The New Wholesaling Law That’s Changing Our Market

Dan Austin: [0:00] Some random person with the same last name in Spokane has the cops literally forcibly remove our buyer, the technical owner.

Mike DeHaan: [0:10] What's going on, guys? Welcome to the collecting keys real estate investing podcast. I am Mike DeHaan here with my cohost, Dan Austin, Dylan Cook. And this is a real estate business show. We talk about real estate business stuff. And Dan, know, has a really fun story he wants to open with that he has been, like, freaking teasing me with for the last twenty four hours. He's told me multiple times that he has this great story that he's saving for the podcast. And so I'm ready to either be amazed Wow. And entertained or so disappointed because it's not nearly as cool when you try to retell it and it just doesn't work out.

Dan Austin: [0:45] It definitely won't be cool because I've lost the emotion, but I will tell the story. It has

Mike DeHaan: [0:49] to do Let's get it fired up. What what can we do to get get Dan's emotions going first? What if we talk about how putting together seller finance offers for for for people, you know, that that don't understand math

Dylan Koch: [1:03] For disabled veterans.

Dan Austin: [1:05] That don't understand math and are stupid at negotiating.

Mike DeHaan: [1:09] What if we talk about how we have a numerical glitch that we discovered in our lending calculation software, and so you're gonna have to redo your bookkeeping again next week for the thirty seventh time. Will that get you fired up?

Dan Austin: [1:23] I'm so calloused on that stuff now.

Dylan Koch: [1:25] Actually, you have to go back through and redo three years of prior tax returns because one thing got messed up.

Mike DeHaan: [1:30] That's me. Dude, I just got another $7,000 freaking tax bill. That's a surprise.

Dan Austin: [1:36] Oh, by the way that I screwed up your taxes, pay some

Mike DeHaan: [1:39] more Yeah. That's literally what happened. Then like your CPA is now ghosting me. I can't even get my fucking loan that I'm trying to get with these tax returns because he's just disappeared off face of the earth and went to Hawaii. So there I'm fired up. That will get on. Will be fired up. Woah.

Dan Austin: [1:52] Let's go. Okay. Let's rewind, like, three years. Remember that time our seller got kidnapped? Yes. Jeff Shit goes full circle. Circle. It goes Right? So this world that we live in, it really is a small world. So anyways I don't

Mike DeHaan: [2:06] know how you're gonna tie this back in because that's like

Dan Austin: [2:09] This is crazy, dude.

Mike DeHaan: [2:10] That story, I think the interesting thing is that story is like one of the reasons we started this podcast.

Dan Austin: [2:15] Is this what I say? It's full circle. Shit just doesn't go away. If you stay in this business long enough, shit just keeps happening. And sometimes it

Mike DeHaan: [2:20] almost think it's episode ends up three. We talked about that.

Dan Austin: [2:22] Is it really? Wow. Golly. And we're at episode, what, like four something?

Mike DeHaan: [2:26] 04:50 or something. Yeah.

Dan Austin: [2:28] I'm sitting at our title agent's office who we've been working with since then. Right? Since that guy. You know what I mean? And she's like, hey. I just I gotta tell you something. I was like, oh, what? She's like, oh, man. So she's like, you remember the house on G Street? I'm like, yeah. Okay. And so she's telling me the story. So she's like, I guess, let me back up and put the context in the story. So we got the call in from a seller who's in Texas. Properties here in Washington. Cool. Whatever. It's a vacant property. The owner at, like, some point put, like, a giant six foot chain link fence around it. All the windows are boarded up. Water shut off. Like, you can't live in the property. Nobody lives in the property. I go in there to walk it. Backdoor's unlocked out of all the windows that are, you know, screwed shut and all that. And clearly, somebody had been squatting in there, but it wasn't like they had, like, trashed it and ripped out all the copper. It was just like they were just like transients kinda hanging out there. Right?

Mike DeHaan: [3:23] This was not the guy that we bought the mobile from. Was that the guy who was squatting in there?

Dan Austin: [3:28] No. No. No. No. You jump ahead of yourself. That would be crazy. So so yeah. So it's vacant anyways. The guy, like, whatever. We do deals with people out of town all the time. So we're like, yeah. Okay. Cool. And so there's a lot to the transaction that I kind of knew, but I didn't know as far as like, it was really weird towards the end of the transaction. So the guy, we we order a mobile notary for his house in Texas. He's like, I'm not in Texas. We're like, well, told us you were in Texas. And he's like, no, I'm in Ohio. And he's like, I'm up here for whatever. Daughter's graduation. Okay, cool. So get the new address to his hotel room. And the mobile notary shows up and he's not at the hotel room. And we're like, okay, where's he at? And the mobile notary is like, well, I gotta go to the hospital. So the mobile notary goes to the hospital. This guy's nowhere to be found. She goes to hot checks herself in the hospital. They tell her like, hey, you need to have emergency surgery. This guy calls her, like connects with her. Hey, I'm back in my hotel room. She literally forcibly checks herself out of the hospital, like rips the shit off of her arms kind of shit, goes to sign this guy. Right? Comes back to the hospital and immediately has gallbladder surgery to remove her gallbladder. But Lady got the shit done.

Mike DeHaan: [4:40] That's awesome. She got she got her I was like, for $200? She did this over $200? Dude, we have American Healthcare, and she's not paying her, you know, her freaking Oh my god. Co payment or whatever, like, without that.

Dan Austin: [4:53] Okay. So anyways, yeah. She's like, I'm not staying in the night. Fast forward. Deal closes. That's all taken care of, whatever. And the buyer starts working on the property and the cops show up.

Mike DeHaan: [5:09] So this buyer is the same guy that stole the kidnapped. That kidnapped Yes. Our

Dan Austin: [5:14] That's where it comes full circle. So so he's there doing his thing on a property he closed on weeks ago. And some dude shows up with the cops and said, this is my house. No way. And has yes. And has an ID that has the name of the person who sold us the house. Right? And the cops, no shit, take this dude who we sold it to, remove him from the property, like remove him and say, you must leave. And then just drives off with the people that showed their ID as the owners. So who owns the house? We don't know. We have no idea. So here's the thing. So is like a deed theft? Yes. Like we don't know, but kind of. Holy shit. I have no idea. So because there's no way to validate this guy's identity, because like usually our title agent, she's really good. They're going come in the office, validate the ID, get your driver's license. If everything seems above board, they're not going to really do anything. But she's like, well, he was in Texas. Just to be extra precautious, we made him sign an affidavit of his identification. He had to put his social security number on that, had to do all this stuff to, like, validate it. Right? So he is, you have all the information plus a driver's license from Texas that says you are the seller. Perfect. Well, then they're going through the title and they're like, oh, there's a HELOC on here. They're like, hey. We need you to we need to get your loan information.

Dan Austin: [6:36] He's like, there's no loan on it, which there wasn't. Right? But she's like, well, there's a HELOC. And he's like, oh gosh, you know, I've never even used that thing on it anyways. But he was able to procure the loan number. So she was able to get the payoff, which was $0 So this guy that we bought it from did everything a seller could potentially do. Like, know knew his social security number, had a driver's license, had the loan number, which is not easy to just to come up with. Right? Has all the stuff. Then either way, some random person with the same last name in Spokane has the cops literally forcibly remove our buyer, the technical owner Oh my god. And just leaves in there with these people. I was like, what the hell, dude?

Dylan Koch: [7:18] What kind of funds did the did he walk away with? The illegitimate seller.

Dan Austin: [7:24] It was, like, 120,000. Well, we don't know if he's illegitimate. Based on what I've heard, he's legitimate.

Dylan Koch: [7:31] Like Oh, okay.

Dan Austin: [7:31] He had everything. These other people that are claiming that it's their house, which the thing is is if they're claiming like we live here, the cops would see you. It's not livable.

Mike DeHaan: [7:40] Mhmm.

Dan Austin: [7:40] Right? It's a vacant house. The water's been shut off, but the cops were just like, well, he has a license that says the name.

Mike DeHaan: [7:45] So I would say that seems more likely based on the state of the house is that the people that were local here are the fraudulent ones. And I'm thinking back to when we did that seven unit apartment complex. Right? And the lady that embezzled all the money with the COVID relief that she was doing, She went all through that same process to basically verify ownership of the property. Right? And so she had identification showing her tied to the property and all these different things, and it was owned by an LLC at that point. So she just said like, oh, yeah. I just have that. You know, I'm connected to the LLC or whatever. And they didn't really question that part, which is funny. But like it was relatively easy for her to do. In the state of Washington as well, we do have this whole I don't know actually if this is outside of Washington too. But if you essentially receive a mail at the property, you now become a tenant in common. And so what has been a play for people for a while is you move in with somebody off lease and then you sign up for like a magazine or whatever, and they send it to the house with your name on it. And now you can say like, oh, I live here even though I'm not on the lease.

Mike DeHaan: [8:52] You cannot remove me for trespassing. I have to be legally evicted, which is a lot more complicated when there's no lease in place. Right? That's so easily manipulative. Yes. That's dumb. It's super It is dumb. So I would bet what these people did is this was a house that had been abandoned for a long time. It was a pretty bad house in like a location that has a lot of transient traffic. I would bet you that somebody was squatting in there and then which went to like the DMV and got a driver's license and said that this is my address. And the DMV lady's like, oh, well, I have no reason to think otherwise, you know, and they just approved it. Yeah.

Dan Austin: [9:26] When it has the exact same name as the previous owner.

Mike DeHaan: [9:29] That is weird.

Dan Austin: [9:30] You could probably you're homeless. Right? Just be like, I need an ID that says this name on it.

Mike DeHaan: [9:33] It's been a long time since I've gotten a new ID, so I don't even know how they verify stuff like that. Like if I went there and I just said my name was Dylan Cook, could I just make that my name on the ID? If it's

Dan Austin: [9:43] the one with, like, the pink banner on top, the verified one, you actually have to, like, bring in, like, multiple identifications. But if it's just like a ID, maybe not even a driver's license, I'm sure they just will give it give you whatever.

Dylan Koch: [9:56] Yeah. Like, people I know with fake IDs in college, like, I'm sure they could just one of those too. Like

Mike DeHaan: [10:01] Oh, totally. Right. Yeah. You know what? That's such a valid point, Dylan. This that's how you know I was not a degenerate as a child. I didn't even think that.

Dan Austin: [10:09] That's wild, though. So wild. Right? Yeah. So the crazy thing is our buyer is still there. He never even called me about it.

Mike DeHaan: [10:15] Good for him.

Dylan Koch: [10:15] Oh, the title the title people said it. Yeah.

Dan Austin: [10:18] He never even said it.

Mike DeHaan: [10:18] You know what, though? I feel so I I guess it's karma. Because we knew that this guy was the one that kidnapped our seller years and years ago. Like, when when Dan said he was selling, I was like, are you serious? You know who that guy is. Right? Because we pieced that together a long time ago, just in a roundabout way, the fact that he bought the property. And so this is this is his karma for that situation coming full circle.

Dan Austin: [10:40] He's had such bad luck, dude. He has such such bad luck.

Mike DeHaan: [10:43] No. He has not had bad luck. The universe is against him. He's had bad karma. Listen.

Dan Austin: [10:47] No. Listen to this. The last deal we sold to him, the mobile we sold him another mobile earlier this year. He got it all finished, and a car ran through it. Good. Like, into the it's, like, inside the mobile home.

Mike DeHaan: [10:59] Dude, like, I'm not a religious person at all, but I do fundamentally believe in, like, a general karma. Like, if you do a lot of bad shit to people The universe will get you, man. The universe will eventually get you in some capacity.

Dan Austin: [11:10] Yeah. He's had a bad streak. Every deal we've sold to him so far has been a bad streak. Oh my

Dylan Koch: [11:15] He's not gonna stop buying from you guys.

Mike DeHaan: [11:16] I know. God damn. Dude.

Dan Austin: [11:18] Oh my god. It's a pretty bad situation.

Mike DeHaan: [11:20] Pretty good crazy story, Dan. If you are a real estate wholesaler and flipper and you want to be around other people that are looking to grow and expand your businesses in this ever changing economy, then you need to check out our scale community. Go to collectingkeys.com/scale, and you can get all the details there. But long story short, we are a small tight knit little group of serious real estate entrepreneurs that are looking to really make massive income and not just passive income through this ever changing economy. So if real estate wholesaling flipping is kinda your thing, go to collectingkeys.com/scale. You can book a call with me in there if you want, and I'd love to see if you'd be a good fit.

Dylan Koch: [11:55] We've had a deal go south once because, like, the dude it was like a family dynamic, but they tried to, like, quick claim it to himself. But, like, the quit claim date was, like, 2018, and the person he was claiming it from died, like, 2016. Nice. So the title company found out.

Dan Austin: [12:10] That's an easy one to figure out.

Dylan Koch: [12:11] Yeah. Right? Yeah. So, like, you probably would have got this house anyway, but you decided to do something illegal.

Mike DeHaan: [12:16] I know. Well, anyways, that's a good story, Dan. I'm not disappointed. So I'm glad that you saved that one. I feel bad for our closer. She puts up with so much crap.

Dan Austin: [12:26] She's like, I cannot sleep at night. I had to take a sleeping pill. Like, I was freaking out. Because she's she's like, oh my god. What did I do? Like, I screwed this up. She didn't do anything wrong. She did, like, all the right things to even double check that some people wouldn't have done. And it's just sometimes there's just nothing you can do.

Dylan Koch: [12:43] Yeah. For the audience.

Dan Austin: [12:44] This is why there's title insurance.

Dylan Koch: [12:45] Not all title companies are created equal, and this is a great example of that.

Mike DeHaan: [12:49] Absolutely. Yeah. She's a freaking rock star, you know. But it's funny because a lot of these deals that we started putting in three years ago, she no longer works with like new wholesalers. I at least know that you guys will do the right thing because we've kinda gone through the ringer on stuff, and she's, like, seen us, like, try to do things well. And for a while, she was opening up her business and, like, people were just doing shady stuff. She's like, yeah. I'm not down for that at all.

Dylan Koch: [13:13] Yeah. And if you have she has enough business, why bother? Right. Exactly. So Yeah. Let's let Dan continue. Dan, you wanna tell us about these FinCEN laws that you were

Dan Austin: [13:22] Oh, yes.

Dylan Koch: [13:23] Talking about? Because I don't know anything about this.

Dan Austin: [13:25] Yeah. This was interesting. So you probably do, you just don't. So you guys remember the BOI reporting the beneficiary ownership,

Dylan Koch: [13:33] you know? Yeah. But didn't that get overturned?

Dan Austin: [13:34] No. So it's actually on. I mean, at least according to what my research is. So there was like this idea. So with the BOI is like, you're supposed to if you have like a certain percentage of ownership in a company, maybe it's 25 or more, you have to report that to the federal government, which before it was just state governments when you set it up. I And even know if you had to report the ownership. I think you, yeah, in Washington you did. But anyways, because I think the idea is they're trying to stop people from laundering money in The United States through businesses and stuff like that. That's the idea. So then they want to know the names of the actual owners that have a beneficial ownership in. Well, part of that is, I don't know if it was the initial law, but part of it is non monetary, like non dollar transfers. So I guess if you think about it, there's probably a way people could launder money through real estate transactions. So if you're buying a property with an LLC or a trust or a business of some sort, now they want you to report that, the LLC and the ownership, and it's like a nine page application. The reason why it affects us is because now your buyers are going to have to it's another step. You're gonna have to jump through the hoops.

Dan Austin: [14:42] This is a federal thing. And I think it goes into effect, like, December first this year. Basically, if it's a week processing time. So you have to fill out this application. And remember, you gotta get your buyers to fill this out. So my thought is is there's if you're smart, there's gonna be some level of, like, you helping figure it out so that you stay ahead of the game and pulling their hands through it kind of stuff. They have to fill it out. They have to submit all of their documents to the title company, driver's license, operating agreements, all that sort of stuff. Like, have to submit. Just like you're getting a loan damn near. Right? Like for your LLC, all this stuff that is associated with LLC, you have to submit to the title company. Because the title company will then become a reporting agency and then fill out this paperwork, which is like a seven expected to be like a seven day processing time. And the shitty thing is, is I don't know if you guys have had this where buyers are like, Oh, I want to change my mind and put it in this LLC. Well, what? Now you have to wait another week while you fill out a whole nother application. So it's going to be another potential hoop. I believe it starts this year. I don't exactly know all the details, but it's something that I got caught up on and someone told me about. And I was like, that sucks.

Mike DeHaan: [15:48] My general view with stuff like that is you just wait until the title company tells you what you need to do and you just kind keep doing business as usual until then.

Dan Austin: [15:56] Yeah, you do. But I do think if you're going to be ahead of the game as a wholesaler, you're gonna need to know this shit, and you're gonna need to help figure it out, because you can reduce the process of time. Because imagine this, it's like when title companies work with sellers, and we have this happen all the time. Oh, this company has a ten day payoff, payoff request policy. It's like, Oh, but you didn't request it until like three days before closing. Now we got to wait ten days or five days or three days. And so what we started doing in our processes was making sure that we would get the payoff request signed like right after we signed the PSA. And so we'd have all the seller information, all that stuff signed. So then the payoff statement comes in, like, in the beginning of the closing process instead of the end. I think this will be one of those things that if you wanna stay ahead of it and you are working with a shitty title company, you'll want to make sure that you're like, hey, we need all your information. Here's the checklist of stuff to do. Yeah.

Dylan Koch: [16:47] That's actually smart about the payoff because I'm supposed to close the deal tomorrow. Literally, the last thing we're waiting on is payoff statement because the the seller didn't get to us in time.

Dan Austin: [16:56] Yep. Yeah. So what I did is I actually had my title company give me their blank I can't remember what they call it, but it's basically like seller information sheet. And it has all the seller information, all their loan numbers, and then I just have the seller sign it. We just do like an e sign with them or take it to them in person. We need their I think we have to have their social security number too on ours. And so get all that information and then give that to title, like, day one or two of closing it. Because it yeah. We had, like, five deals in a row go, like, sideways because of this.

Mike DeHaan: [17:21] There's all these little things, man. Like, I think back to when we got in this business and there was so many wholesaling,

Dan Austin: [17:29] I don't

Mike DeHaan: [17:29] know, gurus, personalities, whatever you want to call them, where it was like this cowboy business. Anyone, you just get a piece of paper signed, you just sell the piece of paper for money. And that's going away very, very quickly with all these like rule change and everything else. Systems and business aside, just like having the real estate and process knowledge to be able to get these deals done is becoming more complicated. You know? And I think about so many people who still to this day, like even some of our main competition here in Spokane, they don't fundamentally understand how a real estate transaction works. Right? Like what goes into it. And those people are gonna get completely cooked once there actually has to be some organization around these things.

Dan Austin: [18:13] Oh yeah. Wait till like so in Washington, there's another thing. This doesn't necessarily apply to most of our listeners. But in Washington, we have a new law that starts goes into effect like the end of this year. You have to have a disclosure now. It doesn't necessarily have to be on your PSA, but you have to have a disclosure to the seller that they are if it's going to be an off market purchase where you solicited them to sell to you, you have to disclose to them that they have the right to an appraisal by, like, a Washington state certified appraisal at your expense as the buyer, like, as us, as a wholesaler, at our expense. And once they get that appraisal back, they have three or four business days to cancel the contract. And if they opt to not do an appraisal, they have ten business days to cancel the contract after it's signed. Yeah. And you have to disclose all of those steps.

Mike DeHaan: [19:00] Yeah. Yeah. That they can do that. But you're waived of that if you have a realtor involved in the transaction.

Dan Austin: [19:05] If you have a real estate license involved, yes. I don't know how that comes into effect, but that's an interesting argument because if you have a real estate license, you're now governed by the real estate board, which asks you to be the fiduciary. And that's where it gets questionable, like, as a real estate agent.

Dylan Koch: [19:22] Or you'd be representing you have to say you'd represent the buyer, not the seller. Is there's no way you can

Mike DeHaan: [19:26] make a Correct. You're representing the buyer.

Dan Austin: [19:27] Yeah. I don't know, though. Like, that's where I think that's that's a loophole you would definitely wanna investigate. Because if that's as easy as it is, perfect. But if you're the buyer and you're the real estate agent, that's you're actually kind of like

Dylan Koch: [19:38] Yeah. Clear conflict.

Dan Austin: [19:39] Would it be considered a double agency where now you have to still be a fiduciary for both people involved, you and the seller? That's where I think it's gonna get really squishy. Because if I'm a wholesaler, that's immediately what I'm gonna go do is get a license, which is fine. Do that. But then I guarantee that the board of real estate brokers in Washington is up to date on this law. They probably lobbied for this law, to be honest.

Dylan Koch: [20:02] I mean, there's anti wholesaling laws going all over the country. Right? And it's from a lot of the bad actors that come in there. I think if you do things kind of the right way, kinda like what Mike alluded to earlier, kinda like the universe thing. I'm not too worried about it because I know how I do business, but we'll see how these rules and regulations change everything.

Dan Austin: [20:19] Right. And you can get around a lot of them, double close, be the actual buyer. There's a lot of ways to do it. And so I think if you are in the business, like you're saying, Dylan, you're doing the right things for the right people, and you have a good business sense, it's going to be better for you anyways. You're gonna learn how to operate and adapt while everybody else kind of falls off the

Dylan Koch: [20:36] Yeah. All the competition I know is slumbags. I was reporting myself. Exactly.

Mike DeHaan: [20:40] Totally. Right? You know, and it's a pain, but it becomes an opportunity because less players means more deals for you.

Dan Austin: [20:46] Yeah. Exactly.

Dylan Koch: [20:47] By the way, Dan, I you Googled it real quick. It's a this is just from the Google AI overview. But no BOI or the beneficial ownership information reporting is not currently required by most US companies, but it is for any foreign companies.

Dan Austin: [21:01] Do they have like a new updated, it goes into effect thing, or is it completely off the table?

Dylan Koch: [21:06] This is as of most recent thing is April 2025. So

Mike DeHaan: [21:10] There's been a lot of shady stuff going on. We talked about this a couple of weeks ago with like the mortgage fraud stuff. And then we had some pretty big adjustments in our lending company just in terms of like the underwriting guidelines that like a lot of the hedge fund providers that do DSGRs do and what they look for. And we had a call on Monday. What our representative there basically broke down is what was happening is you had these people. A lot of them were overseas companies or they were like American companies that had overseas people that were involved. So now if you have an LLC, they verify everyone that's involved and make sure that you're a US citizen. And even if there's one person that's involved that's not a US citizen, they basically price everything and do all the due diligence as if the entire company was foreign. And what was essentially happening is you had these people that were buying these properties. They were getting a hard money loan that was not arm's length. It was like a friend's money. And then they would go and hold on to it, do additional work, whatever. Then they would put a second position on the loan up to 80% of the value. And they would do a refinance that was a rate and term instead of a cash out so that they would get better rates. And they would get more bank money out of it, an additional 5% instead of 75%, like, send it for a cash out.

Mike DeHaan: [22:27] But then the problem is that the second position that they were using to do the rate and term wasn't like an actual loan. So it would be like a filed second position, but no money was actually exchanged. And it wasn't on blank. So it was basically working as like a larger cash out and getting lower rates. And then they would go through and discover that all the appraisals on these properties were also fraudulent. So they were going off of values that also weren't real and that there was this inside baseball line with all the appraisers as well. So now they've gotten really strict around, like, the appraisal committees that you're allowed to use in these different markets and how all the debt and everything has to be structured. Because all all these people, what they were doing is they were stealing the institutional money on these, right, by basically over leveraging these properties. And then a lot of them, they would just, like, let them go to foreclosure and be like, cool. See you. Because we got all of our money and it's significantly more than the property's worth, so we don't care. So you're starting to see stuff like and I would imagine things like that have been going on for a while. Right? And now we're just finally at the point where so many things are starting to, I would say, come to fruition. Like when times get tough is when they start trying to crack down a lot of that stuff because there's now

Dan Austin: [23:38] a lot less room for air. Right? Yeah. Things like light gets shined on it now because it's not just like YOLO making money left and right. It's like, what's going on there? That's a weird situation.

Mike DeHaan: [23:48] And we have all this stuff going on, but at the same time, all of everyone in the government is just insider trading and doing market manipulation to the max.

Dan Austin: [23:57] Well, I mean

Mike DeHaan: [23:58] That doesn't count. Doesn't count.

Dylan Koch: [24:01] The insider trading thing is hilarious because they could literally make like 5,000,000 and the fine, no matter the degree of how big their gains are, is $200.

Mike DeHaan: [24:10] Exactly. Yeah.

Dylan Koch: [24:12] It's $200.

Mike DeHaan: [24:13] Hell yeah, dude. Bet on the Pelosi index, bro. That's what it's all about.

Dylan Koch: [24:17] Yeah. No. For sure.

Mike DeHaan: [24:18] But anyways, cool. So what else we gotta dive into today?

Dylan Koch: [24:21] Well, the I think Jay Scott put out and this has actually came out today, the PPI data, which is basically just like inflation data for wholesalers.

Mike DeHaan: [24:30] Oh, really?

Dylan Koch: [24:30] Yeah. Like, which is typically a leading indicator of consumer inflation.

Mike DeHaan: [24:34] Not real estate wholesalers, but like wholesaling goods, like distributors. Yeah.

Dylan Koch: [24:39] Like, distributors. Yeah. Like, middlemen during the the process of really just good goods and services.

Mike DeHaan: [24:45] Yeah. And was that PPI increase 0.9% for the month, expected at 0.2?

Dylan Koch: [24:51] It was the biggest increase since 2022. And the long story short of it, really, I think there's two takeaways. One is they think that with this data, the next CPI, consumer price index, might be a little bit more elevated. But two, because the last CPI, which is not that long ago, was lower than expected, they're basically pricing in a 99% chance of a rate cut in September. Mhmm. Well, this kind of flips that on its head because they're like, okay, well, if this is coming out now and we think this is a leading indicator, we might not have those rate cuts going forward that we anticipated.

Mike DeHaan: [25:24] Which I mean, like for the average person, the rate cuts don't affect anything though. I don't know why people keep fixating on this. Like, because what would actually change for the everyday consumer if they cut federal interest rates? Your money's not really going to get any cheaper because a lot of this debt is no longer being acquired. Right? The banks are still having to hold it on the books. They're gonna have their baseline of what they're expecting to make.

Dylan Koch: [25:48] Yeah. I think the the rate cut perspective, honestly, who it affects the most are the biggest banks in the world. JP Morgan, Bank of America, because they can overnight trade with each other. The only thing that would affect, like, I guess, it would still have to be affluent people, would be people who have, money in Yeah. In money markets that are paid three to 4%.

Dan Austin: [26:06] I think Mike's point, what you're arguing is is that this you're making the point that the system will no longer work the way it's worked historically.

Mike DeHaan: [26:12] Exactly. Yeah. And and for some reason, the poorest people we know are fixated with the interest rates. And I don't know why.

Dan Austin: [26:19] That's everything that's in the news now, dude. You know what

Mike DeHaan: [26:22] I mean?

Dan Austin: [26:22] It's always about the rates, you know.

Mike DeHaan: [26:23] We're talking about this this morning in our kickoff call with our lending businesses. We're always talking to people that are like, I want to do a refinance on my rental property, do a DSCR, but I'm waiting for rates to come down. And first off, they're not gonna they're probably not going to or if they do, it's completely speculative. The real thing they should be concerned about is what are their property values going to do over the next six months or the next twelve months? Because if, let's say, the rates come down half a percent, that's great. But if your property values drop 3%, which is very realistic in most markets right now, a lot of markets are even worse. So on a $300,000 property, if your property values drop, say, $10,000, that's now $7,500 less that you can pull out. So sure, you're now your rate's at a 6.6 instead of a 6.9. So you're gonna save you know, make an extra $10 a month in cash flow, but you missed out on $7,000 more on the cash out. So what's more important to you? The $10 in cash flow or an extra $7,000 in your account?

Dan Austin: [27:24] Yeah. Ten years.

Dylan Koch: [27:25] You know, it's kind of, like, finicky right now is I'm doing a loan with you guys, and one of the appraisals just came back. And it came back at a really good number. I was very happy with the number. But I'm fairly confident that if I went to go list this property for what I just appraised at, it would not sell.

Mike DeHaan: [27:40] Of course. Is it a duplex Yeah. Or a single family? Yeah. So the multi families especially are a really, really hard asset right now because no one is buying those, that can general, like there's no buyer pool at all because the cash on cash doesn't make sense. Right? Their market value is fundamentally pretty high, right? If you look at it compared to comps mostly because there aren't a lot of comps and the comps are not going to be refreshing because nobody's buying those properties. Right? A lot of them, what we're going off is like tax assessed value right now, which is super high. But if you look at like the interest rate versus what stuff actually rents for, it doesn't make sense unless someone's doing like a ten thirty one exchange, or they're coming in and they're buying cash, which is such a small percentage of people.

Dylan Koch: [28:22] Or they're like the owner occupant person who's just trying to reduce their living expenses.

Mike DeHaan: [28:25] Exactly. Yeah. Like, have a very similar to you, Dylan. I have a triplex that appraised for $6.60. I was unable to sell it for 640,000 earlier this year. Yeah. Exactly. No one wanted it. But they appraised for $6.60, and they're very confident that I was like, sweet, give me that money.

Dan Austin: [28:41] They're like, I'll take that.

Dylan Koch: [28:42] Yeah. So hold on real quick. I have a follow-up to this because would the appraiser not go back and look and say, oh, this was listed for $6.40 and it didn't sell?

Mike DeHaan: [28:51] Oh, yeah. They did, but it didn't matter.

Dan Austin: [28:53] Mike has good karma.

Dylan Koch: [28:54] I guess if they can just justify that higher price, I mean

Mike DeHaan: [28:56] Yeah. Well, it's because they're looking at the other similar sized properties, and my property is really big. Right? And like that is a small enough gap that there's fine. Like if they were doing like $6.40 to like 700, like that's crazy. But that small margin, they're like, if you look at the cost per square footage of everything that has sold, this is what your valuation is at. And then I would say something that I also did was when I put in the refinance request, I said that the value was $6.90. Right? Then when they come in and they're low, they feel good about that justification.

Dan Austin: [29:25] They're like, yeah, we really stuck to this guy.

Mike DeHaan: [29:28] Yeah. You're gonna have to play the game a little bit. Yeah. With those kind of properties too, it's especially if you've owned them for a while. Dan and I talked about this yesterday. If you're looking at even refinancing out of, say, cheaper debt, you have 4% debt, you have a ton of equity. You're not going to be able to sell the property to captures equity. But if you can get thirty year fixed debt at say like 7%, right? So you're doubling your interest rate, but you're able to pull out all this extra money. It'll eat your cash flow, but now you have opportunity cost for that. If you look at, say that 25% that you still have in the deal and you consider the transactional costs, your capital gains, your depreciation recapture, you're probably walking away with the same amount of like actual cash if you just do the cash out without having to pay taxes. Right? Honestly, versus if you were able to sell it after you take into account, like, the longer term taxes and everything else with it. So it's such a weird time with that kind of stuff.

Dylan Koch: [30:21] There's a duplex right now that I listed eight days ago. Good market. I mean, good area, good part of town. There's a comp at $3.15, $3.30, and another one like low 3 hundreds. But we have off street parking and central air, and we're a little bit bigger than some of the comps. And so we are listed at $3.20. And I've had about eight showings, zero offers. Really? And then I'm just like, what do I do if this you know, I've had it for a long time, and the backup plan is make it into a rental. You know? And I still have a spread where I can I mean, I won't get obviously near as much as if I sold it, like you just alluded to, but I can still pull out some money

Dan Austin: [30:56] Yep?

Dylan Koch: [30:56] And just rent it and hopefully break even for five years.

Mike DeHaan: [30:58] Yep. How long have you owned it for?

Dylan Koch: [31:01] That one since I think it was March.

Mike DeHaan: [31:04] So it's pretty recent. Right? Yeah. So where it gets, really weird, it's like my triplex I just talked about. I bought that one in 2019, right? And so things doubled in value. So my long term capital gains is going to be 20% on that. Plus I'm going to have my depreciation recapture on everything. Plus I'm gonna have all the sales costs, plus the concessions that the buyer is gonna want to buy their rate down. You know, if you actually put all of those things together, it's relatively similar to just doing a cash out refinance of 75% if I get that value.

Dylan Koch: [31:37] The good thing about also owning places and like this is like, you can be strategic on how you wanna deploy some of this capital. Like I sold a four unit, and I had bought it in 2020 for like 215,000, sold it for $3.37, four years later. And I took all of that money, but then I reinvested it. I didn't do a 10 30 1. I'm just gonna pay the taxes on it. But if I would have cashed out refi, it wouldn't have cashed out really at all. But the other aspect of this is this is like a d plus, c minus area of town. I knew that wasn't getting any better. Right? So I just I don't know. I'm doing I'm trying to say, listen. You have options when you actually own the asset.

Mike DeHaan: [32:11] When you own the asset, when you buy it at a good price. We've always harped on that. Like, you make making sure that you're buying at a good price always. And it's never been more true than right now than when I've been in business. But I'll also say that everyone that was buying at crappy prices in 2021, 2022 because of the market XYZ reason, now you're paying the piper for that. Right?

Dylan Koch: [32:31] One anecdotal thing I've seen just in my own, like trying to dispo deals is I've had some deals I send out that look pretty good on paper, but let's say they're not a great part of town. Like C areas are worse. Oh, yeah. I get like crickets on that. Not a lot. I will send out one that's in like a B or BB plus area, good school district, but the numbers are pretty tight. I still get flooded with people that want that. So I don't know if people are just more confident in the better areas of town or what. Or maybe my the people I send it to are more, you know, those type of buyers versus just a cash flow buyer. I don't know.

Mike DeHaan: [33:03] But That's always a really hard thing to sell. We've had some in like good areas that nobody wants. And then we sold one completely sight unseen last Friday. That's in like it's a fine spot. It's not fantastic. Place is kinda like a dump, but it just happened to get in front of buyers at the right time when they were ready to make a decision. You know? But who knows? Let me run

Dylan Koch: [33:23] a deal by you guys that I'm working on right now and make it out to the audience. See what you guys would do and see if they agree. Three unit building, like sea area part of town. Gross rents are 3,100 a month, all month a month. But the seller is very like she runs a nonprofit. She's very much like, I'm taking wanna look after my tenants. I don't want them to rent to go up, and I don't want them to be, like, forced to remove. So she's willing to sell to me at one seventy five, which is a good price. It's probably worth, like, $2.50 as it sits. But the only way she'll sell it is she can sign the tenants to a year lease at their current rental rates.

Mike DeHaan: [33:55] I mean, do you like we should about the area. Is it a good area?

Dylan Koch: [33:58] It's okay. I own one not too far from there.

Dan Austin: [34:01] Are they good tenants?

Dylan Koch: [34:02] It's hard to tell. I've seen it once. And I mean, it's kind of dirty, but kind of standard.

Mike DeHaan: [34:08] With where you are in your business, and I know that you're in like acid accumulation mode, if you can get confirmation of rent rolls and that these people are actually performing, I'd buy it. I mean, it's gonna cash flow like a beast. It's doing 3,100 on a $70,100, $1.70 purchase. And then what you could even do is you could buy it with like a stabilized bridge loan. So you could keep your down payment less and your cost less than like straight hard money. And then just do like a quicker seasoning refinance and get out of it at like a a DSCR rate at that higher value and do a cash out, and then you'd hold on to it for like a while. If your intention is to flip it, I mean, it's kind of a tight deal anyway. But I mean, you do have an equity spread around the discount. It does cash flow well. Like, I would look at that deal for sure.

Dylan Koch: [34:52] Any input, Dan? I'll tell you what I'm going to do or what my plan is to do.

Dan Austin: [34:56] I would buy it if I was in your situation. I would not buy it in my situation. Yeah.

Dylan Koch: [35:00] Plan is to buy it. And then I was actually, I like your idea better, Mike, because I was just gonna use hard money and then refi in three to four months, but if I don't need to.

Mike DeHaan: [35:07] Yeah. You can do this like these like stabilized bridge loans, which are like a hybrid of a DSCR and like hard money. They usually just have like a little bit less costs, and they're less like they don't like want you to have construction costs. They already know that the intention is to buy it and increase the rents and all that sort of stuff. But what they allow you to do is close quicker and then more quickly look at like the higher value than doing like a hard money or DSCR. But

Dylan Koch: [35:31] Another product that I don't think I was aware of. Cool.

Mike DeHaan: [35:34] They're pretty niche. You don't hear about them at all. And I think it's because there aren't a lot of people that are buying properties like that. You know, they're just kind of hard to find in general. But they're out there. That's been a it's been interesting sort of like seeing all the different stuff people do. Like there's all kinds of weird loans and stuff that you can get that most people don't even realize. Like one of the things we've seen recently is people will do these, like, delayed financing. If you're in, like, cheaper markets where basically what you can do is you can if you're gonna buy it cash, right, instead of doing, like, a cash out refinance, it should be cash out refinance rates. They treat it like a rate in term standard purchase. But what you do is you have to buy it like straight cash with your own money, like no debt at all. And then you can immediately do like what is essentially a cash out refinance, but they treat it as if you were purchasing it normal. And so your rates will be like 75 basis points lower than if you're doing a cash out.

Dylan Koch: [36:25] So like a decent LTV, like 75%? Yeah. It'd be 80%. Oh, for a single family. Right?

Mike DeHaan: [36:30] Yeah. For a single family. Or a duplex. You can buy a duplex, DSCR, 80%. Right? But because they don't do it as a cash out. And so you can squeeze a little bit more out of your money and get better rates. But yeah, anyway, we're getting in the weeds. There's all kinds of weird stuff you can do that doesn't apply to most people or most deals. But there's always an option out there.

Dylan Koch: [36:49] Well, the more tools you have in your tool belt. Right? I mean, that saves thousands of dollars per per transaction.

Mike DeHaan: [36:54] Cool. Alright, Anything else to wrap up here?

Dylan Koch: [36:56] I think I'm good.

Mike DeHaan: [36:57] I am good. Cool. Alright, guys. Thanks for listening. I'm Mike DeHaan here with Dan Austin and that kid from Ohio. As one of our our listeners on Instagram referred to Dylan the other day, which I found to be hilarious.

Dylan Koch: [37:10] Hey. You called me a woman in your in the latest newsletter. So

Mike DeHaan: [37:13] Dude, ChatGPT says what ChatGPT is gonna say is

Dan Austin: [37:17] Gender neutral name. Dil I know a lot of Dylan's that

Mike DeHaan: [37:20] are working. So Yeah.

Dylan Koch: [37:21] I've met, like, one ever. Actually, when

Mike DeHaan: [37:23] it's a woman, it's pronounced Die lean. Okay? It's very different. Die lean.

Dan Austin: [37:27] I thought we were talking about Dylan Mulvaney. That's the only person I think about when I see Dylan every day.

Dylan Koch: [37:31] Don't even

Mike DeHaan: [37:32] know who that is. You don't know who it is? Oh.

Dylan Koch: [37:34] Isn't that a Bud Light guy? Yes. Yeah.

Dan Austin: [37:35] Woah. Woah. Woah. Bud Bud Light girl.

Dylan Koch: [37:39] Oh, sorry.

Mike DeHaan: [37:40] You're you're showing your your roots there and your age, Dan. You're you've lost me completely.

Dan Austin: [37:44] Bro, this happened, like, six months ago. I'm showing my non ignorance in that I'm open.

Dylan Koch: [37:49] No. That this is a recent thing. You're an idiot. Yeah. You're an idiot.

Mike DeHaan: [37:52] This is showing your lack of knowledge in pop culture. You're showing your age because you're in a situation where you're being exposed to Bud Light ads. I can't tell you the last time I saw a Bud Light ad.

Dan Austin: [38:02] Bro, it was on national TV. Exactly. And then everybody talked about it for the news for, like, six months.

Mike DeHaan: [38:08] You know who watches national TV? Old people.

Dan Austin: [38:11] Did you not see Shane Gillis drinking Bud Light during the conference controversy? He was like, I'm with Bud Light. And then he did a freaking commercial with Bud Light. Come on, dude. You're missing pop culture.

Mike DeHaan: [38:19] I am. It's true. That's always been my life. You're out of it, dude. You're you're

Dan Austin: [38:23] out of it.

Mike DeHaan: [38:24] You're out of

Dylan Koch: [38:24] Mike just listens to reruns of his own podcast.

Dan Austin: [38:27] I do. Mike listens to Reddit and then his own voice.

Mike DeHaan: [38:30] I just come on here so we can all learn to be master debaters and, be the best that we can be and talk shit on the Internet. So, anyways, guys, have a great rest of your week, and we'll talk to you guys next time.

Dylan Koch: [38:40] See you.

Mike DeHaan: [38:42] 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.