The Problem With “No Money Down” Investments

Mike DeHaan: [0:00] I bet you if a lot of people did that, they would probably realize they're underwater on a lot of their pro like, on their net worth. Why are they called claw bot? I feel like here's the real problem with AI. I feel like all the names are freaking stupid. Like, let's just, like, give them names that actually make me wanna use it. Like, that's would be better. What's going on, guys? Welcome to collecting keys. I'm your host, Mike DeHaan, here with just Dylan Cook today because Dan accepted a calendar invite, and then he's not responding to Slack, text, anything. So he's probably busy.

Dylan Koch: [0:32] Is he busy or he's dead? So who knows?

Mike DeHaan: [0:34] Yeah. Busy or is he dead? Actually, he just messaged me. He's gonna hop on right now. So he's gonna make, like, a ghost appearance in the middle of the show. But yeah. So, Dylan, what's good, man? But, yeah, going back to that that AI comment, like, it's funny. I there's there's so many of these different AI platforms that are popping up. What's up, Dan? Mid show appearance. You basically just like

Dan Austin: [0:56] What is?

Mike DeHaan: [0:57] You came, like, running into the green room, like, while we were recording.

Dan Austin: [1:00] Hey. I'm out of breath too.

Mike DeHaan: [1:02] You're out of breath. Well, I don't know what you were doing, why you're taking so long because you're

Dylan Koch: [1:06] It was just like a flight of stairs.

Mike DeHaan: [1:07] That was Yeah. But it's it's there's all these AI stuffs. You you posted like this Clawbot one. I feel like there's like a new one every single week, and there's always, like, the most unproductive people that I know on my Facebook feed that are talking about them all the time. And, like, I what are I don't understand what they're doing. Like, why is there always, a new thing? How is this different from all the other ones? And why do they have such ridiculous names that makes me not

Dylan Koch: [1:34] The ridiculous name things, I don't know. Because this was like it was like Claude Bot, but then Claude, like, Anthropic got mad for being so close with the name infringement, so then they changed it. And then opened the

Mike DeHaan: [1:43] eyes fair. Like Yeah. Like, you know, like, if we if we called our you know, if we had, like, a a legitimate home buying company that we or, like, a short term rental company that we called, like, I don't know, Air, Bed, and Bee, like, like, they would probably get slapped with that.

Dylan Koch: [1:58] Yeah. Air bed.

Mike DeHaan: [1:59] Yeah. Have you guys heard of Kimi? No. Is this another one?

Dan Austin: [2:05] Yeah. It kind of goes hand in hand with Clobbop, but it's like, I think it's a open Chinese open source model. So people are really kind of skeptical of giving it information, but essentially, it's like this it's like the new AI personal assistant way.

Mike DeHaan: [2:16] Is this

Dylan Koch: [2:16] like the the deep seek analogy to open to OpenAI?

Mike DeHaan: [2:20] The ChatGPT. The the think the so.

Dan Austin: [2:22] But Kimi is not their actual that's not like that I wouldn't say it's the same thing as ChatGPT. Kimi is an actual, like, open source model that was created on top of probably DeepSeek. I I don't know what it's built on top of. I just know it was built I I believe it's in China. And so but you if you connect all your shit to it, like, will legit like, it's it's I've heard really good things about it. What a lot of people are doing now is they're creating replicas of their employees with these machines, not to do the employees' jobs, but basically, like, go look at everything. They give them, like, access to their whole Slack system, give them access to their whole Gmail, their Google Drive, everything that they need, And they're putting it on a single machine, so it's like not open to the world. And then they are apps they're like running running that person's role through that and training it to do a lot of

Dylan Koch: [3:12] that stuff. So I've tried. I've been very busy lately, so I haven't dedicated a lot of time to it. But I want to stay like up to date on some of this stuff of what's signal and what's noise. And I do think this not necessarily maybe Clawbod, but like this AI agent stuff, I do think, as at least right now will be a factor. I don't know who the I will, I think it'll be a winner take most thing. There won't be 1000s of them. Someone will emerge as like the primary source for this, a package in a box, and then you can download it and then it kind of works like a plug and play model. But I don't know, I've seen some of these tutorials and like, it's kind of fascinating what people can create in just a couple minutes that would have taken like an idea, a project

Mike DeHaan: [3:54] team, design team. Like they could they know how to create it so that when they're showing you on a freaking Instagram Reel, it looks like it did something. But then if you actually try to use it, it doesn't do shit. I

Dan Austin: [4:06] I tend to agree in part with what Mike's sentiment is is which I think there's people that are over selling what they've got. Like, not the companies that are building them, but the people like, oh, look. I had to create this for me. At this point, I think I agree vastly with you, Dylan, is it's going to be a significant part of our daily work and the younger generation as they into work. I don't know how that affects them or their roles. The key, and I think it will continue to be a challenge, is how much information in your personal life and your personal business do you give to these systems? Because once you give it to them, it's kind of out there. Unless you bring

Mike DeHaan: [4:42] it like, if unless you're

Dan Austin: [4:43] a corporation and you can move all your shit to on prem, right, where you can, like, build it on your site and have it all, like, secured, which then it'll be less cool. It'll be less good, unless you're Amazon or some one of these big companies. But for people like us and how it applies to real estate investors, small business entrepreneurs, I think at what at what amount of information can you give it that you're okay with giving it, I think it will become a significant amount of your labor force. Not to and I hate to say labor force, but I I feel like it's gonna make things more efficient. Even little things that I do in the lending business, I use it for it every single day. I don't have time to build a model. And I'm perfectly okay with that right now for some of the stuff I'm doing, but it makes my job way more efficient.

Dylan Koch: [5:26] Two things I would say. One is a lot of the people that I try to listen to it's just like in off market real estate that like who you listen to matters. Like, you know, when we first started listening to people who we know are good operators, I try to find people that are analogous to that. They're like, okay, you are the head of Anthropic or like you are like, so, like, you actually probably know what you're talking about. And two things is the privacy aspect, what you alluded to, like giving things these things like your bank statements, your Gmail might actually not be great because you don't know what it where that's gonna end up. And the second thing was this is a good example. Like, I wanted to redo my my website. I went on Claude, and I had a new website in literally five minutes. And I get I've tried to play with it, and it seems to be working. Like, the Zapier still works. Like, the I've entered my own stuff. And that is something that would have taken someone a website designer. Maybe not long, but more than five minutes.

Mike DeHaan: [6:17] Yeah. So I guess, like, what extent they just build out like a design and stuff for you?

Dylan Koch: [6:20] Yeah. So I I mean, it took a couple of prompts. It was like, here's my current website. And here's and I gave it like a couple I want this color scheme. I wanted it to say these

Mike DeHaan: [6:29] What's the options? Like, what'd you do

Dylan Koch: [6:31] with it? So already simply is what it's hosted on right now. And so I had to upload, like, the HTML file, give it to the developers, and they had to do it on their end. But I also asked if I didn't Well, do here's

Mike DeHaan: [6:41] the thing.

Dylan Koch: [6:42] I asked if I did do that, if I hosted it myself, like on a WordPress or something, he said it would have been a lot easier, because I wouldn't have asked for those permissions. So I don't know. That's just one small example of I think something that will continue in a very fast trend.

Mike DeHaan: [6:54] Yeah, I think so. That kind of stuff will change a lot or like a lot of the repetitive stuff like Dan was saying before. But I mean, like, I still think that people are not understanding its true use case. People are trying to use it to, like, create things. And ultimately with AI, right, it doesn't actually create. What it does is it takes things that have already existed and essentially modifies it to you. And it feels like a creation to you because it's something that you haven't seen. Right? But, like, it does very few things that are actually, like, original. You know? It's all gonna be stuff that it's based off of previous information that it's been given, which is fine. But I don't think that people are thinking about it the correct way because when you're talking about having, like, employees, ultimately, the value of humans, if you have good ones, is they have the ability to think outside the box and to do things that are outside of their scope. And AI is a very, very long way from being able to do that. Right? They can make like, it can, like, do a pattern recognition, right, and realize that there was something that was similar that happened before, and it can make an adjustment for it.

Mike DeHaan: [7:56] But when you start to get, like, some of these one off deals or, you know, stuff that is, like, a little bit more nuanced. Right? So, like, for example, on the loan processing piece, let's say that we have, like, an AI bot that was, you know, talking to one of our borrowers in the zone we currently have and trying to figure out their their liquidity. It has to know how to interact with this person and the kind of questions to ask and these sort of things, especially when the person is kind of like irrational or they're disorganized that it's talking to. It's not gonna know how to like pry that information out of them if they don't participate. And so in the example I'm talking about right now, this borrower, he actually had a whole other business that had more LLC, that had more money in it. They had an IRA that had all these sort of things that overcame the liquidity issue. But is the AI gonna know to like to like ask about that? I don't know. Right? Because it's like just so just like outside of like the box that you've given. Not yet, for sure. But

Dan Austin: [8:50] Yeah. Why couldn't you just feed it all your phone conversations and tell it to talk just like you though?

Dylan Koch: [8:54] Well, I think that's something that you could do. And this is the difference between, like, the LLMs that everyone's used to, ChatGPT, etcetera, versus, like, Replay is one that's out there that you can basically plug and chug apps that can even go up on the Apple App Store. Like so I guess my point of saying is it it changes very quickly. And I think these like, I think it's important to stay on top of it. This is my my message here. It's like because I think if you don't, you could have competition that does, and that's gonna be bad for business.

Dan Austin: [9:22] Yeah, I think so. I think it's a tool that's worthy to be continuously researching and updating and testing and retesting because it's not one of those like try it now and it sucks. In two months from now, it's gonna be totally different.

Dylan Koch: [9:34] Yeah. And Mike's example of whatever he was trying to build with the platform, it could be two, three months from now, and be like, oh, it works now. Right? Like, and that's

Dan Austin: [9:41] kind From of learnings on an economic standpoint too, is like, there's a reason why it's driving The US economy. I mean, it's a it's a big it's a lot

Mike DeHaan: [9:51] of money.

Dan Austin: [9:52] There's just a there's a lot of money there. You can say it's speculation, but, like, here's what I don't I don't like. And I know, Dylan, this this maybe is a a slight pivot to the topic where Dylan, had said some stuff on the jobs report. I don't like when people like, well, yeah, but it it removes all of this. It's like, yeah, but every year there's always some speculation in the economy. Every year there's always this or that. So if you took out everything, then you're there would just wouldn't be any data. So it's like, yeah, the economy's not doing that great except for AI. If AI was taken out, it's like, but AI is the next thing. That's like saying take out social media six months or six years ago. Like, it it became the thing. Right? And so as it's becoming the thing, it is a massive part of the economy because it's consuming a ton of investment. And so for for that reason, like, it is speculation, but it's, like, pretty solid. Like, AI is not going anywhere. The speculation on which company is gonna do good, because there's a lot of companies out there right

Mike DeHaan: [10:42] now that

Dan Austin: [10:42] you don't know. They're they're gonna be dead. You know what I mean? It's always kinda it's like MySpace doesn't exist. Right? If you gambled everything on MySpace, whoops, even though they were the first mover. Right?

Mike DeHaan: [10:51] I think fundamentally, the the value like, the most common consumer value in AI is going to be come from, like, the software companies, that are the applications that use it in their platform Right. Versus people trying to build it themselves. You know?

Dan Austin: [11:05] That's a

Mike DeHaan: [11:06] good point. Like like, right now, because there's all these, like, sort of different tools and stuff, it's kinda similar to when the Internet first came around and people were, like, building all their own websites and different things. Very few people actually do that shit anymore. Right? You know, even if people say, oh, I build my website on Wix or WordPress. Yeah. That is the platform that is utilizing that ability. Right? Yes. And so moving forward, I think that'll be something that, like, that's where the real real value will be. We'll not be in the underbelly companies that are creating the AI, but the companies that actually adopt.

Dan Austin: [11:36] Yeah. Well, think about

Mike DeHaan: [11:37] it too.

Dan Austin: [11:38] Most people aren't smart enough to do that stuff.

Mike DeHaan: [11:40] Of course not. You know? But it's it's like cloud computing. You know, like, for so long, there was all this stuff. There's when we were in college, right, about cloud computing, all sorts of things. They're always independent cloud platforms that you could set up to host all your files and different things. No one uses those anymore. You use Google Drive.

Dan Austin: [11:54] Yeah.

Mike DeHaan: [11:54] Yeah. Right? You use, like, the big company's versions of that cloud computing. And that's

Dylan Koch: [11:59] a Everyone certain problem with should learn how to code to the no code movement to vibe coding. That's where we're at right now. Right.

Mike DeHaan: [12:05] Yeah. Totally. But, you know, and what'll be interesting is like how will that adapt and change and grow because I mean, in my short period of time where I was learning how to code, there was already this big movement away from like, if you were a good developer, you didn't actually code shit. You just knew how to pull stuff out of libraries and tie shit together. Right? And it's been that way for a long time, and now AI has just amplified the speed and the number of people that can do that. I don't know. Well, either way, they just stop having dumb names on things. Because I'm like, have have you tried Purple Dragon? It's like, was that fucking cannabis or is that the new a Are we getting high this

Dylan Koch: [12:40] or what? This is funny. And we'll wrap up the the technology store with this. Is so there's a realtor in my in my market and he's like, oh, I just built this bot that takes like MLS data and calculates if a property cash flows or not. And he's like, there's a 113 properties actually. And I saw that like, my first thought, there's no fucking way. There's there's no way that's right. So I just asked a simple question, does this account for percentage of like, CapEx maintenance, like that kind of stuff? And does it also account for tax reassessment when the property gets re taxed at the new sales value? And both of the questions were no. I mean, you're going back and forth kind of like in a social manner. I was like, there's no way that you can advertise this to your clients. If you're telling these your clients that these places actually cash flow, you're doing them a disservice.

Mike DeHaan: [13:26] You don't understand how cash flow conversations work on the Internet, Dylan. You ignore maintenance. You ignore CapEx. You ignore vacancy. You ignore any kind of drops in rents, any kind of tax increases, all that stuff's pretend. You just look at it you just look at it today, and you just pretend like everything is going to improve for the next thirty years, and you will never have maintenance issues. That that's a way better Instagram story for people.

Dylan Koch: [13:50] And like to that, if you're looking if you're underwriting a a place or at least for cash flow, at least in my market, I would be comfortable with like a 15% off gross income, especially if you're burying it because that means you're gonna have a lot of the stuff replace, the plumbing, the electrical, the roof, like the things that might be big ticket items later. But as we've talked about in the show, all those things have gone up, property taxes, insurance, cost of repairs, rent that lately has gone down. So I might be adjusting what I'm taking off gross rents as a percentage basis to account for those differences. And that's gonna make less things cash flow and will lower my purchase prices on some stuff, but like, better to do that than buy shitty deals.

Mike DeHaan: [14:29] Totally. You know? But the problem is that's that feels harder. You know? Buying a shitty deal and convincing yourself that it's good is easier. You know?

Dylan Koch: [14:37] Yeah. Until you run out of money.

Mike DeHaan: [14:38] Yeah. For sure. It's like it's like how people are trying to lose weight. They can convince themselves that they only eat pizza on Fridays and they eat an entire pizza that That's

Dan Austin: [14:46] the fuck up. That's my diet plan, dude.

Mike DeHaan: [14:48] Yeah. But, like, you're bulking, That's why you're all that's why you're all jacked now. Forever bulking. Forever bulking. Hey. I did that diet for a long time. This is,

Dylan Koch: [14:56] like, the fast, like, where people intermittent fast. So I like, I intermittent fast, like, every day. I sleep, and I don't eat till, like, noon the

Dan Austin: [15:01] next day.

Mike DeHaan: [15:02] There you go.

Dan Austin: [15:03] That's cool. I wake up at 11:30.

Mike DeHaan: [15:05] Yeah. That's actually really funny. See, I do an eight hour fast every day.

Dylan Koch: [15:08] Yeah. Oh,

Mike DeHaan: [15:09] really? Yeah. Do you feel like yeah. Go to bed at I wake

Dan Austin: [15:12] up at six. Have you said you went into work all morning, though, people would be like, no shit. I'm I'm gonna try that. God.

Dylan Koch: [15:17] Oh, yeah.

Mike DeHaan: [15:18] That's right. I'm so glad that we've kind of moved away from that super I don't like that weird, like, echo chamber of all the people that were trying to have, like, the perfect, like, mornings and habits and all these different things. And the funny thing is is I feel like the people that were the most into that were always not overly productive or successful people. Or they were people that were already so rich. I'm like, yeah. Of course, you have a freaking six hour morning routine. Have fucking nothing else to do. Yeah.

Dylan Koch: [15:48] Right. You don't need to

Mike DeHaan: [15:49] do anything.

Dylan Koch: [15:49] It's the 20 year old that doesn't have any other thing. He can do all this other stuff. That was me for a little bit. And then I was like, oh, I got older and I had a kid. And so like, oh, that goes out the window. Yeah.

Mike DeHaan: [16:00] For sure. But like that that whole movement, I feel like a couple years ago was like everywhere. And everyone had like a new book that was talked about. It was like, know, here's my book, The Five Second Morning Secret that I'm writing. And I'm gonna go talk on all these stages and be on all these podcasts talking about how great

Dylan Koch: [16:15] It's a modern version of p 90 x. That was, like, the first thing I remember from the fitness industry.

Mike DeHaan: [16:20] Version of p 90 x. Hey. That one black dude that was in that, those abs was freaking shredded. Yeah. You know? I'm like, no wonder they sold a lot of those. I was like,

Dan Austin: [16:29] I wanna look like that guy. He already had

Mike DeHaan: [16:30] the abs.

Dylan Koch: [16:31] Exactly. Exactly.

Mike DeHaan: [16:32] He did not get that body from p 90 x. But, god, for so long, I feel like that was that was such a problem. And I think that's one of the reasons that Hermozzi got so popular so quickly is because there was definitely an appetite for like, hey, just shut up and do the work Yes. Sort of thing. You know, and he just fully embodied that.

Dan Austin: [16:51] Well, it's like, this whole Did you listen it? A distraction. All the other Yeah.

Mike DeHaan: [16:55] Such a distraction.

Dan Austin: [16:56] I know.

Dylan Koch: [16:56] The favorite example is like, I did my three hour morning routine and then I didn't do x y and z. It's like, well, just don't do the routine. Like, the way the delivery was usually pretty good too.

Mike DeHaan: [17:04] Yeah. Well, it's I used to go back when we first started the show and I was kinda doing the podcast circuit. And I went on pretty much every podcast that I could find. Right? Trying to to kinda grow this out and just put myself out there. And that was one of the most common questions is like, what kind of like morning routines and stuff do I have that make me be successful? And like my answer was always like, well, especially back then, I didn't have kids. I didn't have much else to do. Was like, well, I wake up and I start working. And then I work out at like noon. And then I work until I go to bed. And, like, they they never liked that answer. They always, like, wanted to, like, like, woah. Do you, like, structure things this way? Do you like this? I'm like, no. Dude, I just Do you

Dylan Koch: [17:42] have a sauna?

Mike DeHaan: [17:43] No. None of that. Right.

Dan Austin: [17:45] A cold plunge? No cold plunge? Yeah. There's no way you could be successful without a cold plunge. Right.

Mike DeHaan: [17:50] It's not possible. That's why I live where it's winter. I don't need one. I just go outside. Do

Dylan Koch: [17:54] you guys when you guys are doing your off market business, did you guys ever get buyers that came back to you because they lost money on the deal and they thought it was your for sending them the deal too high?

Mike DeHaan: [18:03] No. Because we only sold good deals, Dylan.

Dan Austin: [18:05] Yeah. Actually, no. We haven't

Mike DeHaan: [18:06] had I can I can confidently say that we never had that?

Dylan Koch: [18:09] I am

Dan Austin: [18:10] not saying they

Dylan Koch: [18:10] would Call me today and he was he was Yeah. Angry because he's gonna lose money and he's like, and it was like the second deal I ever bought. And I was like, but to be fair, the contractor that he hired, they did a very piss poor job with the remodel. And that is why the house isn't selling. Like Oh,

Mike DeHaan: [18:25] it's weird. I mean, we we've definitely had buyers that have had similar circumstances. They very rarely I they've never blamed it on us. Don't think we've ever had that conversation with anybody. The question always comes down with those people is like, what phase caused them to lose money? Know? Like and and because, like, it is possible that you sold them a shitty deal and they overpaid for it. And, I mean, we've definitely sold deals for more than people should have paid for them. It's usually because they were like there's like a bidding thing and decided they really wanted it, different stuff, whatever. But the areas that especially newbies tend to lose money is, like you said, it's the contractors that do shitty job and they kinda, like, just patch together, especially in this market. And now you have this piecemeal house that goes in the markets competing against better stuff. Or it's like if they are one of those, like, really dumb newbies that has no money and they just find, like, whatever crooked local hard money lender is going to steal all their profit, which we have one of those companies here. And, like, they will take these people that have no money at all, and they'll give them, like and they'll say, hey. We'll give you a 100% or, like, we'll we'll just do it's just gonna be 5% for you to close the loan. That's what they say.

Mike DeHaan: [19:34] Jesus. But but they but they don't that's not 5% down. That's five that's five points that they're charging you. Third point is paid upfront. Yeah. I paid upfront. Don't back. And so like how they pitch to these newbies is they'll say like, oh, yeah. If you talk to like Chiavee, they're gonna this here's how much they need to close. We need way less than that. But they don't explain to them the difference between the fact that it's a down payment that's equity versus just fees. Yep. You know? Yep. And these same companies, they'll, like, extend and extend and extend, and they'll, like, just take all this money from people and they'll ultimately foreclose and then just, like, flip the house themselves. And that's a really big thing that gets people is, like, the too expensive money out of the gates, you know, and not running their their numbers correctly on that.

Dylan Koch: [20:14] Yeah. I mean, ever since I made a Facebook post, I've been inundated with people who are trying to, like because I offered 100% financing. I told Mike the other day, probably turned down close to $2,000,000 worth of loans. Not necessarily because I don't have that much to give out, frankly, not even close. Yeah. But this the deals themselves, like even if we were to go down that rabbit hole, they probably wouldn't pencil because they're they don't have any money or they're they're trying to give away too much where it doesn't make any Yeah.

Mike DeHaan: [20:42] Well, you know, it's it's like, that's what we were talking about the other day. And then you had that one that came in that was like so desperate they wouldn't offer you equity.

Dylan Koch: [20:49] Yeah. 30% equity for a 150 k.

Mike DeHaan: [20:52] You didn't even tell me details. I just

Dan Austin: [20:54] said don't do it. Don't do

Dylan Koch: [20:55] it. Yeah.

Mike DeHaan: [20:55] Don't even like, just like it's you know, and and it's a dumb thing for them to do. Right? Like, it doesn't make sense. And that's also another thing if you're like a newer investor kind of getting into the space. Don't give away too much on your deal if you don't have to. It's stupid. Yeah. Like, you can probably give away less than think, and you think it's like, oh, I want people aren't gonna work with me because I'm new, whatever. It's like, what will make people wanna work with you is if you're organized and you have realistic expectations, Right? And you actually do due diligence on a deal, not like giving away extra on a pipe dream that a pro knows is b s anyway.

Dylan Koch: [21:28] Yeah.

Dan Austin: [21:28] Right?

Mike DeHaan: [21:29] Yep. You know?

Dylan Koch: [21:30] So I've already given like a $150. Would've got paid back the $150 and made $50.

Mike DeHaan: [21:35] Yeah. No way. No. You would have got paid back jack shit, Dylan. Yeah. You would have lost a $150.

Dan Austin: [21:40] Yeah. My general rule of thumb is I don't do business with people that are desperate because it usually get like Yeah. Especially if you're like, oh, man. I can make so much money. This is a lopsided deal. You're probably gonna make less money. And like you're gonna like everybody's gonna lose. Just because they lose doesn't mean you don't lose. You'll still lose.

Mike DeHaan: [21:55] Oh, yeah. Is not it's just

Dan Austin: [21:56] not and it's never a good position to be in. If they're not they're desperate, it's a stressful situation where they're

Dylan Koch: [22:01] not The other thing is this property was not in my market. It was like three hours away. So like I Yeah. You know, if it was in my market, I would maybe want to consider it. It's like, okay, I can, you know, I I will know the numbers here. But, yeah.

Dan Austin: [22:11] You have the resources to take it over and all

Dylan Koch: [22:12] that stuff. Yes. Exactly. Yeah.

Mike DeHaan: [22:14] But, yeah. I mean, that's just a good rule for life because I understand real estate, Dan, but just never do business in general with desperate people. Mhmm. You know? And and it's it's always challenging because I think people, they confuse people that are, like, desperate with people that are, like, down on their luck, which are very different things, or people that are, like, don't have a lot and are, like, grinding it out. Because you you hear people say, especially when, you know, hiring salespeople or starting up or whatever, and they'll say, I want to be with somebody that has nothing to lose. That is not a desperate person. Mhmm. Right? There's people that have nothing to lose that are in a perfectly content position, but they're going to do things correctly because they're smart and they're trying to grow. But it's when you get like, I would say, honestly, the worst people to do business with are the people that have, like, kinda made it before and are about to lose it because they are gonna absolutely throw you under the bus to protect themselves if things get even worse. Right? Like, so many of the people that are, like, underwater on these flips and, like, different things or, know, built all this real estate portfolio that now they're cash flow hemorrhaging on it because they didn't account for the property tax increase and everything else. Those people coming in and trying to, like, give you an opportunity to bail them out, run. Run as far away as you possibly can.

Mike DeHaan: [23:30] Like when, you know, even like big names, like you had freaking Brandon Turner with his open door stuff when he I heard from your our friend Tyler in in Cincinnati, Dylan, who was like on the call with that where he's like, yeah. So basically, here's how cooked you all are. And Yeah. There's a $3,000,000 capital call that I have to do. I really hope that nobody did that because you're probably gonna lose that money.

Dylan Koch: [23:52] Yeah. You're just you're just like, you have money on fire. You're just adding more money to it. Like, just building the flame.

Mike DeHaan: [24:00] Yeah. It it would be great to just have like a montage of all the the gurus, like, saying stuff like that or sort of like begging their followers, investors, whatever to bail them out and just pair it against the clips of them on, like, the Ryan Potter show saying Yeah. Saying my overhead is $85,000 a month. Like, your personal overhead. I'm like, yeah. So you're where where's all the money gone? Like, what are you doing?

Dylan Koch: [24:22] There and there's such a big difference, like, when the in the GoBundance had a thing of, like, if they were good person, bad deal, bad person, bad deal, or just, like, they got unlucky. And a lot of them were, like, what are you doing to fact that try to make it right? Are you actually trying to save these? Or you just like putting your tail between your legs and saying, peace, you guys, like, sorry, guys. See you later. And unfortunately, there was more of that than there was of the former.

Mike DeHaan: [24:43] A lot of it. People just disappearing completely.

Dan Austin: [24:46] You

Mike DeHaan: [24:46] know? Just like not talking to anyone anymore. But you know? And then those people come around and you start seeing them on Facebook, and they have, a new opportunity for people. And you know what's going on. There's actually one in our local market. There was a whole, like, hit piece on them in all the newspapers, which apparently started because I talk shit about them on Reddit. That's what him and his that's what him and his wife said.

Dan Austin: [25:06] On his parade right now.

Mike DeHaan: [25:07] Now he's on his parade. He, like, started a new development. He's, like, building all these houses about the lake, all sort of shit. And it's it's funny because you see the new generation of suckers that are commenting on his post that are like, let me know if you need quotes on cabinets and all sort of things. I really wanna comment, like, out to those people and say, don't do it, man. You're not gonna He didn't

Dan Austin: [25:24] pay the last people.

Mike DeHaan: [25:26] I know. We did. We know them. You should've. The ones you got ripped

Dan Austin: [25:28] off. You should've. Did you hit did you hit up Mike Nuss? Is he part of the Real Estate Junkies podcast?

Mike DeHaan: [25:35] Is that his show?

Dan Austin: [25:36] I don't know. I've seen him on the show, though, as, a regular or something like that.

Mike DeHaan: [25:39] Yeah. I don't know.

Dan Austin: [25:40] He's But he's down at Oregon. But, anyways Yeah. Your buddy was on that podcast recently.

Mike DeHaan: [25:44] Was he really? Oh my god. I should I should let him know that.

Dan Austin: [25:49] Yeah. Yeah.

Mike DeHaan: [25:49] Because I I know I know Mike and us dig decently well. We we talk a lot of shit on different people.

Dan Austin: [25:54] It's a good friend.

Mike DeHaan: [25:55] Yeah.

Dan Austin: [25:56] Yeah. No. I I I had noticed that. I put the two to two together. I was like, that's interesting. Just because I know Mike would be a first guy to call BS on something like that. If if you do.

Mike DeHaan: [26:06] Totally. Right. But, I mean, that's a perfect example though. Right? Or somebody that was like desperate and desperate and desperate and then had was just prolific enough that people didn't hear why the desperation existed. Right? And now they're buying into it and you know it's gonna

Dan Austin: [26:18] Or it's hard to believe when there's desperation when somebody else when the when that same person's throwing out new deals all the time and talking about it. And and that's where like the visionary mindset, like, it it's really important, but also it can become manipulative. Right? Yeah. Especially when you're dealing with other people's monies. And like, I would say and know Brandon's situation that well, but like, you know, if he's out there doing new business while while his others are on fire, like, he's just bringing everybody thinks it's okay. Like, the new investors, the old investors know it's not okay. But they're not saying anything. They're not saying enough anyways. Right?

Mike DeHaan: [26:48] Well, what I think when you're on that pedestal, I mean, that's kinda what you have to do is you just keep pretending like those situations aren't happening. I mean, like, we know Brandon's situation. Him and David Green have been posting these stupid AI videos on Instagram about some conference that they're putting on. David Green is he's everyone knows his shit is fucked. We have a scale member that was going and making offers on foreclosure properties in the Bay Area. Guess who owned those properties? Yes, dude. His he did. He's, like, losing all these assets everywhere, and he's going and he's promoting his get started in real estate conference with Brandon.

Dan Austin: [27:24] I I I don't I showed up a little late. Did we start our told you so conversation, or is this the beginning of the told you so conversation?

Mike DeHaan: [27:30] We we can start with this.

Dan Austin: [27:31] Is the you so. Like, I we've had a good thread going on with this group of just not that I mean, I'm not personally relishing in other people's failures, but I am pretty stoked on, like, the told you so stuff. Like, the the David Green's a good example. Brandon you know, like, David Green kind of surprised doesn't surprise me, and I'm surprised that it surprises other people. Like, Brandon, I totally get the surprise factor. And I'm not even saying that he's a dirtbag. I don't know that he is. I do know from personal experiences and firsthand accounts that David Green perhaps is not a a great person. Anyway, so anyways. But just like even we were talking about the, the cohousing stuff, like how much how bad that is and, like, all the guys that were running, like, around saying this is the next best thing are kind of losing their asses.

Mike DeHaan: [28:15] They are. I know. And and when I was in Breckenridge a couple weeks ago, that was a pretty common theme was like, oh, what happened to so and so? What happened to so and so? And they were all kind of the co living people that are no longer a part of GoBundance or have like left the country even, some

Dan Austin: [28:31] of them.

Dylan Koch: [28:31] That's bad.

Mike DeHaan: [28:32] And so other places Or they ruin their marriages or They ruin their marriages. Right? There's like stuff that they've gotten cooked and a lot of it comes down to they get so over leveraged on these properties, you know, it doesn't perform how it's going. And so what do do? You like move to like a lower cost of living area? Because also when it comes to the co living stuff, you can't really sell those properties that easy. You have like eight leases and you just Frankenstein this house into a setup that nobody wants anymore.

Dan Austin: [28:57] What are

Mike DeHaan: [28:58] you doing?

Dylan Koch: [28:58] Well, lot of people too, they get their identity being around the co living guy or at least not even maybe around a niche, but around like just being a wealthy guy that has money. And if you turn around, that gets flipped on its head and you tie your whole identity to that. I mean, that's gonna be a quick downward spiral. And like Yeah. My net worth this year is significantly low, what it was past couple years. And it's hard not to be like, how do I get back to that as quick as possible? But then also not taking the extra risk to do that.

Mike DeHaan: [29:25] Yeah. It's so humbling to go back, I would say, like, now that I feel like things have kind of settled out, like, little bit in terms of values. And if you go back and you do like your personal financial statement and you take your total asset value, you reanalyze everything, see what it's actually worth Mhmm. Reduce the transaction costs to get that money. And then if you really wanna get humble, reduce your capital gains tax. Drop on that. And you realize how much yeah. You realize how much money you actually have. I bet you if a lot of people did that, they would probably realize they're underwater on a lot of their problem, like, on their net worth Yeah. Because they probably refinance everything at 75 percent. The values have increased an incredible amount. And if you took into account the, you know, 10% to sell the property and all the capital gains you're gonna pay, they probably don't have any equity left. Right. They're being completely honest with

Dylan Koch: [30:14] themselves. Well, the problem with like the the BRRRR strategy is like, it's a great way to lever up and build quick, but in a down market like this, you really can't sell it because you pulled out all the equity that you have, the transaction costs kill you. And you get still get taxed on what you sell for minus your cost basis, not what you pulled out in the refi. Yeah.

Dan Austin: [30:30] The refi doesn't reset the value.

Dylan Koch: [30:32] No. So like you you and then so my guess, my point is it takes away optionality if you need to pull levers to for some money.

Mike DeHaan: [30:39] Yeah. And what's funny is how many people don't realize that. You know, they don't understand that when you're doing that refinance, a big cash refinance, you're basically taking all of your future gains today. Yes.

Dan Austin: [30:48] Which by the way, is a big

Dylan Koch: [30:49] tax Time value of money would tell you that's smart, right? Because the dollar today is worth more than a dollar tomorrow.

Dan Austin: [30:53] Of course.

Dylan Koch: [30:53] So I understand the math and I understand to get it, but you can't do that with every property if you don't have significant liquidity elsewhere. And you have

Mike DeHaan: [31:00] to do something with it. If you take all that money and you just go and you spend it on personal liabilities, get a car, get a boat, And do you don't set any of that money aside for taxes or any more investments, like you're you're throwing away your

Dan Austin: [31:13] gains. You basically have no options to point your option. Like, when you do get into a down market and you can't make money transactionally, you're like, oh, crap. Let me go tap my properties. You can't. You already tapped them or the market value is so low, there's nothing to tap. And I I agree with you, Mike. I think from a net worth standpoint, a lot I I don't see any value other than getting loans, to to have your net worth at full value. But, like, if you're it should be what you can what you can grab. Right? What you can take out. And so you do have an eight to 10% transactional cost, 15 to 20% capital gains cost to that if you had to if you had to go and grab it. Right? So if you have if you're all in real estate, take off a huge chunk of that net worth. Like, now if it's diff if if it's a different type where the transactional cost is low, like stocks or some of your transaction cost is low, Right? That that's not as big of deal. You still have capital gains though. Got it's like, what what's the point of of net worth if you can't spend it? So you got 20% of your net worth you can't spend. Maybe more. 25%.

Mike DeHaan: [32:10] Well, goes back to what Dylan was talking about before. People get their entire identities tied into it.

Dan Austin: [32:14] It's stupid because you can't buy a jet ski with net worth. I can tell you that right now.

Mike DeHaan: [32:17] I know. Can't. You can't. You know? But yeah. It's when when people get tied into it, know, think there's a there's a level of fear around being honest with yourself. Yeah. I think so. You know, around what your I think the true situation looks like. People don't like that exposure.

Dylan Koch: [32:30] Yeah. The vindication, think, I had not that I like to see other people relish in failure like like Dan mentioned. But I would see people have these victory posts. And I remember, like, there would be exact deals that I saw. I'm like, they bought it for that? And it's just like this mental thing, like, okay, I was right. Like, they were they way overpaid for that. And like Yes. Now it's coming home to risk. Like

Dan Austin: [32:50] Yeah. That model wasn't the greatest model, you know? Yeah.

Mike DeHaan: [32:54] I I mean, at at the end of the day, if something feels fishy or something feels like it doesn't make sense, like, listen to your gut Yeah. On that. Yeah.

Dan Austin: [33:01] Go with your gut.

Mike DeHaan: [33:01] You know? Yeah. Don't don't just, like, follow along with the fads or whatever just because you've seen it, like, enough times. Because also here's how marketing works is you see it the first time, that's bullshit. See it seven times, it starts to make sense. You see it 30 times, you're like, what am I missing here? Like, am I am I the dumb one? Right? And that's how it works.

Dylan Koch: [33:19] How many times that it come in my head the past couple of years, Mike? It's it's nuts.

Dan Austin: [33:22] Yeah. Exactly.

Mike DeHaan: [33:23] All the time. Yeah. Know. And I think back to '21, just to close that really quick again, when you and me were really, really active in our wholesaling and flipping business, I remember talking to you. And there were so many people in town that were, like, closing on all of these deals.

Dan Austin: [33:38] Mhmm.

Mike DeHaan: [33:38] And they were just, like, lipstick on a pig, and they would, you know, just flip it. And, like, we would make $10.15 grand on the wholesale. They'd go and they'd make 40. Right? And they would show over and over. And after a while, you'd be like, should we do that? Should and we held our guns, and we didn't. And all those people lost their asses in '22.

Dylan Koch: [33:53] All of that.

Mike DeHaan: [33:53] A great point. Like, yeah,

Dan Austin: [33:54] if it doesn't make sense, it just doesn't make sense.

Mike DeHaan: [33:56] You

Dan Austin: [33:56] know? And and and you've heard it here first. I don't remember which one we called first. It was Airbnb or syndications, but it was right around the same time. Right? Like, obviously, we've talked a lot about some of these syndications that go out there and all these all these GPs raising capital on these shitty deals. And guess what? They're all gone. Airbnb operators, the same thing. Like and and there's nothing wrong with any of these tools, by the way. Like, co living, to be honest, I think is a great tool for a very specific use case. You shouldn't make that your whole business though because that is not a business. Right? That's a how do I maximize cash flow on a property as one strategy. Right? Maybe I maybe I cash flow 3 or $400 a month after everything on this house. But given my market circumstances, currently, I can cash flow 2,000, and I'm willing to put the effort in. Right? Cool. Do that. Don't make that a whole business where you're tearing up neighborhoods because it doesn't make sense. Right? But, you know, the their Airbnb thing, again, that's a great strategy for in certain areas with certain people and certain goals, but we saw that whole industry kinda get wiped out. And that one could that continues to consolidate, to the point to now where you're like, unless you're traveling with a group, you're like, why don't I just go get a hotel? It's gonna be clean and nice, and the washing machine's not gonna leak.

Dan Austin: [35:04] You know? So so right? And then Cole Lemmy is the latest, and it's like, what's the next told you? So they're coming they're it's gonna come up. And I think you gotta just do I I don't wanna say do do what seems smart because I don't think the knowledge out there is at a capable level of of the the education you see out there because it's also stupid.

Dylan Koch: [35:23] A lot of Airbnb's are in like the vacation markets where it has to be that, where it can't be a long term rental and it make financial sense. Like, I had one Airbnb, but if it didn't work, was like, I'll just rent it. Like, it'd be fine. Exactly.

Mike DeHaan: [35:33] That that was one of the first ones that Dan and I sort of started talking about it being such a big bubble issue was we had a couple of houses on the market. I remember we were getting offers over ask from people that were trying to turn them into Airbnb's. And these were in, like, just like suburban neighborhoods in Spokane, Washington. Yep. And I'm like, what are you justifying this on? Mhmm. You know? And and the whole thing was, well, you couldn't get DSCR loans because you're overpaying for us. They would go and get these like Fannie Freddie conventional full doc loans to get buy these Airbnb because no one else would lend to them on it.

Dylan Koch: [36:05] You know? Yeah. At that point, the lender is just lending on the person, not the property.

Dan Austin: [36:08] Their justification was always like, oh, I have a friend and that's killing they're getting cash flow. And this is like, you're like this two one in like East Spokane is not gonna be a badass Airbnb. And maybe for a couple months it was during COVID, like when everybody was like, I'm gonna go visit family in this random city. You know what I mean? And Airbnb things, but then people quickly found out. And I've been I've been subject to Airbnb's where you show up and you're like, those pictures were awesome, but this place sucks. You know what I mean? And so it's like, then that reality

Dylan Koch: [36:36] Clean is the entire fucking place before you leave. And then we're gonna pay cleaners clean it after you clean it for $500.

Dan Austin: [36:42] Yeah. It just it just got out of hand. Right? And now I I I think there's still a great use case for vacation rentals. I think there always will be, but not as a as a business model like all these guys are are all these guys are trying to do. It just doesn't make sense. And location definitely matters. But.

Mike DeHaan: [36:55] Yeah. You you know how it's how you tell when a niche of any market is truly become a bubble and is about to collapse is when you see people expanding into services around that industry. And you have, like, the person that was the original Airbnb person that you heard about, and now they no longer are doing that, but they have, an Airbnb management company Yeah. Or they're building out some kind of, like, platform around it. You know, some sort of, like, cleaning thing or something else. Yep. Because that because if the core of the industry was going that well for them, they wouldn't pivot. Right. You know? Just like how you the whole thing is once you have people that are graduating and becoming gurus or different things, it means they probably weren't that successful at that business. You know, that was the that was kind of when we were really running scale. That was one of the things that we always had to do that was different was we were operators first. Right? And then we had scale kind of on the side. It turns out that actually makes it almost impossible to grow a community because you're competing with the freaking gurus that just tell the potential member what they wanna hear.

Mike DeHaan: [37:56] Right? And it's like, oh, We'll be cheap. It's easy. Yeah. Here's what you can expect to do. You know? And you have like a full sales process. And when you're like, oh, well, we're focused on our business. We'll come help you do yours as well. And yeah, it is hard. You probably need to have like $50 to get started like, nah, fuck that. I'd rather go and pay Smorby $8 or doing it. I know. Yeah.

Dylan Koch: [38:14] And then they'll get a testimonial from someone who's paid that, oh, I made $50 my first two months. It's like, you were just paid $2 to say So Yeah. Totally.

Mike DeHaan: [38:22] You know, it's like that like that with everything. Yeah.

Dylan Koch: [38:24] The last I guess the last point to touch on with this is like, at least personally, my wife and I have done a decent job of keeping our expenses low during this whole time. I didn't look at the p and l as we're growing our rental and be like, okay. Now that we can afford a million dollar house, even though maybe we could have, we've like even if we lost 50% of our rental income, like, we'd be okay. And I guess coming from, like, the risk averse asset or like risk averse part of investing first. And then, you know, we probably won't upscale now for a couple of years until like the portfolio can pay for it by itself.

Mike DeHaan: [38:55] Yeah.

Dylan Koch: [38:56] Like, I don't even have to do the wholesaling stuff.

Dan Austin: [38:57] Yep. So Yeah. I think that's important. Right? And thinking of it as a business because at real estate investment at scale is a business. And so just making sure you're looking at the risk you're taking for the rewards you're getting, when you're having to invest a lot of capital and a lot of effort, I guess, to man. I mean, what you're doing, Dylan, like, no not very few people can do what you do, which is manage a decently sizable portfolio and a pretty damn good wholesale operation. Oh, by the way, you're flipping houses too. So you got property management. You've got flipping. You've got wholesaling and essentially marketing for that wholesale business. So it's like that's a lot. And so if you can't see the amount of risk that someone has to take when it comes to property ownership versus the reward, it's pretty crazy. Right? Like I think

Dylan Koch: [39:37] that that surprise. Go ahead.

Dan Austin: [39:39] No. I was gonna say, for you to think you're gonna live off the cash flow in any meaningful way before you get to a real scale is a farce.

Dylan Koch: [39:47] Yeah. The the surprise of entrepreneurship and not in real estate, especially because of the bigger numbers. But like how much difference your income could change on a week to week, month over month, year over year basis. Like, it could change a lot. One of my current

Mike DeHaan: [40:01] pet peeves, and then we'll wrap up. I see this happen periodically. It's always from, like, I would say, like, the low level sort of financial gurus that are just, like, pandering to their Facebook audience. They'll say shit like, step to get wealthy. Buy rental. Rental. Buy rental. Buy rental. Buy rental. For twenty years. Yeah. Congratulations, you're wealthy. I'm like, nah. It's not really how

Dylan Koch: [40:22] it Yeah.

Mike DeHaan: [40:22] No. It's not.

Dylan Koch: [40:23] There's the guy on Facebook or Instagram that says, here's the secret of being success. And he's like, buy 10 rentals paid off before you're 30. And then it cuts to someone else like, oh, fuck. Why did I do

Dan Austin: [40:33] that? Yeah. Don't remember.

Dylan Koch: [40:34] This guy with curly hair?

Dan Austin: [40:36] I like that. I don't remember.

Mike DeHaan: [40:37] But I

Dan Austin: [40:37] was like, this is Yeah.

Mike DeHaan: [40:40] Damn it.

Dan Austin: [40:41] I didn't think about that.

Mike DeHaan: [40:42] Yeah. Was like, shit. Was I doing in middle school during the two thousand nine crisis instead of buying properties?

Dan Austin: [40:47] Every year for ten years,

Mike DeHaan: [40:48] come up with

Dan Austin: [40:48] an extra 75 to $100 to put as a down payment on a property so that it cash flows for ten years.

Mike DeHaan: [40:54] I I have one more. I saw this got circulating on Reddit. It was like a real post from some finance guru, and it said, people don't understand the value of compound interest if you were to just invest $5,000 a month into the S and P five People were like, yeah. If I had $5,000 a month to just dump into stocks, I would not be following you, homie. Sorry. Yeah.

Dan Austin: [41:15] Come on.

Dylan Koch: [41:15] Like, for that's $60 a year that people are people are pitching pennies.

Mike DeHaan: [41:18] What a Yeah. That's like that's a all coverage household income United States. It's so out of touch. Anyways, anything else to wrap up, guys? Well, thanks for listening everybody. You guys should like share a show with your friends or something to get some get some growth. Growing podcast is like so impossible right now because apparently all you freaking nerds watch YouTube. Who does that? Who has time to like sit and watch like a long form video? World class platform.

Dylan Koch: [41:41] Only listen to podcasts on my car. That's it. Like, that's the only kind of entertainment that I listen

Mike DeHaan: [41:45] to is in

Dylan Koch: [41:45] my car.

Mike DeHaan: [41:46] Like That's that's the problem. I mean, I I I pretty much only listen to comedy podcasts

Dan Austin: [41:50] on YouTube.

Mike DeHaan: [41:52] No. No. I don't watch YouTube. Never.

Dan Austin: [41:53] I mean, I want to. I want to. Because I talked to people that do it, they're like, yeah. I watched it. I'm like, man, that sounds great, but I just can't. I don't, first of all, have time to watch

Mike DeHaan: [42:00] anything. So, again, it goes back to what you're saying before. This is this is the new morning routine is people that learn everything through YouTube. How successful are those people that are really into their YouTube videos on average?

Dan Austin: [42:09] Yeah. I don't know.

Mike DeHaan: [42:10] Probably not that Yeah.

Dan Austin: [42:12] You're right. Absolutely.

Mike DeHaan: [42:13] They're watching TV. They're watching TV that is completely created for them because the algorithm has optimized that video for them. It is it is exactly the same as them watching Netflix, except it is their algorithm, and it is something that was created by some schmuck that is way bigger and way more rich than all of the Netflix.

Dan Austin: [42:30] Confirm, like, YouTube Shorts because I've been on YouTube Shorts before where you get into it. They really hammer. You know, where, like, if you're on Instagram Reels, like, they're like, let me just throw in a, like, girl dancing real quick. See if he likes that. You know what I mean? Like, you're you know I mean? Let me just throw in a little Pace Morby video, see if he responds to that. Like, you get these random videos. YouTube, like, you wanna search stuff about Ukrainian war? You're there for eight hours watching people get killed by drones. Like, one after the other, and each one's more awesome. Like, YouTube's algorithm is just like where I am with Let's get this one. Wow. I watched his eye movement on that one. Yeah. Jesus Christ. Alright.

Mike DeHaan: [43:09] We'll close-up there. Thanks for listening, everybody, and we'll talk you guys next week.

Dylan Koch: [43:12] See This

Mike DeHaan: [43:13] episode is sponsored by Sir Lenzelot LLC, also known as SLA Capital, which if you didn't know, is Dan and I's private lending company. So, yes, we are sponsoring our own show, but what you're do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper than pretty much every other company out there. So whatever big company you've been working with, bring us their term sheets, I guarantee that we can probably beat it. We have the same connections they do. We just don't have all the overhead and middlemen. So 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. 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.