The Only Housing Markets Still Appreciating in 2025

Mike DeHaan: [0:00] 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 gonna do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper, than pretty much every other company out there. So whatever big company you've been working with, bring us their term sheets, 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. So slacapital.com/keys, we would love to fund your next deal. In a country where pretty much everything else is dropping, those markets are actually up 10% year over year in value, which is crazy.

Mike DeHaan: [1:02] Congrats, Dylan. You're you're officially a collecting keys host now.

Dylan Koch: [1:05] You put me right in the middle too, man. I appreciate that. I know.

Mike DeHaan: [1:08] Well, so so here's the thing. So if you guys go to collectingkeys.com, you can see Dylan's on there now. It took me embarrassingly long to figure out how to make that image of you in the circle. Was it just a crop feature? Well, so the problem is when it was built out before, we had a designer on staff who no longer works for us. And so I had to figure out to do it myself. And it was a hard part is the piece at the bottom where, like, it fades with, the light blue so it looks the same.

Dylan Koch: [1:33] You should have told me to take a picture in the scale or collecting key shirt like

Mike DeHaan: [1:36] you I know.

Dylan Koch: [1:37] That you and Dan had.

Mike DeHaan: [1:38] I know. Well, you still can. I'll update it. But just go just go get a picture taken.

Dylan Koch: [1:42] Okay. Now that you know how.

Mike DeHaan: [1:43] What's going on, guys? Welcome to the Collecting Keys Real Estate Investing Podcast. You are joined by me, Mike DeHaan, and Dylan Cook over in Cincinnati today. Dan is out. He is at a conference in Banff, living the good life up there in, looks like a beautiful area from his photos. But, yeah. So he is traveling back, so he will be missing the show today. So sorry. No, off color commentary by Dan today. We'll we'll keep things kosher for the kids.

Dylan Koch: [2:11] For the viewership, if you had to look it up like I did, Banff is like the West Side Of Canada.

Mike DeHaan: [2:15] You didn't know where Banff was?

Dylan Koch: [2:17] No. Did not. Well, because that's closer to you guys than it would be for me.

Mike DeHaan: [2:20] Oh, yeah. I mean, it's like a seven hour drive from where we live. It's not far.

Dylan Koch: [2:23] Yeah. It'd be like a probably a day and a half drive.

Mike DeHaan: [2:26] It's so funny though, because like there's always the regional stuff you always sort of learn like that. So I grew up in Montana. Right? In Bozeman, Montana, which people come from all over the world and say this is one of the most beautiful place I've ever seen. Cause I grew up with that. I like go there and I'm like, whatever. Like, you know, I think of like going to high school there and like all these different things. And so it's like, I can recognize it's a beautiful place. It just doesn't like touch my soul like it does for people that, you know, are Yellowstone fans and go visit, like, big sky country.

Dylan Koch: [2:55] You'd rather be in a third world country.

Mike DeHaan: [2:57] Well, I I like I I tend to find more and more beauty in that kind of stuff because it's so different. But then people go to, like, Banff, which is a very, very pretty area. And it's funny. I know other people are at this conference with Dan. And there's people that are coming from, like, some of these places in, the Midwest or the South, I think it's just flat. And they're just, like, mind is blown by these mountains.

Dylan Koch: [3:16] Mhmm.

Mike DeHaan: [3:16] And I've had this realization over the years that growing up, like, somewhere in Montana is so cool because of like the childhood they gotta have and you gotta grow up skiing and doing all this outdoor stuff. But as an adult, it kind of sucks because your bar is so high Sure. For so many things. And, like, it is very challenging. Like, it's hard to be impressed by a lot of stuff just because it's sort of, like, commoditized to me.

Dylan Koch: [3:40] When I first went to Breckenridge in Colorado, and I was probably 20 years old, and I did, like, the snowmobile ride or, like, a dog sledding thing, I was like, this is a different world.

Mike DeHaan: [3:49] Oh, for sure.

Dylan Koch: [3:50] You know, I'm to farmland pretty much. You know?

Mike DeHaan: [3:53] Yeah. It's fascinating. You know? Like that how much your set point can change. I think that as you travel and things more too, that sort of happens again and again and again throughout your life. So, like, for me now at this point, I've traveled all throughout Africa, parts of, like, like, Arabic countries, things like that. I've gone all across Asia to the point that now, like, when I go to Europe, which is like a big deal for a lot of people who go to Europe

Dylan Koch: [4:16] Mhmm. It's

Mike DeHaan: [4:16] making me sound so entitled. I go to Europe and I'm like, it's fun. Like, it's cool to, like, sort of see sites and stuff, but it's not like that awe inspiring just because I've seen parts of the world that are so drastically different that has changed my perspective on, like, human nature. And then if I go to, like, Spain, I'm like, this might as well be Southern California. Like, honestly.

Dylan Koch: [4:36] Yeah. I mean, though what's crazy, Mike, is like, yes, you're doing this at a big level. Like, there's not many places in the world that can be awe inspiring anymore. But this goes back to, like, the day to day life stuff. Whereas, like, growing up, if you had a pizza every Friday with the family, like, you looked forward to something like that. You know? But now that I could order a pizza every day if I wanted to and I didn't care about my health. Right? Like, is it like I don't know. Things like that you can if you get too much of it, no matter what it is, it like, the euphoria kind of fades away.

Mike DeHaan: [5:02] For sure. And I think the same thing applies, like, financially too. Right? Like, your expectation on quality or what's, like, good or what's, like, decent level experiences change. You know, there's always gonna be haters that kind of hate everything. But also too, I would say your standards can change very, very quickly as you make money. And I think that's why people that have money tend to be labeled as, like, snobby or aloof or whatever is because their now floor is just, like, above other people's kind of, like, expectations and ceilings, and so it creates that gap.

Dylan Koch: [5:30] I mean, I'm more willing to pay for convenience now than anything else. Like, first class flights or I don't like, let's say we went to Disney World as a family, like, I'm paying for a fucking FastPass. Sorry. Absolutely. Like It's

Mike DeHaan: [5:42] not even like a question. Like, I'm not gonna wait in line if I don't have to.

Dylan Koch: [5:46] No. Exactly. So

Mike DeHaan: [5:47] Anyways, so welcome to the entitled White Dude Show. Anyways, Banff is a cool spot though if you ever have chance to make it out there though. It is very beautiful. That I will say out of all of the travels that I have done, the Pacific Northwest, Banff fits into that, like, that region. But like Western Canada, like Western Washington is up there with one of the most beautiful places in the world. Like, it's absolutely stunning to go up there and see, like, especially the volcanoes and how dramatic the mountains and stuff are. Like, it's super super cool.

Dylan Koch: [6:17] Well, unfortunately, I don't even us being entitled white guys, don't think we can afford a place in Banff because they're like millions and millions and millions of dollars.

Mike DeHaan: [6:24] No way, dude.

Dylan Koch: [6:24] Like, people think it's bad in The US. Like, the median price income in Canada is, like, 10 times worse than it is in The United States.

Mike DeHaan: [6:31] It's crazy. Vancouver is one of the most overpriced cities in the world now because what they didn't crack down on several years ago was the overseas investment. And so what you had happening is you had all these Chinese people that were coming in and buying properties there that they were allowing to sit vacant and were basically losing money because they were trying to shelter their money from the manipulation of currency that was going on in China.

Dylan Koch: [6:57] Their own government. And so

Mike DeHaan: [6:58] you have all, like, all these things that are so unbelievably overpriced in Canada.

Dylan Koch: [7:02] That no one lives in.

Mike DeHaan: [7:03] That nobody lives in. I know. We we went to this, my wife and I, she's really into tattoos and there's this tattoo artist that she wanted to see in Vancouver. She went off there last December. And we we just got on Airbnb, like, this little tiny it was like a condo apartment thing. One bedroom, one bath. I think it's, like, 500 square feet, or as they would say up there, 200 square meters. Right? I don't know if that's that conversion's right. But, it's really small. And it was, like, directly out the window was an exit ramp from the freeway. It was an awesome location. Like, you could walk to all the restaurants and stuff, but no view. You saw, like, the freeway at, like, eye level. So, like, if you were in the living room standing, you could, like, wave at people that were waiting to get off the freeway. And it's, like, super super small, wasn't overly fancy. But we looked it up, and the dude that we had rented out from an Airbnb had bought for $1,800,000 several years earlier.

Dylan Koch: [7:53] It's insane. Unbelievable. A couple thousand dollars per square foot Totally. On a sale price.

Mike DeHaan: [7:59] Yeah. It it was like the size of my bedroom. It was so small. That's like a a cheap option. Know, You they were looking at some other stuff and like if you wanted an actual, like, three bedroom thing, they were like $5,000,000.

Dylan Koch: [8:11] Yep. And the other half of this is like the geopolitical side where, you know, they have the Chinese people trying to buy like farmland or like other that might be, you know, might not be in the strategic interest.

Mike DeHaan: [8:21] For

Dylan Koch: [8:22] sure. You know, right? And so this goes in the whole, property rights discussion. Like, do you disallow that? Do you don't? But that's probably a topic for another day.

Mike DeHaan: [8:29] If we wanna go down that rabbit hole, I'm curious for somebody that this isn't directly next to you. I'm sure you heard about the Qatari Air Force Base that they're allowing them to build in Central Idaho.

Dylan Koch: [8:39] Mhmm.

Mike DeHaan: [8:39] That is such like, I don't know the reason for this. Like, I've tried to find it. I can't seem to find one other than the fact that they had some, like, rich dudes handshake agreement. But it's wild for several reasons. A, because it is a completely foreign air force base, I guess, that they're building on American soil. From a Middle Eastern country, which if unless you grew up under Iraq, you knew that The US and Middle Eastern countries don't typically have the best relationships.

Dylan Koch: [9:04] Mhmm.

Mike DeHaan: [9:04] And it's also in fucking Idaho, which is like the most, I would say, like, white not accepting state that probably exists right now, honestly. Like, even compared to some of the the Southern states that are kind of known for having issues with that. They're And just gonna throw open air force base out there. And I don't know why.

Dylan Koch: [9:24] I it's so far above my pay grade. And my default answer is that the government is usually pretty incompetent. But this is just a glaring, like, what the hell kind of a thing. I know. I don't know. I don't have a better explanation for you or theory.

Mike DeHaan: [9:36] My only sort of thought is where they're doing it is kind of near the the mountains that are down there. And I'm like, I don't know. Maybe there's like a Qatari prince that likes to go skiing in McCall for some reason. But like, he he doesn't like Jackson Hole, which is a way better mountain, but he wants to go there. So they're like, they they're setting that up so he can fly over in his private triple seven.

Dylan Koch: [9:56] I mean, I know money talks, but, I mean, when you put national security over financial gain. Goddamn.

Mike DeHaan: [10:02] I don't know. Anyways, I wanna talk about some of these different regions though, and how stuff's sort of panning out on just like the real estate investment realm. So I've been using first off, let's talk about AI because I've been using ChatGPT to just like figure out some of these headlines and stuff to talk about. And it's funny. And so this one, it it came up with a bunch of like regional comparisons for how markets are doing across different parts of the country. And then after it sort of spun up all these little notes for me, it said like, hey, I can build out a map slash slideshow visual that you could use for a reel to show the metro comparisons visually. It's like, do want me to mock it up? And I said, absolutely. And so what it did is it proceeded to spin up this map. And my thought is, like, with how sort of the micro entrepreneurs work is they're going to have these prompts, this GPT that they built, quote unquote. They're gonna have a Filipino or, like, an overseas person run it that's then just going to go and just download things and post them on social media and just be like, content. I'm a content creator. So anyway, it's spit up this map that is 100% incorrect in every way. I'll download it. I'll put it in the show notes because hey, Dale.

Mike DeHaan: [11:14] I'm gonna share share this with you on the share screen. So, basically, it has Syracuse is in Texas. It has Scranton in New York. Oh, boy. It has two Miamis with different stats. And then, basically, it has all of the colors wrong.

Dylan Koch: [11:30] Well, the whole graph

Mike DeHaan: [11:31] is wrong. The whole yeah. The whole graph is wrong. So, basically, it says that Florida is a good market. Like, Montana, you know, Washington

Dylan Koch: [11:40] aren't good. I would literally just flip flop this whole thing.

Mike DeHaan: [11:43] The whole thing. It's just like backwards. And I was like, what is it talking about? And then I tried to I was like, this thing is wrong. Can we do anything different? Like, can we just like fix it? And he just said, well, what do you need me to correct? And I was like, okay. So it actually has no idea what's going on.

Dylan Koch: [11:58] Yeah.

Mike DeHaan: [11:59] But the point being is that, you know, you know that content information is really hard to trust right now. It's only going to get worse as more and more stuff like this becomes the norm. Right? And it's like how over the past decade or whatever, influencers have been able to come in and if they speak very charismatically, they can just like say shit and people will believe it. Now they can back that up with quote unquote infographics and facts, right, that are just completely bullshit and people will buy it. You know? And the problem is now you don't even have to have like an understanding of like a graphics tool to put it together. You could just have AI do it for you. But even worse still is that if you don't check it, you won't even know that it's wrong.

Dylan Koch: [12:37] Yeah.

Mike DeHaan: [12:37] Right?

Dylan Koch: [12:38] I think it's harder now than ever to not know or what to believe that you see anything online. And that's especially true for, to be honest, like boomer people who like, who Absolutely. Believe anything they see online I mean, if I'm I'm looking at this from a point of how am I gonna use any type of AI for my business, I'm probably not gonna rely on it for data like that. But it's still a good, I don't know, synthesizer of, like, information. For example, some of the information that I put out there in your notes looks accurate, but the graph is severely wrong.

Mike DeHaan: [13:06] Correct. Yeah. And I I think the key is it's a great compiler.

Dylan Koch: [13:10] Yeah. Like curation of information.

Mike DeHaan: [13:12] Yeah. I actually saw it was a a Reddit post, which is always questionable. But here's one of things that's ironic about that is that Reddit is one of the largest sources for Chattypuki to gather information from, which is funny.

Dylan Koch: [13:24] A scary thought in and of itself.

Mike DeHaan: [13:25] Yeah. Because I've been a Redditor for a long time. And one of the jokes about Reddit is that you can seem like there's so much information on there, but the more that you personally know about a topic, the more you realize the people on Reddit don't know anything about it. Mhmm. Right? And it was, like, an AI article, and this person was basically saying that they're a software engineer that works with AI. And people think that it is it is basically generating content. What it actually is, it's predictive. Right? And so it has, like, the history of everything on the Internet. And what it does is it takes prompts that it has received from you and other people, and it tries to predict an answer that will satisfy what you're asking for.

Dylan Koch: [14:05] Mhmm.

Mike DeHaan: [14:05] Not an answer that is correct. Right? And so what it does, it tries to pick up on your tone and what you kind of wanna hear, and it will give you something that it thinks will be acceptable to you.

Dylan Koch: [14:16] I saw something like this on x where it's basically like, if I just prompt the AI enough, it'll give me the answer I'm looking for. Correct. It's like recency or it can like your own bias being enforced.

Mike DeHaan: [14:27] Yeah. There's a whole recent South Park episode about that where Randy Marsh is trying to pivot his weed farm, and he's using AI to tell him how to do it. And basically, every time he asks asks it a question, says, do you think this is a good idea? He just goes, absolutely. This is this is how we do it. And it eventually involves it evolves to where they're like a an AI integration, like, weed platform, like, for weed farmers. And the whole joke is that everyone basically is leading to become an AI integrator for whatever thing they're in. But you're completely right though, is that's what it'll do. It becomes like a self fulfilling prophecy. Mhmm. Whereas it's not a similar from Google where if you, like, prompt it to give you an answer a certain way, will find it. Like if I go on Google and I were to type in, you know, reasons why liberals are causing the world to die. Like, could do that and you'll find a bunch of stuff about it. You can swap liberals with MAGA conservatives, whatever. It will you will get confirmation of links

Dylan Koch: [15:24] Yes.

Mike DeHaan: [15:24] That will completely, tell you what you want to hear. And AI is doing the same thing. But the problem is is right now we currently just completely trust AI because it does it in a way where it feels so, like, believable.

Dylan Koch: [15:36] I think one of the differentiators you have to put out there is a lot of, I think, what the quote unquote AI that people interact with today are the LLMs, the Grox, ChatGBTs. But there are other AI systems being built that aren't large language models. Like, I've heard of things where you can basically, like, build your own code, like a no code coder Mhmm. And, like, build your own websites and, like, I don't know, do stuff that I came and really fathom or, like, maybe financial models or something like that. Right? Whereas that's not the same thing as using AI for LLM that I think which should most people 90% of people, that is their what they think of when they think of AI.

Mike DeHaan: [16:11] Well, even then, right, if you do use it for code. So I'm building out, like, our the back end for our lending business. And just because I hate all the canned products, I'm linking a bunch of stuff together with APIs because I'm a fucking dork and that's what I do.

Dylan Koch: [16:23] You are a nerd.

Mike DeHaan: [16:24] Yep. I am. For sure. And so but, you know, writing APIs takes a long time. So I've been using AI to do it. And it's awesome because what it does is it spits out this all the code that you need, everything's like freaking spaced out. It looks so good. You copy and paste it, never works.

Dylan Koch: [16:39] Really? Literally never works ever. That's good to know.

Mike DeHaan: [16:43] The stuff that's usually messed up is like the easy stuff, which is funny. It won't have picked up on, like, the right key structure. Right? Or it like, the the naming convention of it will it will just, like, have ignored. But all the kind of nitpicky stuff with code, like your comma placement and all those sort things Mhmm. That'll all be great. Interesting. So that helps, but you have to be able to debug it. Otherwise, it's completely pointless.

Dylan Koch: [17:05] And I guess the point is, like, I think the thought process is this is going to get better over time. Right? Like, eventually, it should just be plug and play. And I was actually listening to another podcast where everyone thinks, like, I don't know, like ChatGPT or Grok are gonna be, like, these all in company things, where it might be more like Grok will be strictly better like, be the best AI at code. And another AI might be the best AI at building websites. Or another AI might be best at financial modeling. It's not gonna be an all in one intuitive thing.

Mike DeHaan: [17:34] Sure. But then the problem will be when, you know, that AI is getting used for the same kind of things over and over and over and over again. Right. And technically, it is this all encompassing model that is collecting information from everybody, people that feed it worse and worse and worse and worse and worse information, won't that inherently make it dumber? I don't know.

Dylan Koch: [17:53] Yes. Yeah. Here, let's tie this back to the real estate part is I actually remember there's two members in in scale who were thinking of they are in California. They're thinking about investing in Cincinnati. They asked an AI, you know, what are the best ZIP codes to invest in Cincinnati? And they texted me and said, hey, like, do you agree with this? And literally, I would not have picked any worse ZIP codes. Right. Like, I would not, like, I was like, no way in hell would any of those zip codes work. They're like very, very frequently. So one, it shows like it didn't know. But two, to the real estate piece is like, I think it's so important now to be know your local market to the street, not even the ZIP code, like to like literally block by block if you're gonna wanna do this off market business.

Mike DeHaan: [18:35] Well, I think the challenge would be there too, right, is if they said simply what are the best ZIP codes? It doesn't know what best means.

Dylan Koch: [18:43] Sure. The prompt matters. Right?

Mike DeHaan: [18:45] Prompt matters a lot and you need to be a lot more specific. So if you were to say, I'm looking for markets to invest in real estate in Cincinnati where I want to be able to buy properties that are gonna have the least risk of needing, you know, additional work, that are going to be able to be bought at a discount because there's a higher population of distressed sellers that is, you know, has a decent crime rate. So I have to worry about issues with my tenants, whatever. Right? And like, actually, outline it that way, and it will probably still tell you something wrong. But at least you will feel like you fed up the right information.

Dylan Koch: [19:16] Yeah. Well, I mean, I asked Chad GB, like, when you're redoing the website for collecting keys, I prompted it with write my own biography, like basically what you know. And actually did a pretty good job.

Mike DeHaan: [19:25] It did a pretty good job, actually. Yeah. Know, You but it's not like that's, like, so little like, so simple and so low consequence.

Dylan Koch: [19:30] Yes.

Mike DeHaan: [19:31] True. Know, I I think the problem is when people are, you know, using it to either project information to others, like, they have an authority, that's a problem. Or if they're using it to make, like, larger decisions about themselves or about their investments is where it gets a little bit dicey.

Dylan Koch: [19:44] Yeah. I don't think anything beats talking to someone who's doing the business where you want to do business at. That's always gonna be the go to. But, like, the podcast I just listened to too, Mike, is the Reventure app guy. I forget his name. But if you look it up, he's got a pretty good UI on what markets are hot, what are not. And he was basically saying the same thing where they're looking at the new credit reporting that we talked about last week, how that's a lot of the credit reports, especially for the younger population, are going down because of missed student loan payments. Mhmm. And this is the government's response, like the rent rates and stuff to hopefully increase that to increase lending.

Mike DeHaan: [20:18] Mhmm.

Dylan Koch: [20:19] But long story short is, like, the DFWs, the Jacksons, like, Florida's, a lot of this stuff is, if you're in a market with rising inventory, it's great to be a buyer. If you're in a market with there's still markets with very little inventory and it's so good to be like a seller. So it's just so hyper local, it's hard to give a broad definition.

Mike DeHaan: [20:39] Yeah. And that's where things like ChatGPT can be helpful is they can, like, help you actually, like, gather information and get into a singular place. And so like for the the purpose of this show, I wanted to talk about some kind of these different markets and what things are looking like. And so this is what I kind of ran through here. And the general gist of what we're seeing overall, and the thing I always like about it too is it actually does link it to like MarketWatch and business Mhmm. HousingWire and all those sort things. You can see where these headlines come from. And so the markets that should be doing the best right now are some of these, the Rust Belt markets. Right? So kind of like, are you part of Rust Belt Cincinnati? I know it's

Dylan Koch: [21:16] No. I think we're just more Midwest. Rust Belt's more South.

Mike DeHaan: [21:20] More South. Well, it goes south up through

Dylan Koch: [21:23] Like Pittsburgh, like the Pennsylvania. Yeah. Like, I don't think we're considered that, but we're close.

Mike DeHaan: [21:27] Yeah. Because they said Syracuse, New York was like one of the top, like the most northern parts of the Rust Belt. And so those markets are actually up 10% year over year in value, which is crazy. And a country where pretty much everything else is dropping. And then all of the the Sunbelt sort of old people markets, Arizona, Florida. Mhmm. Right? Those are all in the shitty. Everyone knows that. With Miami actually being the worst market with currently ten months of supply, whereas the Northeastern markets are sitting under three months. And so it's funny. I wonder how much of that is, I would say, like the long term fallout of COVID both politically and socially with a, people retiring and just basically being like, well, COVID is my excuse to exit my career and retire and move out. Plus the fact we've had unprecedented securities growth and four zero one k growth over the last five years, so people are being comfortable in the trigger. And then also the migration of people from, like, blue states or whatever that happens for a year and a half.

Dylan Koch: [22:23] Well, I think there's even some reversal of that with people having to come back to office.

Mike DeHaan: [22:28] I think so. Actually, yeah. That's probably true.

Dylan Koch: [22:30] And so there there are more the one thing I liked in that podcast episode that goes along with this is you're basically starting to get to some points of pre pandemic levels of inventory in some of these markets. I know. Which I think that is the only thing that you can compare it to. Yeah. Because COVID had so much intervention that I don't think you can use that as a normal market timing at all.

Mike DeHaan: [22:47] Totally. Well, I think the the fact that so many markets grew as well, I mean, there are people that affordability is more important to them than lifestyle. Yep. Right? And so you're also seeing a huge movement of people moving towards those super affordable markets, even if it means leaving their home in Florida.

Dylan Koch: [23:04] I know someone that's personally leaving Nashville, Tennessee to go to St. Louis, Missouri just for a cost of living.

Mike DeHaan: [23:09] Isn't that crazy? Yeah. I know somebody that moved from Spokane to Iowa.

Dylan Koch: [23:12] Oh, god.

Mike DeHaan: [23:13] I was like,

Dylan Koch: [23:13] what is in Iowa, dude? Nothing. That's the point.

Mike DeHaan: [23:16] That is a state that I have never thought about except for when the Hawkeyes have, like, a decent team. Yeah. You know, once every six years in March Madness.

Dylan Koch: [23:24] I think a name like Des Moines, Iowa, and that's about it.

Mike DeHaan: [23:27] Was there any other like, I don't even know. There's probably a Springfield there. Probably. But but so but their people are are moving that way, and so you're starting to see places like some of these smaller metros in Indiana, so there's more more rural spots that are having a massive decrease in days on market just because there's actually a population of people buying houses there now. Mhmm. I see lots of jokes about this too on Instagram. You know, there's a lot of, like I I suppose it should be what I get targeted with, but, like, millennial doomer content, I would call it, where, like, they talk about how impossible their life is now because they are victims, whatever. And I see a lot of stuff. It's along the lines of, like, this is what a house will buy you in, you know, LA versus, like, here's what a house will buy you in Monk you know, not Montgomery, Alabama, which is actually a pretty private place in whatever area in the South. And, like, the one in the South will be, like, a 100, and it's, a six bedroom, eight bath, like, old, like, slave plantation too that has, like, the white pillars and stuff.

Dylan Koch: [24:23] Yep.

Mike DeHaan: [24:24] Yep. You know? And, like, the commentary always be like, oh, yeah. I think it's worth giving my kids the worst possible education for this.

Dylan Koch: [24:33] Everyone has their own trade offs. Right? You know? Yeah. Want the big ass house that you post on Instagram, but your kids are dumb or

Mike DeHaan: [24:39] Hey. I'm sure there's some smart people that come out of there. They should go to private school, like, you know, because they have money because they live in the fancy $100,000 house, not the $20,000 one.

Dylan Koch: [24:48] Right. But like same podcast too. They talked about we talk a lot on the show about like mortgage rates. Right? How everyone that the COVID had like, you know, anywhere from a the percentage of mortgages that were under 4% were at an all time high. Well, now these mortgages that are 6% or higher are starting to creep back up and that's starting to get to a closer and closer ratio. Just indicating that people are asking, why would people move if they have such a low interest rate? Sometimes they have to.

Mike DeHaan: [25:13] They

Dylan Koch: [25:13] have. Like things just happen. Right? So, like, it's not like this is gonna be set in place forever. And eventually, there will be more mortgages in the six plus range or five plus range than there will be in the four minus range.

Mike DeHaan: [25:23] Yeah.

Dylan Koch: [25:23] But that's still gonna be local dependent on where you're at.

Mike DeHaan: [25:26] Yeah. So here's a question for you on that. Let's say that you are someone that has a decent income, but you're not a full time real estate professional. Right? So like, let's say that you work for Cisco doing outside sales. You make $200,000 a year, and you wanna be a real estate person. And you can basically buy whatever, but you have like a decent buying power. Does it make more sense for that person to buy real estate in like a market that I would say has a high quality of life potential, high growth potential. Think place like San Diego. Right? Places like Seattle. Places like Austin. Right? Where there's there's growth that has happened there. People generally like living there. They have a good culture. But the cash is gonna be trash. Or does it make sense to go and buy things in whatever town, Ohio, Indiana, Illinois, that maybe has, a population of 100,000? There's not lot going on there, but you can buy things on like a one and a half, 2% rule. What do you think like, that person, if their goal is to be a real estate investor, I'm not saying about cash flow. I'm just talking about, like, they wanna have a portion of their investments in real estate. What do you think is a better bet?

Dylan Koch: [26:37] From a long term wealth perspective answer, probably the higher quality of life with a more expensive market. And I say that because of just the equity spread you're gonna get over time versus the other markets. They're gonna trump probably anything else.

Mike DeHaan: [26:51] Yeah. I would tend to agree. But it's funny because I think most of those people, they would probably think the other way around because they're gonna look at the the rental to price the cash on cash.

Dylan Koch: [27:00] Cash on cash or whatever. Yeah.

Mike DeHaan: [27:02] But but if you look at like a levered return, even even an unlevered return, honestly, on, like, a property in San Diego that you buy for $800,000, is the thing about places like San Diego. It's between seventy two and eighty five degrees, three hundred and sixty days a year. There's, like, five days where it'll vary. Right? It's always nice.

Dylan Koch: [27:21] It's landlocked.

Mike DeHaan: [27:22] It's landlocked. Well, except for the beach on San Diego. But there isn't, like, room. It can grow out any direction. It's pretty light compounds. There is, a supply and demand issue. There's a lot to do there. A There's lot of industry. It has a major airport. There's probably never gonna be a time people don't wanna live there.

Dylan Koch: [27:38] Mhmm.

Mike DeHaan: [27:39] Right? And as a result, people will come with money and eventually invest there. Same with like Hawaii. I remember when Brandon Turner bought his place out in Maui. He talked about this on back when he was on Bigger Pockets. And he really struggled with it because it was such an expensive thing. And someone pointed out to him, he's like, people are never gonna not wanna live in Hawaii. So it'll probably go up. Yep.

Dylan Koch: [27:59] Andy was able to house hack his place. I know. Right? Andy sold it to Cam just recently and made over 7 figures.

Mike DeHaan: [28:06] Did he really? I didn't know that.

Dylan Koch: [28:08] Yep. Cam said that on their pod, so I feel okay disclosing it to our audience. Oh, really? Yeah.

Mike DeHaan: [28:11] Oh, nice. Yeah. So like, if you're looking over like a the course of your life, that that probably will make sense. But you'll probably eat your lunch the entire time that you own it because you're gonna make zero income off of it. Anything that comes up as like an expense will come out of your pocket.

Dylan Koch: [28:26] Mhmm.

Mike DeHaan: [28:26] Right? But if you look at, like so you it takes $200,000 to buy it and, you know, it's worth $800 now, and then it's gonna be worth $2,000,000 in thirty years. That's a huge growth that you just had versus if you buy $200,000, you use that to buy, like, five houses that are worth, say, $200 each. So it's a million dollars worth.

Dylan Koch: [28:47] Mhmm.

Mike DeHaan: [28:47] And those properties go to realistically, like, 100 and like, 1.4, 1,500,000.

Dylan Koch: [28:52] In total, made

Mike DeHaan: [28:53] Same period of probably less. You're gonna have so much less growth on that. While also probably having more problems because you're gonna have more doors. Correct. Right? In a lower quality market with probably lower quality materials, worse weather. That's another thing people that I don't think take into account too is they'll look at some of these cash flow markets where it snows and you have, like, floods and you have other stuff that happens versus, like, the warm weather markets where that just doesn't.

Dylan Koch: [29:18] Yeah. And depending on the CapEx side. Like, if you buy these and they're already 19 fifties or older homes, and you need to put every fifteen, twenty years, you're putting 10 to $20.30 grand in these places, like, it's really hard to make that back over the lifetime. Now it's nice when you're 20 down the road and you're like, oh, my mortgage is only $25 left and I have all this equity. But over time, you really like, you just paid for the equity out of your own pocket over that duration of time.

Mike DeHaan: [29:40] Totally. Yeah. Do you know well, you probably don't because you live in one of these markets. So over here, I know quite a few people that have gotten into real estate and then they look at places like the Midwest, different Wood Medicine market, and they decide that they're gonna start building a portfolio over there.

Dylan Koch: [29:56] Mhmm.

Mike DeHaan: [29:57] And I have yet to meet someone that was actually happy with that decision.

Dylan Koch: [30:00] I mean, yeah. I I will say this as a wholesaler in this market, I know some of these California people. And I see what they they buy at. Pick California, New York, Florida, it doesn't really matter. And not all of them stick around for a long time.

Mike DeHaan: [30:11] No. No way, dude. Not even sort of. One of our, like, biggest flippers in Spokane, he decided he wanted to start accumulating a portfolio. And here's here's where silly is. He could, like, buy stuff here, but wasn't gonna cash flow. And he had been sold by people in the collective genius group that he was in that you have to have cash flow Mhmm. Because all those people are all over. But it doesn't really exist up here. And so we started buying all these, like, $50,000 houses in, like, Dayton and these other markets in Ohio. Right? He's not trying to fire sale all of them because here he goes in and it's a $50,000 house and it rents for $1,500 a month allegedly, but it turns over every quarter. It's always trash. There's always issues with it. The quality of the build is so poor. There's stuff that just, like, falls apart. And he's just rapidly trying to get out of everything, and he's now actually in the process of doing build to rents here in Spokane that will cash flow zero. But at least it'll be a concrete asset that he knows somebody will wanna buy sometime in the future.

Dylan Koch: [31:06] And someone will pay down his head if he keeps them. Correct. You know? Right? Yeah. I mean, they're a perfect example of this is there's a guy I know who bought a 100 unit apartment complex. It was like six total buildings, but they're all together in a sea area of Cincinnati that's here. But the guy that he bought it from was an outn investor, and he had third party property management that was supposed to be local. It was 40% occupied when he got one new contract. He had in his due diligence period, which was about sixty days, that he could try to lease it up during the due diligence period so that way, times closed and Hawaii's a lot better, etcetera. Genius bar on his. He had it 90% filled, occupied at the time that closing happened just because the he has boots on the ground and he was able to, like, basically hustle his way to get these things leased up. That third party board manager cost the seller millions of dollars.

Mike DeHaan: [31:56] Isn't that crazy? That's so unbelievable, dude. But like that's so common though.

Dylan Koch: [32:01] Yeah. They have no way to verify that the work that they're doing is being done correctly or at all.

Mike DeHaan: [32:05] I mean, we've bought houses in our wholesale business from people that were out of the area that were, like, literally, that we'd have one conversation with them. They say, just talk to property manager. And then the property manager has something in there, you know, property management agreement that says that they're a real estate agent. And so if the property sells, that they get to represent the seller and all sorts of bullshit. And we would go through, and they wouldn't actually guide the seller on the value of the property because we would basically make our offer that's at 70¢ in the dollar, and they would accept it. And the property manager just goes through with the transaction, and the property is, like, turnkey.

Dylan Koch: [32:37] Yeah.

Mike DeHaan: [32:38] We literally had one back in '21. Look, I lived in Japan. He wasn't like a military. He was just from here. I moved to Japan. And so like all of our calls were always at like 11:00 at night or, you stuff would come back at weird hours. And he just wanted us to work with the private manager on it. So this house at the time was worth like $2.50. Pretty much turnkey, had a long term tenant in it. We offered $1.65. He's like, yeah, you know, whatever. Go walk with my property manager. I wanna know what the condition is. So walks around the property manager, like Dan actually did the walk through. Property manager talks about all the problems with the house.

Dylan Koch: [33:10] Oh, god.

Mike DeHaan: [33:11] He's talking to himself and the guy about the rain gutters that are leaking and all sorts of things. Then we go inside the house and the tenant, who's a single guy, sort of just like a talk at you, sort of brushing. He's like, oh man, let me tell you how much of a piece of shit this house is. And he'll go and toss all the stuff.

Dylan Koch: [33:25] Those are

Mike DeHaan: [33:25] your favorite. And so we use this as leverage and we go back and we say, well, here's what your property manager says. Here's the pictures. Here's what the tenant said. We'll buy it for $1.65, but these are the problems that exist, just so you know. He's like, cool. Let's take it. We closed on the house. Property manager got us 3%. Larry, we're doing our walk through again after we bought it. She's gonna fix some stuff up. And the tenant's like, oh, did you guys end up buying this house? And we're like, yeah. He's like, oh, well, I told that property manager I wanted to buy it before you guys. He's like, what do you want for it? And we're like, I don't know, like $2.50? And he's like, done. The tenant Wayne got preapproved for Fuck. A The next day, we sold it to him four weeks later for $2.50.

Dylan Koch: [34:05] I love that story.

Mike DeHaan: [34:06] It's so dumb. I love that story. So stupid. Like, I I actually, like, felt bad about that one because the guy, he he was put together, the tenant was, and the property manager just completely fucked the seller on this whole thing.

Dylan Koch: [34:18] This is the third part. And then people always ask me for third like, property manager recommendations, and I'm like, I'm so hesitant to give anyone's name because Yeah. They're never gonna care for your place like you care for your own. Like No. That's a perfect example.

Mike DeHaan: [34:31] Your investment and like the the whole thing of this property manager is like, he was the worst property manager. Like, if you were to, like, have a lineup of random people and you knew nothing about any of them and all all it said was, who do you think is the worst property manager of this? He's the guy you would point to. Right? He was old, sloppy. Like, he had no actual skills or personable skills or anything.

Dylan Koch: [34:55] Or knowledge. Yeah.

Mike DeHaan: [34:56] I'm guessing that he probably collected rent, like, with cash and then sometimes remembered to send it to the owner, probably forgot how it was such a joke, dude.

Dylan Koch: [35:05] Yeah.

Mike DeHaan: [35:06] But that was the guy had been using it for twenty years, and so that's what he did.

Dylan Koch: [35:10] For anyone that uses third party management and you could put in your agreement a lot of times if any repairs, like, over a set dollar amount called $500 that it needs your approval to be fixed first. Where a lot of the property managers will get you is they'll be like they'll be like, I'm gonna go replace an air filter, and they'll charge you $200 to do it. Or like so it's on the rehab side that they'll try to make a lot their money, not on the leasing or continue maintenance side. We had a a four unit that was out of state seller, same kind of thing, walked through the property manager. And it was not a great part of town, but all four units were recently done. All the utilities and, like, mechanicals were new. And their in place rents were like $3,500, maybe $3,400. And we bought it. This was her number, by the way. I didn't even start for 205. I didn't even negotiate. I said, yeah, I'll buy it. And then I think two years later, we collected rents. I sold it for 347 k, and I put $0 in this place.

Mike DeHaan: [36:03] That's crazy.

Dylan Koch: [36:04] But those are opportunities too. Like, I yeah. I I do you feel bad about it? No. But I don't know.

Mike DeHaan: [36:09] I would say if anything, it makes you super cautious. Right? Like, when you start to own stuff yourself, that is the main benefit. It's like if you I don't know. If you're like a hiker and you hear that, like, someone got attacked by a bear on a trail that you're going to, you're gonna be extra cautious on that trail. Yeah. Even though, like, you're probably not gonna have a problem, it will make you be more queued into things. It's the same sort of concept. Right? Like, you see the things that can go wrong with your properties, with the property manager, the teams that are involved, you're gonna have a different level of due diligence when you approach them going forward.

Dylan Koch: [36:39] Or just stick to wholesaling and flipping and don't own rentals. This is a separate business. It's a whole separate thing. I know. Like

Mike DeHaan: [36:45] That's the other thing too is I we can't emphasize that enough, and I've tried to talk to you about that so many times. It's funny. We like with our Jir Lenzel out there, lending company, we get kind of people that come and, like, invest with us that are like, what's a very common situation is they're a high income earner, doctor, whatever. They listen to the show. We know they're from a different group. And they say, hey, I wanna get into doing what you do. And I'm like, you're a physician. You don't want to buy crack houses. Like trust me. Just go be just go be a physician and make $700,000 a year. Mhmm. Like, oh, but like, I think it'll be fun. Like, I wanna I wanna invest more in my doctors. So I'm like, invest in debt, invest in like LPs. Yep. Invest in that $1,200,000 beach home in San Diego. Right? Do those things. Those will be a much better outcome with way less headache than trying to get into fixing up renos, the buying like, having a big portfolio.

Dylan Koch: [37:34] They can literally go pick up overtime and make an extra $100 a year for very little, things Totally. Versus trying to buy a $70,000 crack house in Springfield, Ohio.

Mike DeHaan: [37:43] I know. But they always wanna do it. I don't know what that is.

Dylan Koch: [37:46] I think a lot of it, they get get sold on the depreciation of how to lower their taxable income from, like, being a high w two earner, which I can understand, you're probably paying 40% in total for some of your taxes if you're a physician.

Mike DeHaan: [37:57] Well, you're about to be paying 80% when you have your depreciation, and now you need to rebuild the house every two years because it freaking floods. And, you know, when you have people selling meth out of there. But I don't know, man. It's a there's always big red flags when people try to sell an investment with the tax benefits being on it. But Mhmm. If you're in that position though where you can afford to buy higher quality stuff, should just do it. And don't get into the fixer upper game unless you wanna do it actively as a business. Even, like, people that I meet that are like, I wanna flip, like, one or two houses a year. I'm always like, you probably shouldn't do that just because you will eventually lose. And the problem is if you lose on your one house for the year, that's a pretty big loss for the year.

Dylan Koch: [38:39] I'm gonna lose $40 on a flip that we're losing that's coming up and like That sucks. Does it suck? Yes. Yeah. But like, if I was new, I'd be in trouble.

Mike DeHaan: [38:47] You'd be devastated.

Dylan Koch: [38:48] Luckily, I'm okay now.

Mike DeHaan: [38:49] And also that's just like a line item for you, you know? That is Yeah. Amongst the 50 other deals that you've done that are profitable. So it doesn't really But I don't know, as people do, I would just say that when you're looking at locations on stuff, if you are looking to go virtual with it, just make sure that it actually aligns what you're trying to do, You know? And if you're already wealthy, you do all for yourself, you don't need to go to some of these, like, shitbox markets. Also too, would say that if you already do off yourself, you don't need to chase, like, home runs.

Dylan Koch: [39:16] Yeah. Yeah. That's a good point.

Mike DeHaan: [39:17] You know, like, over the course of a of a lifetime, the base hits are what builds, like, very long lasting guaranteed wealth. And I don't think we're last we're like ten years, honestly. You know, we've been in this game long enough that there's guys that I would say are very wise and patient. I consider to use one of these Dylan. Consider Drew Wired is on the show last week, one of those people that have kinda like stuck to their guns and they've built a strong foundation. And now you guys are crushing it. Right? Like, you have an awesome balance sheet. You make a lot of money. You do well. Most of the guys that I know that have just been constantly chasing the next, like, big home run, the big thing, they're all screwed. They have made nothing or if anything, they're in a massive deficit from where they were five years ago.

Dylan Koch: [39:56] I mean, imagine you accumulated a couple $100 over the past three or four years building this business. You make one decision that wiped out three to four years of work.

Mike DeHaan: [40:04] Right? And that can happen.

Dylan Koch: [40:05] No one obviously is going to talk about that. But you and I both know people that's happened to, especially being like abundance in these circles, like, it happens. It's just not advertised.

Mike DeHaan: [40:13] Yeah. And the thing is too is, especially if you're buying real estate, understand that you do not have gains until you sell. Right? And there's so many people that are still in denial of what their portfolios are actually worth. There was, on a, I don't know if you talked about this on here or if it was just between us, but there was a guy that presented a GoBundance call that he had, like, a $15,000,000 net worth. And I was saying, and it just, like, kinda didn't seem right. And one of the guys in my pod, he went and, like, basically back checked this dude's numbers. We're looking at the average cap rates of this market. And honestly, like, being super honest, instead of a $15,000,000 note, he probably had a negative $150,000 net worth.

Dylan Koch: [40:53] That's such a big difference.

Mike DeHaan: [40:55] When you reanalyze things at the actual cap rates versus what he said they were in his presentation. You know? That's nuts.

Dylan Koch: [41:01] Well, and realistically, anybody who's in real estate, there's nothing wrong with I do this. Full disclosure. But if you take ARV minus your debt. Right? Let's say that you have a million dollars in ARV and 500,000 in value, $5,000 on equity that you can count towards your personal financial statement. In reality, that's closer to 400 just from sale sale cost alone.

Mike DeHaan: [41:20] It's not including your cap gains

Dylan Koch: [41:22] Exactly.

Mike DeHaan: [41:22] Which are gonna be significant. It's not gonna include your depreciation recapture, which if you've taken any is more than you would expect.

Dylan Koch: [41:28] Yep.

Mike DeHaan: [41:28] Right? So all of a sudden that $500,000 in equity is actually only $200,000.

Dylan Koch: [41:33] Right.

Mike DeHaan: [41:33] Right?

Dylan Koch: [41:33] And so, like, but from a balance sheet standpoint, no one like, if you're presenting to a bank, no one actually does the math on the cap gains, the recapture. But you have to be aware that that is the thing if you're making decisions to sell or not sell or to keep, you know, etcetera.

Mike DeHaan: [41:46] Yeah. I would say that concept alone is why the value of getting additional leverage is such a huge talking point with, like, the OGs of real estate, the Kiyosakis, and those sort of people, is because they fully recognize that if they were to sell their assets with how many little threads they've pulled and not pay taxes, they'd be completely screwed, they would probably lose their ass.

Dylan Koch: [42:05] Yeah. I mean, I know we're running out of time here too, but there's a seller that I wanna buy one of his buildings. But he started with single he's 70 years old. He started with single families. He ten thirty one all the way up to this, like, 50,000 square foot strip mall that's in a good part of town. He literally, like, you'd think it's paid off. You would think that he has all this equity and stuff. But he's because he's ten thirty one so much His

Mike DeHaan: [42:25] basis is nothing.

Dylan Koch: [42:26] He basically has nothing. Yeah. His basis is nothing. So he's like, I can't I literally have to die with this asset. Oh my god. It happens. And this is why

Mike DeHaan: [42:33] you end up with, like, dilapidated, like, triple nets and stuff in some of these places because people can't sell them. If they were to sell the property that they've done that over their entire life, now they're 80 years old, someone's gonna have to pay those taxes, and they probably don't have $3,500,000.

Dylan Koch: [42:48] He literally has to die. So his kids get like a step up basis. Like, it's wild. I tried to go through like all these sophisticated I think there's Del Torres something statutory trust. I forget. It like a DS. But I tried everything I could, and our accounts and attorneys are basically like, guy screwed and he knows he's screwed.

Mike DeHaan: [43:05] Yeah. It's a Delaware statutory trust that you're talking

Dylan Koch: [43:06] about for. Yeah. You.

Mike DeHaan: [43:07] But anyways alright. Well, good chat, Dylan. I appreciate that.

Dylan Koch: [43:10] Yeah.

Mike DeHaan: [43:10] Well, thanks for listening everybody. I started putting together a little newsletter. If you guys want to see some more information on, like, the different little headlines that we talked about in here, you can get that collectingkeys.com/newsletter. Go grab that. Just ask your email. You'll get an email from me weekly, same day as the show comes out. Be a good little, like, what do they call it? Like, a companion for the podcast. I think that's what they call it on, like, TV shows when they have, like, oh, you wanna watch the Game of Thrones companion podcast. But, yeah, collectthecubes.com/newsletter. I'll send some out there so you can follow on a little bit better. Thanks for listening, everybody. We'll talk to you guys next week. See you. 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.