job. There's less like life satisfaction. People are commuting. People have like less options for like to participate in different things.

Dan Austin: [22:38] You know what is a great example of this? And and this I think speaks to why this is. And the reason why it's like this in The US is because we have more land than any any fucking country. Right?

Dylan Koch: [22:47] Yeah.

Dan Austin: [22:47] So it's it's cheaper and easier,

Mike DeHaan: [22:48] and that's how capitalism is

Dan Austin: [22:49] always gonna find that. When you fly into Vegas or you fly into Phoenix and all you see is flat brown desert, and then you just see another block. It's just an extension of the road infrastructure. It's just like a square block with, like, 500 more houses in it. And you can see in five years from now, and it's just gonna keep going because there's no incentive from the builder standpoint to do that because building up usually costs more. Right? So, like, I'll just buy this cheap dirt land, and every time they can add an extension to the sewer system, they just keep going on out.

Mike DeHaan: [23:18] Yeah. I personally don't like that setup. Because, like, for example, when we were in Scottsdale, we did the first Keyes Con event a couple years ago. Like, yeah. You know, we got this Airbnb. That's cool. We're gonna go set up to play to play fucking Topgolf. We had a whole group go play golf. Topgolf. Oh, yeah. It's in Scottsdale. Can't be that far away. No. An hour. Yeah.

Dan Austin: [23:36] There's two Topgolfs in Phoenix area too, by the way.

Mike DeHaan: [23:38] We went to the close one.

Dan Austin: [23:40] Yeah. Close one.

Mike DeHaan: [23:40] You know? And and it wasn't just like we're going through trap. We were on the highway for fifty five minutes of that hour in the same city.

Dylan Koch: [23:49] Yeah. I remember

Mike DeHaan: [23:49] that. Like, that's ridiculous. Why is it like that? You know?

Dan Austin: [23:52] Well, that's why it's honestly well, here's the thing on that sort of stuff.

Mike DeHaan: [23:56] Is it and Stacy

Dan Austin: [23:57] and I talk about this all all the time. It's like, it's really hard to find your home in a city like that. Phoenix is a great example because it's almost all looks the same. It's all brown shopping centers and brown houses that are usually one to two stories. There's nothing tall. I mean, downtown has some tall skyscrapers and stuff, but generally speaking, this sprawl. So it's like, do I live in North Scottsdale? Do I live in Old Scottsdale? Do I live in Mesa? Do I live in I mean, it all looks the same. It's like really hard to envision that being like a place you would call home.

Mike DeHaan: [24:25] Slight different way of what I was saying before is then what happens if you do end up in those areas because it's all the same brown houses in the same part of town or whatever. Your home, right, your community becomes whoever just happens to live directly around you. And it's very, very hard to branch outside of that because nothing is accessible. You know, you can't walk anywhere. That's good point. Yeah. That's a good point. You can't really travel anywhere unless you want to commit serious time. Yeah. You know, to do that. Right? And make that part of your routine.

Dylan Koch: [24:50] There's a book that you guys can both read for homework. It's called strong towns and talks about a lot of this. It talks about, like, that culture aspect of, his synopsis was he likes new builds that are the mixed use at bottom and apartments up top, but you don't have the big name franchise like a subway or something. You have local people that have their own bakery and shit. But he goes to the numbers of, when developers build this stuff, like you said, Dan, they attach it to the sewer line, they put it in their own waterworks and stuff. But then once they sell the development, that maintenance is now in the city. And so they don't really have the incentive to do it the first time. And then these things only have ten to fifteen year half life, but developer gets off of scot free. And then the city just has this permanent liability so they could build more housing. Anyway, it's a good

Dan Austin: [25:35] Where Mike and I live is a great example of that, and this is the thing that I hate so much about the area specific that Mike and I live in. There's only what it'd be like, basically, like, four main roads for all the housing up here, and then all the rest of it's filled in with dead end development. So you can't easily navigate. Like, you could live feasibly right next to somebody, like, literally next door, and you have to drive five minutes around your development to go back into their development to go to their house if you're driving.

Mike DeHaan: [26:00] So that seems dumb to me. It's really dumb.

Dan Austin: [26:02] It's so dumb. And it's terrible city planning. In my opinion, it's not the developer's fault. Sure. They're doing what, like, the shittiest thing ever and it's the cheapest, most efficient way to do it, but it's the city or the county who approves that. Like, that's their fault for having such bad planning and visioning for their city. Because not all cities are like that. Like, of these master plan cities that were built, they have, like, those mixed use. We kinda have, like, a master plan neighborhood, Mike, down, like, where Kimmel Yards is at kinda near our downtown. That was set up and planned from the beginning to be its own community and has everything it would need to support it. You can do that. It just takes planning and effort and not some loser city planner just approving something.

Mike DeHaan: [26:40] The problem is that had to have happened so long ago. Right? And it would have had to have been from people that already understood that, which is when you're in a newer cities, particularly out in the Pacific Northwest where all the cities are from, like, the late eighteen hundreds at the latest. You know? I mean, Washington was even a state until, what, 1890?

Dan Austin: [26:56] Probably. Somewhere in there.

Mike DeHaan: [26:57] Yeah. Yeah. So, like, no one had moved out here to had learned those lessons. You know? Like, if you're talking to, like, the larger metros in, like, Northeast, they'd already had people that had been sort of figuring this stuff out forever. But I don't know. And then, like, it makes it so tough too from, like, a a real estate investment standpoint because what happens when you're in these sort of sprawl focused areas is you have all these developers that are incentivized to make it so that only they can develop houses and nobody else can because then they can basically restrict the supply of it. You know? Because if they don't do that, then essentially everyone could go out and start building houses, and now you have an oversupply and the values go down.

Dan Austin: [27:32] Well, that goes back to the national homebuilders on that point is that they do land bank in areas. And so they can and they did it in Spokane when they moved in here within, I would say, within inside of five years. They basically I mean, they bought hundreds and thousands of acres and are developing them as they want. So they're kinda squeezing it out, and they can come in with the cheapest products no matter what because they can adjust their interest rates. They can do all sorts of stuff. And then they become kind of the sole developer. And that's what's happened particularly in Spokane talking to a of these builders. Like, it's really hard to just be a builder that does three or four houses a

Mike DeHaan: [28:02] year. Yeah. And I would imagine there's a lot of other cities that are very, very similar to that. Totally.

Dan Austin: [28:07] Yikes. We're not. We're new to that game.

Mike DeHaan: [28:08] And it makes whole thing artificial.

Dylan Koch: [28:10] Who is the president that like the highway initiative was it? I don't wanna say it because I'll forgive.

Mike DeHaan: [28:15] It was post World War II because during the Cold War.

Dylan Koch: [28:17] Yeah. But there's a highway that runs through right I 75 runs through Downtown Cincinnati. This is what it used to look like and this is what it looks like now. And what it looks used to look like looks so much better than what it looks like now, at least aesthetically.

Dan Austin: [28:30] Really?

Dylan Koch: [28:31] But then this is like, you get the logistics companies, you could be anywhere, but I don't know, there's obviously positives to that, but there's also some negatives that no one really talked about for a very long time.

Mike DeHaan: [28:39] Yeah. It was Eisenhower too, by the way, that that

Dylan Koch: [28:42] I was gonna say that. I don't wanna be wrong on there.

Dan Austin: [28:44] Great president.

Mike DeHaan: [28:45] Yeah. I don't know. I think that, like, big picture, the density is the is the thing that we need, and then there has to be a cultural change where people just become more comfortable with that.

Dylan Koch: [28:53] Yeah. No one's gonna put on Instagram, I just bought my $250,000 three bed, one half bath house, though. Like, I think that's part of it.

Mike DeHaan: [29:01] I think

Dylan Koch: [29:01] the social media aspect is part of it.

Mike DeHaan: [29:03] Well, also too, I think that there's a whole new generation now that doesn't necessarily wanna own homes. Sure. Yeah. Because, like, there's certain things that are millennial flexes, you'll see this say. And it it's very, like, homely sort of stuff that's it's kinda pointless. And so I'll see, like, jokes about this, and it'll be like, oh, I got my new garage fridge, and it's, like, perfectly lined up with, like, drinks. That's such like our generation sort of, flashlight. That's fucking sweet. Right? Or Yeah.

Dan Austin: [29:27] Got some Celsius in there, some beers, some leftover Totally.

Mike DeHaan: [29:31] Yeah. You know, like, something like that or people that I'm trying to about some of other ones I've seen that are kinda weird. If you have, like, a setup in your garage where you can, like, moose around and have, a beer pong table out there.

Dan Austin: [29:41] Right? Or a full fucking commercial gym. That's the new flex. I'm talking about Mike here.

Mike DeHaan: [29:46] Well, stuff there. You know, if you have your own home, it's, like, very sort of easy to do, but if you're, like, renting, an apartment or something isn't. And Gen z sort of people don't really care about that because what they really want is they they want security, right, which you can generally get in an apartment. They want mobility. They want flexibility. They don't really care about having their place, it seems like quite as much. I know they've been doing studies on this as well. So a lot of them have commitment issues and different things too. So they want to be able to change their mind. And buying a house is definitely not something that you can just change super easily.

Dan Austin: [30:20] Yeah.

Dylan Koch: [30:21] I think for at least for me and, you know, maybe this is a small minority people, but like pursuing a wealthier life is not even on the radar for a lot of these like younger kids, I feel like.

Mike DeHaan: [30:29] Or their standards for wealth is just significantly higher. There's that sales been around for a while and it was like, is considered a good salary?

Dylan Koch: [30:37] Oh, yeah.

Mike DeHaan: [30:37] Gen z's was, like, $700,000. It was, like, so high. Like, that was what they considered, like, good. And then, like, baby boomers were super low. It it was, like, a 110,000 millennials. It was, like, two fifty. And so it was like so much larger because that's just how their view of success and money has been skewed by social media. You know? And they're following all the YouTubers that are like their age that are printing all this money. You know? They have like the chick they went to high school with that started an OnlyFans that made fucking $3,000,000 last year. Right? Like, you have all these different sort of scenarios where people can make a lot of money. That's an extreme minority of the population. But when they are doing it in a way that feels so personal, it's hard to understand the difference between them and you.

Dylan Koch: [31:23] And it happens so quick to them So quick. They're they're literally overnight success. Like, that's a cliche to

Mike DeHaan: [31:28] a

Dylan Koch: [31:28] Yeah. Business. But, like, they are literally overnight, like, successes.

Mike DeHaan: [31:31] For sure. The 20 year old OnlyFans chick making several million dollars, I really hope that she doesn't have a ten year origin story because that's fucking problematic. Like, honestly, that's super problematic. She doesn't have the rags, the riches hustle.

Dan Austin: [31:43] You gotta perfect your talents, dude.

Dylan Koch: [31:45] Jesus Christ. You

Dan Austin: [31:47] gotta perfect it.

Dylan Koch: [31:48] Last question, then we'll jump off here. Do you guys have an office for your lending business?

Mike DeHaan: [31:52] No. We pay for one. Well, it's part of our of our split from back at home buyers. We still have a lease

Dylan Koch: [31:57] Oh, okay.

Mike DeHaan: [31:57] For the next six months.

Dan Austin: [31:59] We have a rug in there that's just lends a lot.

Mike DeHaan: [32:01] Yeah. We talked about getting one, but then when we were trying to hire more, we couldn't find any local talents. We ended up hiring a bunch of overseas talent, so it just doesn't make sense.

Dan Austin: [32:08] We looked at one recently. I don't know. There's pros and cons for us, yeah, none none of our we have one staff member that lives here in Spokane.

Dylan Koch: [32:15] Gotcha. We haven't sent a lease yet, but I think we're going to for the following year. And I don't know, I've always gone back and forth on this and like staying lean and minimizing overhead. The intangible side of that is okay, you can build off momentum in the office, you have a dedicated workspace instead of, you know, up in our spare bedroom.

Mike DeHaan: [32:34] Yeah.

Dylan Koch: [32:34] So we'll see how it goes. I don't know.

Mike DeHaan: [32:36] How many staff members? You just have one?

Dylan Koch: [32:38] So one acquisitions guy, and then I have that part time assistant that's local. But then I just made the acquisition guy commission only.

Mike DeHaan: [32:45] So his time's numbered?

Dylan Koch: [32:47] Well, I'm not saying that. I'm just saying that I get

Dan Austin: [32:51] Mike is saying that.

Dylan Koch: [32:52] I could have room to bring on more people without increasing overhead.

Mike DeHaan: [32:56] Yeah. Yeah. I mean, it's really hard when you're a small company because like, so there's three people in the office. One person doesn't show up. You don't wanna go on that day. You have your kid has a doctor appointment. Right? And now it's just the assistant and the AM. And the AM's like, well, this is awkward. So I'm gonna go walk a house. And they leave. Now the assistant's just, like, sitting there, like, on their computer part time.

Dylan Koch: [33:16] Yeah. I mean, that shit might happen, but I also think, like, it builds like, if they Google our, you know, our name or business name or whatever, like, it's a great part of town. Like, it might just build some credibility, and there's definitely pros and cons. I'm not saying there's not trade offs. I'm just we'll figure it out. It's worth it.

Mike DeHaan: [33:29] Yeah. Like, our office that we had for back at home buyers is sweet. It was like a condo loft downtown, walking distance and stuff. It was great to people were there. They wanted me for coffee, just like walk down. Like, oh, yeah. Come back, check out the office. It was a cool setup. Yeah. But like, we just don't really have the people for it. And we were originally trying to find a bunch of people locally, then our plan was to have an office. We could have everyone in, and it just didn't work out that way. And so, you know, right now we're just paying our share of the lease until it expires here in six months. And then what the new owners of company just had to do was up to them.

Dylan Koch: [33:59] Sure. Yeah. So no plans for like in the in the near future, I guess, for the lending company. It's

Dan Austin: [34:04] kinda challenging. I don't know. I almost like this concept and I'll I'll test this on the group. It's like WeWork concept, less WeWork though, but more like let's rent it by the week or the day where you if you have a local staff, you can kinda meet up there. You don't even have like, you could pay like a monthly subscription and use the meeting rooms. I don't know. Like, I feel like something like that is actually makes more sense for us at this point.

Mike DeHaan: [34:26] Yeah. Or like, personally, honestly, what I would like to do is have a place that we owned that we could sublease out to other people that we're trying to do that model, that we're like a smaller company. Right? Because then it covers the overhead. You own an asset, but then also you can have somewhere that your staff can come in and it's not like an empty place. Because I will tell you from having that office that we had, it sucked if you were like, you showed up and like, well, I guess I'm the only person here today. Why the fuck did I drive down here?

Dylan Koch: [34:52] Sure. Yeah.

Dan Austin: [34:53] Yeah. Well, and there's also no other social aspect because this is just our office. Right? There's nobody else to even interact with. And and it's hard to work alone in a dark like, I'll walk in an eye's office and have a window.

Dylan Koch: [35:02] That sounds awful. Like a dark

Dan Austin: [35:04] room by yourself where, like, I could just do this at home where I have a fucking pantry with food in it and snacks.

Mike DeHaan: [35:09] Yeah. There's nuances to it. But You want a office hack.

Dylan Koch: [35:12] You wanna buy an office, rent out the spaces, cover your costs,

Dan Austin: [35:16] Wait. Wait. Wait. Okay. Level 2.0 of that is I want there to be a gym in there. Mhmm.

Mike DeHaan: [35:20] I want there to be

Dan Austin: [35:20] a dope ass coffee shop, a place I can get a craft cocktail. I want my whole life

Dylan Koch: [35:24] in there. Okay.

Mike DeHaan: [35:25] Yeah. Like that the Collective place in Austin that I went. That

Dan Austin: [35:28] place is sweet. That is what I want.

Mike DeHaan: [35:29] Yeah. It it's like a super expensive gym, they have, like, an entire, like, lifestyle thing, and they have these suite offices. They have a podcast recording studio. Is it called Field Collective? It's just called Collective.

Dylan Koch: [35:39] We have one of those in Cincinnati, and it's it's like the same thing you're describing. It's awesome. Don't get me wrong,

Mike DeHaan: [35:43] but it's also

Dylan Koch: [35:43] like forty minutes from my house.

Dan Austin: [35:45] So Yeah. See that? See, it's gotta be convenient.

Mike DeHaan: [35:47] See, if we didn't have this damn urban sprawl, it could be downstairs.

Dan Austin: [35:50] Micah's 100% right on this.

Mike DeHaan: [35:51] I'm out in

Dylan Koch: [35:51] the suburbs, so I I get it. It's a thrill thing.

Mike DeHaan: [35:54] Yeah. You're out in the suburbs. You don't have a choice. That's how America works. Because you're not gonna live downtown with the crackheads. Why would you do that? That's ridiculous. You can't

Dan Austin: [36:00] do that, dude. You got a kid now. You gotta be in the suburbs.

Dylan Koch: [36:02] Yeah. That's what my wife thinks. Exactly.

Dan Austin: [36:05] Get that minivan too while you're at it.

Mike DeHaan: [36:07] No. There's plus and minuses. I would say go in with, like, loose expectations, and then there's probably a fifty fifty chance that in, like, six months, you're like, cool. Now I'm just paying for this empty space that I'm not gonna renew in, like, another six months. We'll see. What's the cost of

Dan Austin: [36:20] your lease? Is this super cheap? Like, you're just getting, like,

Dylan Koch: [36:23] To me, it'd be like 1,100.

Dan Austin: [36:25] Okay. So it's not that cheap. I was thinking if it was $400, but it's not super expensive either.

Dylan Koch: [36:30] I mean, no, but it's it's almost 1,500 square feet, and I'm splitting it with another guy that's in the same business. And it's got this conference room. It's got two private baths. Like, it's nice. Like, don't get me wrong. It's nice.

Dan Austin: [36:41] That sounds really nice, actually.

Mike DeHaan: [36:43] And like also, you'll figure out if it's for you or not.

Dan Austin: [36:45] You kinda don't know until you

Dylan Koch: [36:45] try it. Exactly.

Mike DeHaan: [36:46] Cool. Right on, guys. Well, next week will be our last show for the year. So come check that out. We're gonna do I'm gonna call high low buffalo. Basically, we're talk about our highs for the year, lows for the years, and something that we did not expect. So it should be a pretty fun one. So definitely come and check that out next week, guys. Alright. Thanks for listening, everybody, and we'll talk to you guys next time. See you. See you. This episode is sponsored by Sir Lenzalot 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 if 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.

Mike DeHaan: [37:56] 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.