Why You Should Start Investing in a Market Downturn

Mike DeHaan: [0:00] Real quick before we jump into the show, we created the collecting keys podcast to be a real estate investing podcast that is created by real estate operators for real estate operators. And we want operators everywhere to know what it really takes these days to be successful in this business rather than all the fluff that all the other content creators and podcasters out there make. And so one of the challenges with this is that it's challenging to grow because most operators are too busy out there working. Right? And they aren't always learning or actively seeking new learning material. And so if you could please share this show with any fellow operators you know, you know, you can text it to them, you can post it on your socials, you can leave us a good review that you then share somewhere, that would be amazing. But really, whatever, it really helps us continue to get excited to create content, and it will also help you because everyone that you expose us to will get better as a real estate operator and close more deals. So if you could do that for us, it would really need a ton. And, otherwise, we appreciate you guys, and let's get into this episode.

Dan Austin: [1:04] This is going to be a long term effect that we're switching to a renter's nation. We're coming to Cincinnati. Don't

Dylan Koch: [1:09] worry. We'll be there.

Mike DeHaan: [1:10] Nothing you can do about it.

Dylan Koch: [1:11] At least you guys lend. Lend.

Dan Austin: [1:13] We're coming to a market near you. What

Mike DeHaan: [1:16] is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. I'm your host, Mike DeHaan, here with my cohost, Dan Austin and Dylan Cook. And this is a real estate investing show by full time investors and operators made for other operators. You guys continue to make money and do well in your business. And in case you missed that little quip at the start, Dylan is horrified that Dan and I are going to come and start taking his market share in Cincinnati. Because tell you what, that market seems pretty hot. Not gonna lie. So we're gonna start promoting it here.

Dylan Koch: [1:48] Not horrified in the slightest, but don't want more competition.

Dan Austin: [1:52] You're scared. You're scared.

Mike DeHaan: [1:54] You should be. What do you what do you think, Dan? I bet six months we could take Dylan's whole business.

Dan Austin: [1:58] We could take all we could crush Dylan. And then we Dylan will be paying us.

Dylan Koch: [2:02] That was a challenge. I want you guys to come here.

Mike DeHaan: [2:05] No way, dude. What what we'll do is we'll we'll put Cody over there in an Airbnb for, like, six months, and he will just carve out his own little, like, niche Mhmm. Of these, like, weird ass deals that nobody else can seem to get done and just gonna chip away your bottom line.

Dylan Koch: [2:20] So that's how I feel like those are the deals I do. So like.

Mike DeHaan: [2:22] See, exactly. That's what I'm saying.

Dan Austin: [2:24] Exactly. We're gonna steal your shit from you, dude. Just out of spite for no good reason. We're not even we're gonna just donate all the profits.

Dylan Koch: [2:29] After I give you guys appraisers, lending contacts, know, like, all this stuff.

Dan Austin: [2:34] You have been you have been nice to us.

Mike DeHaan: [2:36] It's called espionage. It's what Russia has been doing forever. Right? We're basically the same thing. But

Dan Austin: [2:43] It's true.

Mike DeHaan: [2:43] I I was saying this before we started. I I looked at buying some stuff back at Cincinnati back in 2019 when I was selling off some of my single families that I appreciate. It was actually, like, my old primary that I bought in 2015 that I kept as a rental, and I was planning to roll into, like, more stuff. And I ended up going to Minneapolis to Cincinnati because the cash flow was better, and that was what I cared about back then. But I definitely messed up because Cincinnati has boomed, and Cincinnati also doesn't have all the shitty weather that Minneapolis has.

Dylan Koch: [3:14] Mhmm. I know it was rained, like, I feel like two weeks straight right here right now. But Really?

Dan Austin: [3:19] Other than that, welcome to Washington.

Mike DeHaan: [3:21] Yeah. Right. But but does it have minus 40 degrees cold snaps with fucking windstorms? Probably not.

Dylan Koch: [3:27] Yeah. Not right now.

Mike DeHaan: [3:29] No. Not right now. But no. That mark seems to be pretty hot though.

Dylan Koch: [3:32] Are you rental free now, Mike?

Mike DeHaan: [3:34] No. I got all this shit that I sold them with Dan. And then I got a triplex and duplex still.

Dylan Koch: [3:40] Okay.

Mike DeHaan: [3:40] Should be on the market. But now that I've sold all my single families, and honestly without those, I'm like, I'm not as heavily motivated because I do have a ton of equity in the multis, but they do actually cash flow okay. Right. And they're stable. They're relatively easy. And my plan is if I don't get the price that I want, kind of by the end of the summer, that I'll probably just look to get, like, a line of credit. And I did the quick math. I should be able to plot about $300 on credit out of those. So I would still be leaving in, like, 300, but I would, you know, get a good amount of liquidity. I could go do loans. Haven't paid taxes.

Dylan Koch: [4:16] Yeah. You'll lend in, arbitrage difference.

Mike DeHaan: [4:19] Yeah. So that's kind of my strategy with it. But Dan and I still own a bunch of stuff, which we're trying to get rid of the, like, the single family, the less cash flowy stuff. But even then, like, the multifamily that Dan and I have practically rebuilt are all pretty strong.

Dan Austin: [4:32] Yeah.

Dylan Koch: [4:33] Yeah. I mean, I've added close to, like, 40 doors in the past two years, but, like, it was the beginning of 2023 or '20 yeah. 2023, I'm like, I'm not buying single families anymore for like for that same reason. Like, it has to be a duplex or larger for me to consider to hold it.

Mike DeHaan: [4:49] Yeah. I mean, the perks of the single family is they're easy to sell.

Dylan Koch: [4:52] Yep. Right? When you don't

Mike DeHaan: [4:53] want them, and they're easy to force appreciation. Mhmm. But the cash flow piece is kind of the trade off. But let me tell you what, they're like all the single families when I listed them. I don't think a single one was on the market for more than a week.

Dan Austin: [5:05] Yeah. They all just flew.

Dylan Koch: [5:07] And that's kinda like, you know, we talk about on this show a lot, the affordability. Like, a lot of the economic indicators aren't necessarily good right now. But like what we're feeling with boots on the ground and maybe it's, you know, Spokane and and here I am is, we're kinda going oak like firing on all cylinders still.

Mike DeHaan: [5:23] Mhmm.

Dan Austin: [5:24] Yeah. There's an argument that maybe like the Fed did like a good job and everything is

Dylan Koch: [5:29] just fine. I don't know if I can admit that. There is. There's an

Dan Austin: [5:33] argument for it because it's like, first of all, all the economic indicators always point to something different. People are like, oh, I'm so surprised by this happening. It's because it's like all happening in real time, you don't really know what's going on, but then you can look back and you can like, say, hey, actually, it wasn't like all that bad compared to what people were saying, because it's always the sky is falling, it's just human nature.

Mike DeHaan: [5:52] I mean, I don't know. Like, depends on what media you consume. Right? Like, you look at the actual macroeconomics, things are very very poor. Are they? What's poor about them? The general affordability of Of what? Everyone, of people who are like, can afford just standard goods.

Dan Austin: [6:06] Is there blood in the streets?

Mike DeHaan: [6:07] Not yet. Consumer debt is massive.

Dan Austin: [6:10] Mhmm. But what does that what does that mean in real time though?

Dylan Koch: [6:13] The thing is like, everyone's like, the wall is cracking, right? But every now we're still able to do deals, so the thing is you're not caught when if that dam breaks. Mhmm. Right? That's what everyone's trying to avoid. Yeah. Unfortunately, don't know if anyone has the answer of when that's going to be.

Mike DeHaan: [6:26] Correct.

Dan Austin: [6:26] Yeah. If, when? Could it be twenty years from now? That's guess that's my point in It like

Mike DeHaan: [6:30] could be.

Dan Austin: [6:30] That's my point in saying all this is like, you know, we know the foundation's cracking. Like, if you look at it like from a debt standpoint, from the like the US government, man, they're like Moody downgrade, nobody's gonna wanna buy our debt, it's gonna get really bad, but it's like when? And if you think it's gonna get really bad now, then you're gonna make certain decisions, but if it's twenty or thirty years from now, the decision you're making today probably, if you're doing it defensively, probably aren't gonna help you. Sure.

Mike DeHaan: [6:56] Yeah. You know? But I mean, it's one of those things like it's in hindsight, everything's twenty twenty, and stuff does take a long time. I don't think a lot of people realize that, and I always think it's funny when people quote history or, like, historical things, you know, that have happened and they Exactly. Equate the trends to exactly what's going on in, like, the modern world because

Dan Austin: [7:16] So some previous economic situation that doesn't exist anymore.

Mike DeHaan: [7:19] Well, not not only doesn't exist, but the previous economic situation we talked about took twenty years to happen. Right? Or, like, you know, people always talk about the authoritarian sort of setup in, you know, World War two and those sort of things. People don't realize that it took, like, you know, the Nazis in World War two, like, close to a decade to go through that whole process. But when you learn about it in history class in a three day segment, it feels like it's very, very fast. Yeah. You know? And so same with, like, economic collapses. You know? Those things tend to take a long time. And even like if you go look at the depression, sure there was the it was a Black Tuesday or whatever the big day was where the market collapsed. Mhmm. That was a singular day, but there was so many things up to that that led to that first. Right. And then the real issues came over the following close to a decade afterwards where things were really bad.

Dan Austin: [8:06] So Yeah.

Dylan Koch: [8:07] I guess the only thing I'd like to add to that is there are recessions and whatnot that come without some dramatic event. Yeah. That you can gradually go into these.

Mike DeHaan: [8:15] Of course.

Dylan Koch: [8:16] So it doesn't have to be a Black Tuesday or a Lehman Brothers event in 2008. Yep. Or a COVID of, you know, March 2020 that these things kind of happened. They can just be gradual things. Yeah.

Mike DeHaan: [8:25] Yeah. It's like that with everything. Right? Even look at outside of economics, like your health. You typically don't immediately have a health problem. Mhmm. Health problems that develop, they develop over years and decades, the vast majority of the time.

Dylan Koch: [8:36] Yep. Right.

Mike DeHaan: [8:37] You know? But we will just let them go and check. And so when you have trends that are negative, when you walk around with high blood pressure and, you know, poorly regulated blood sugar all the time, eventually, that's gonna lead to health issues. And so if you look at this with, the economic standpoint, when you have a massive consumer debt issue, you have defaulting on loans, you have the treasury continuing to climb, you just have a general unaffordability for most people, it's safe to say that probably will lead to problems at some time in the future, you just don't know exactly what.

Dan Austin: [9:04] Keep this in mind. So like 2008, 2009, like worst modern day financial crisis we've ever ex experienced. Right? And many many people were affected, but I don't know, people were still making money, people in our shoes were still doing well, people were still buying and selling houses during the worst economic crisis. Of course. And so then also, as we come out of that, they created monetary tools that did not exist before that. So who's to say we can't create some genius smart person in either in like the FOMC or somebody, some smart economic person is going to create a new tool that's not quantitative easing or quantitative tightening, has nothing to do with that, that they can help kind of build out and actually create what would have or avoid like a a modern day disaster. Right? Because all the economic indicators are pointing towards like a major crisis if you're like a person that thinks it's going to happen that way, but what if it's more of like a soft kind of like you said, easing into it and easing out of it. Is that not an option?

Dylan Koch: [10:01] It is. I'd say it's a low probability and like the acronym department at the Fed's gonna be busy. Right? Because they always come out with these things. There's quantitative easing, they have the SLR ratio requirements that are just like the leverage ratios that banks have, that they have to hold treasuries. Like during COVID, they got rid of that, so they they could provide more liquidity, and then they brought them back. But they'll probably get rid of that again.

Dan Austin: [10:20] Right.

Dylan Koch: [10:21] I think to the point is, it's like, the saying is, history doesn't repeat, but it often rhymes. Mhmm. And so, I don't think there's a way, if you just look at Mike's point, the affordability and prices. Right. Either wages have to come up, or prices have to come down, one way or the other. And so can that be gradual and slow? Yes. But that's this is probably not the most likely scenario I put my Right. My money on.

Mike DeHaan: [10:43] Yeah.

Dan Austin: [10:43] Yeah. I think the challenge we're in is like this lock where you can't drop rates, which is what they wanna do. Correct. Right? The at least the Trump administration, because I probably would assume that there's still some level of inflation shaking through the system, and there's enough demand, I think, right now for things that it would cause additional inflation, which would just kind of keep repeating the cycle of like a of a death spiral.

Dylan Koch: [11:04] It's a feedback loop. And plus the ninety day tariff stuff is like that ninety days will come up soon, and who knows what's gonna happen when that time comes? Yeah. If they're gonna kick

Dan Austin: [11:12] it down the road again.

Mike DeHaan: [11:12] They kick the can, yeah, as they always do.

Dan Austin: [11:14] I mean, don't be don't be dumb, like Trump's going to do whatever is in the best interest of his like election and what he looks like, he's not Of gonna he's an economy guy, he's not gonna want a bad economy, so if the tariffs He also has like really, really smart like people on his side, on the finance side that I actually like do respect that I think are really good, that are telling him what to do.

Dylan Koch: [11:33] Well, Scott Bessette was like the treasury secretary or whatever Yeah. And he worked with George Soros when he was younger, which they famously broke the the English pound Mhmm. And basically like devalued currency, and this was a long time ago. But point being is like, the dude has the contacts and the knowledge base to seemingly go through any kind of economic environment.

Dan Austin: [11:55] Totally. And he's likely gonna be the next Fed chair, like he's a legit player, and I I think that if Trump's smart, he's listening to him, and so I do think that anything like the the Black Swan Civil Terrorist is not actually going to ever result in anything.

Dylan Koch: [12:08] I guess my whole point in all this is like, you talked about Spokane, firing all cylinders, kinda doing here in Cincinnati, it's like

Mike DeHaan: [12:14] Mhmm.

Dylan Koch: [12:14] I almost feel a little insulated being in this market, and maybe that's right or wrong, I don't know. But that's how I feel right now. So I'm still very aggressively like doing this business, and even taking down more stuff right now. Totally. Time will tell if that's right or not.

Mike DeHaan: [12:28] Well, and I think that that's the direction these are gonna go. So I did a little talk to John Brooks' brokerage who was on the episode on the show with us last week. I did that talk today and kinda talking about wholesaling and marketing and things like that. But one of the discussions that came up was around just like the general economy and and where we think real estate and stuff's headed. And so Jacksonville, where he's based right now, is currently in the worst housing market in terms of inventory increase and time on market and just general lack of sales that it's ever been in. It's significantly worse right now than it was in 2008, and it is trending worse at a very aggressive rate. That's just one market that I know of because I know somebody there. I am sure there are other markets that are similar. Like, I have friends that are doing stuff in Austin. One of my my good buddies is one of biggest house flippers in Austin. And they can't, like, give a house away right now. Right? Because of these markets that have had these huge run up. And I guarantee you that there are all these busting markets that are going very, very sideways. But then the places where, you know, things are going pretty well, I don't think we're gonna necessarily see that.

Mike DeHaan: [13:32] Like, I don't think it's gonna be a national sort of wave that causes issues. Because I know, for example, in Washington State, and I imagine Cincinnati is similar because I know people have been moving there for a while. There's a good desirability for cost of living. There is a younger population that has been moving up here. There's generally, like, a higher income compared to the national average. Yep. I don't know what Ohio as a whole state looks like, but I think Cincinnati would fit into that. I would agree. And so people can generally just, like, afford to live life at, like, a basic standard that they enjoy. And there it's also, like, a good place to live.

Dylan Koch: [14:07] Right.

Mike DeHaan: [14:07] You know? Like, even if people are, like, generally poor, people move to Washington because it's sweet. Like, it's a beautiful place. It has good services for people that are not making a lot of money. Like, there's a ton of stuff to do. It has great school systems. Mhmm. It's honestly what you should be doing is betting on places that from, like, a social factor more so than just like a total economic factor in my opinion.

Dan Austin: [14:29] Right. Especially a place like Washington, there's this argument that, I guess, a place that has more social services is better for a younger generation than older generation. So you wanna see, you won't see old people moving to Washington because they don't wanna have to deal with the benefits of the younger getting, whether that's you know, taxes or whatever it is, and that's why you see a lot of people moving to no income state, dates like so no income tax dates.

Mike DeHaan: [14:52] Or you know, like like being gay, old people hate that shit. It's fucking They hate it. They don't wanna come to Washington. Yeah. You can do that openly. Yeah. Totally.

Dan Austin: [15:00] But, yeah, I think to your also to add on to what you're saying, Dylan, with the with the insulation, I think you go back to like the local economics of what we were taught, at least I remember learning when I was going into real estate, it's like look at your local economy. And in Spokane, we didn't get crushed by 2,008. We I mean, we felt it, I think everywhere felt it somewhat, but like it wasn't that bad, but it it was not good. But if you look at our if you just go and like look up your largest employers in your local market, you'll start seeing, and then you can look at the macroeconomics of who and what industries are being affected. So like for us, like largest employer, Fairchild Air Force Base, then you have teachers, then you have hospitals and medical folks. Right? We don't have any single major employer. All three of those are somewhat government funded, so we're quite insulated from things.

Dylan Koch: [15:45] Mhmm.

Dan Austin: [15:45] And then we have some pretty large, like mid sized, large for our local companies, like a handful of them. And then the rest of them are like, honestly, just like small small companies. So we're pretty well diversified and insulated from like a major economic thing where, for example, if you're over in Seattle, although I don't just using this as an example, but if there

Dylan Koch: [16:04] Tech bros.

Dan Austin: [16:05] If there's a tech bubble, there would be blood in the streets. Because all of that, like their major employers that are also concentrated with wealth, those employees are all like Microsoft, Google's, Amazon's, Starbucks, all that stuff. And so, like, I don't think we're at all gonna see that bubble pop, but like Austin, like if there was some tech struggles, they would certainly I think those companies would certainly feel it, and then because the market ran up so much, a lot of those people were going to Austin, but working remotely to places like Seattle. And I would also add that I think the Florida situation is more unique than any other boom bus market they've experienced in the past, because Florida, Arizona, these states like that are known for like the boom bus cycles, they feel it the worst. But with COVID, the black swan event with COVID, which was I'm going to move to Florida because of political reasoning, as well as like some sort of freedom, like, don't wanna wear a mask, or I don't wanna do things, but you also had all these people bouncing over to Austin, and bouncing over to Florida for reasons that had nothing to do with economics. And so you had an even higher boom market, so I think the trough compared to the peak is gonna be way deeper, and I think there there's no there's no way they're getting around it.

Dylan Koch: [17:16] Well, and then you have like, everyone in real estate probably has like the recency bias with 2007, 2008 being the last like true recession that we had. But that was more of like a nationwide thing, because it was a real estate related recession Right. Because like the ninja loans that they were doing. Mhmm. No income, no job, no assets. Here's your $500,000 loan, and here's a couple of them.

Dan Austin: [17:35] That was every market.

Dylan Koch: [17:36] Yeah. And that was everywhere. And so like, if that's gonna happen in today, I I just don't know what the primary driver is outside of affordability. And so prices have to come down in some way, but like real estate's probably the biggest like chunk of someone's expenses.

Mike DeHaan: [17:52] Yeah. Well, prices have to come down or the buyers have to change. Yep. Right? And so like I think this is a big reason in the in the lending space with our lending business. We're starting to see such a push for DSCR loans, and DSCR loans actually trending to rates lower than conventional Mhmm. Loans. Right?

Dylan Koch: [18:10] I think, not to interrupt you, Mike, but I think that needs to be like replayed because I don't think people know that unless you're a lender right now.

Mike DeHaan: [18:17] No. It's it's a really weird phenomenon because like I remember getting my first DSLR, kinda looking at it back in like 2018. And they were always, like, significantly higher.

Dan Austin: [18:27] Super expensive.

Mike DeHaan: [18:28] We'd looking at 9% interest, you know, and then a conventional mortgage would be, like, five and a half, six.

Dylan Koch: [18:34] Uh-huh.

Mike DeHaan: [18:34] Now we're getting to the point where, yeah, in your nose here with the ten year treasury increase, you're saying mortgage rates should be back above seven. We're able to write DSCR loans in the sixes right now if it's a good deal. Mhmm. Right? And so what that means is fundamentally, like, the big, big money, the ones who buy these tranches of mortgages, they are looking at investor grade Yep. Debt as being more favorable than consumer grade debt. And I think a lot of that is due to the unperforming, like, borrowers and and, you know, people that have debt that are on the consumer side. Right?

Dylan Koch: [19:04] Totally. Would you take a a 96 and a half percent levered FHA buyer, you have to pay a $40 credit card so you could buy, or an investor with a couple million dollars of equity and $300 in the bank?

Dan Austin: [19:14] Exactly.

Mike DeHaan: [19:15] Yeah. Absolutely. But the funny thing is, it's not like any investor. Right? Because we've also seen it really tighten on what they're asking for for their underwriting. So Mhmm. They're not doing, like, rural properties. Right? They're wanting higher credit for investors. They want to have, like, more months of runway and better financial stability. So, basically, what they're doing is what any smart person should do is they wanna bet on the people that have money and a track record. And they're kinda moving away from, like, the everyone else group, right, which is the vast majority of the population. And so what'll happen is more people with money will start to buy the houses, you know, and they will continue to sort of, like, be able to make that investment work for some reason or another. Because the other thing too is the government will be incentivized to make sure that people are providing housing and are buying houses. Right? Totally. Whether that comes in the form of, like, tax deficits, Florida or some these places are talking about getting rid of property taxes, which will increase the cash flow in all these places, you know, because rental rates can only go up so far. Yep. They're they're gonna change something on that end. You know, forty year mortgage, like, I've already heard about forty year DSCRs.

Mike DeHaan: [20:15] Mhmm. Wow. Right? Which will make the payment lower.

Dylan Koch: [20:17] Do you see this trend continuing of, like, more competitive investing lending?

Mike DeHaan: [20:22] Totally. I don't know how it won't.

Dan Austin: [20:24] That's what's like intriguing to me is like, I I worry like, like not worry, but like I think about this. Is this like a blip in time? Because I think capital markets are efficient, right? Like they will find the best way to deploy capital in the most secure way, in in times of it's like going back to recessions, people make money during recessions, right? But like, or is this this is going to be a long term effect that we're switching to a renter's nation because it goes back to that affordability issue, like I don't disagree, there is a major affordability issue when it comes to housing for most Americans and it only continues to As generations hold on to their housing, you know, we all become house dragons and we have low interest rates that are locked in for the next thirty years, people just are less incentivized to sell their house unless they have a life event, and people are more likely these days to say, well I'm gonna hang on to that house as I step up into my other house. And I talk to so many people that are not real estate investors, they're like, well we're just gonna keep that one and rent it out. Right? And so are we actually switching over now, over the next twenty to thirty years to a renter's nation, because of the affordability issue? And I'm not saying that that's a bad thing, I think people are gonna have to develop wealth a different way

Dylan Koch: [21:28] Mhmm.

Dan Austin: [21:28] And not in their primary home now. Because I will say owning a primary home, like does kinda suck sometimes. Oh, yeah. When you have to repair it, when your taxes jump up, when all that stuff jumps up, rents at least lag that.

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Dylan Koch: [22:22] I saw something the other day, like the median age for a home buyer is like 50 right now.

Dan Austin: [22:28] That's crazy.

Dylan Koch: [22:29] But like that was the same age for something like 2,007.

Dan Austin: [22:32] Oh, interesting.

Dylan Koch: [22:33] Basically, there's like twenty years apart and the median age hasn't changed.

Dan Austin: [22:36] Right. Yep. Right.

Dylan Koch: [22:37] So like, they're just trading houses amongst each other's.

Dan Austin: [22:40] Gotcha. Okay. Yeah. That's interesting.

Mike DeHaan: [22:42] I saw that. I think that was actually John Brooks that shared that on his Instagram.

Dan Austin: [22:46] Really?

Mike DeHaan: [22:47] Yeah. And so it said, yeah, the average birth year of a home buyer in 2008 was like 1967. And then like the average birth year of one in, like right now, was like 1969.

Dylan Koch: [22:59] Yeah. That's what it was.

Mike DeHaan: [23:00] They were fundamentally the same same like bracket of people.

Dan Austin: [23:04] They're the only people actually transacting houses right now.

Mike DeHaan: [23:07] Correct.

Dan Austin: [23:07] Right. I see. Yeah, which makes sense, because they're the ones with wealth, they're also the ones that need to downsize, or at that time, up in time maybe buying a lake house twenty years ago.

Mike DeHaan: [23:15] Totally. Yeah. So Interesting. Like on this on this note, when I did speak to John Brooks' group today, he actually asked a question I thought was pretty interesting. And so I talked a lot about when Dan and I got started back in kind of 2019, 2020, and COVID happened and a lot of our competition left. And, you know, Dan and I were able to kinda take a good market share because of that. So John John Brooks' question was, okay. So now we're in a similar situation where there's a ton of real estate people that are leaving the market. What would you say is, like, a good tip for someone to have the mindset to keep basically charging into the fire when everyone else is running out? K? So what would your guys' thoughts be on that?

Dylan Koch: [23:59] I'll think about it for a minute, but it's when you're just starting in that position, you don't know what you don't know.

Mike DeHaan: [24:05] Mhmm.

Dylan Koch: [24:05] So you kinda just go for it Yeah. Out of ignorance. Dan, you wanna answer what I think about it? I will here's what I here's what

Dan Austin: [24:13] I would say as somebody who's I lived like as an adult and like somebody like somewhat investing or being invested through like 2008, 2009, like I've I fully experienced that. Going into COVID, I experienced that. There's so there's tons of uncertainty in 2008, 2009, tons of uncertainty during COVID. There's tons of uncertainty right now. Like, uncertainty is like the only thing that's guaranteed in any business in any industry. And going into real estate now, it doesn't feel like it's the right move and but if it's something that you were looking, like, that's where you're gonna plant your flag, you plant your flag in any industry. But if you're gonna plant your flag in real estate, what a better time to do it when a, it's hard and you have to learn the hard way, makes the easier times even better, and b, there's just less competition. Seventy one percent of real estate agents last year didn't sell a single house. Pretty wild. You know what I mean? Just because there's a ton of real estate agents out there, doesn't mean that they're even your competition. There's a lot of people parking their license, there's a lot of people like me who maybe sell a handful of your own listings once in a while, don't like let what you think is the competition affect how you're gonna make your business decisions, because as we all three sit here, I agree, like it's kind of like a very uncertain time, and I don't know what's gonna happen tomorrow, but I could still guarantee that I'll make money tomorrow in this industry. And as people jump ship because they suck at being business owners, you can still dig your heels in and make quite a bit of money.

Mike DeHaan: [25:36] Yeah. My response to it was back then when we started, what we really focused on was doing the things that other people were doing that was getting them results. Right? And we just figured if we did the same thing, then we would also get results. And sure enough, it worked. I will say for me personally, the main difference between now and then is back in 2020, you know, was COVID was the big hiccup. That was like a biological event, and I was like, well, it's eventually gonna go away or we're all gonna fucking die.

Dan Austin: [26:03] It's like a flu.

Mike DeHaan: [26:03] Right? Yeah. Well, well, that's the thing. It's like when you have like a disease, there's there's eventually gonna be an end Mhmm. To that. Mhmm. When it comes to like a larger, you know, political macroeconomic issue, it's kind of harder to see that. Because very seriously, you could have a macroeconomic situation that goes on for twenty years. Sure. Like, the fact that COVID even went on for two years blew everyone's mind. Right? But we knew that wasn't gonna go on for twenty. And so it was a little bit easier to see past that. Now, I mean, I think just look at who is is currently making money and literally just copy and paste what they're doing.

Dylan Koch: [26:39] Yep.

Mike DeHaan: [26:39] Right? And then you're not gonna do it as well as them, but that's where the skill set comes in.

Dan Austin: [26:43] Can I add a caveat to that before Dylan answers? Do your fucking homework though on who's making money, because as we've seen, most people out there are not actually making money. All the gurus that are literally just I mean, you could open up your Instagram app, and every single day there's a new new guru story about them just ripping people off and not making money. So do your I would say on that, do your due diligence, and find people that are just genuinely like honest, and like just doing their thing. Mhmm.

Dylan Koch: [27:08] That's it. That's what I'll do. Yeah. Yeah. I don't have much to add other than like the the influencer people is probably not the people that go out. Find the guy that's dressed in like freaking overalls at your local Home Depot and drives a beat down truck.

Dan Austin: [27:21] Seriously, dude.

Mike DeHaan: [27:22] Honestly, do what our interns that work for us have done, where they know that we're making money and they say, hey, can I like come and work for you and like learn from you? Yep. Right? And yeah, they're in there every day. They're doing the hard work. They're doing the shit that we don't wanna do, but they're also gonna be around success and they're learning. Yep. You know? And if you're like a 40 year old dude and you're like, I don't wanna do that. I'm a fucking banker. It's like, well then you don't wanna grow grow a business that bad.

Dylan Koch: [27:45] Right. I have a question for you guys that's kind of related to this. But I got asked this question earlier today. Basically, and the gist of it is, would you ever or could you ever take your current wholesaling and real off market business, and hire yourselves out, like basically hire a CEO, and now you're strictly the owner where you're spending less than ten hours or less per week on this, and you're still making the same amount of money?

Mike DeHaan: [28:07] We pretty much did that last year Yeah. With our, like, big backer home buyers Mhmm.

Dan Austin: [28:11] Crew. Because we had the

Mike DeHaan: [28:12] whole team over there. Right? We had this guy, Matt, who basically ran the team and then did dispo, and then we had outsourced a lot of the disposition to the partners in those markets. Mhmm. Like, I mean, there was periods of time where I didn't have any idea what was going on in the pipeline.

Dan Austin: [28:28] You can do that. I think the the incentives you gotta in line with the incentives. Right? I mean, you gotta find the right person. I think the profit share employee is probably the best or some employee that's highly incentivized transactionally.

Dylan Koch: [28:41] Yeah. I guess, I have not heard I mean, you guys may be the exception with your national brand, but like especially locally, I've not heard of that being a thing. And I just had my brain turning, I guess, if I paid someone on a 100 and 150 k a year to basically be the CEO of my business, and how that would look like. And but then what else would I do, right? I don't I don't know. You'd find something.

Mike DeHaan: [29:01] Yeah. Like, well, what happens you get into fucking making content and having a stupid podcast. Yeah. Yeah. Like that's what happened when you have too much time.

Dan Austin: [29:08] Start a private lending company. I don't know. Whatever.

Dylan Koch: [29:10] Yeah.

Dan Austin: [29:10] You know?

Mike DeHaan: [29:10] So That's like the number one like red flag when I know people are either crushing it. I'll say red flag. No way in here I don't if people are either crushing it or going very poorly is all of a sudden they become a YouTuber.

Dan Austin: [29:20] They've become a YouTuber.

Mike DeHaan: [29:21] Dude, totally. Like, I mean, guilty myself as well. Yeah. We had a point, was like, I don't guess I don't know what to do. Like, we're making asses. I would have sales calls with people, you know, like looking to bring more partners or with scale or doing different things. But we were doing a lot of transactions, and then I went and did content, and I was like, this is fucking horrible. Yeah. And so I did shitty content for years, and now I'm back to being in real estate again, and it's way better. Like, I prefer that.

Dylan Koch: [29:46] Totally.

Mike DeHaan: [29:46] So but you could do it. I think the biggest thing is if you're trying to grow a business, where, like, the mindset shift that you kind of have to happen is your profit percentage will take a significant dip.

Dylan Koch: [29:56] Oh, for sure.

Mike DeHaan: [29:57] Yeah. You're no longer running a 70% profit wholesaling business. You know? You're gonna be down at, like, a 40% profit wholesaling business, more like what every other business is. Right? Like, wholesaling is kind of an anomaly in the ROI you can get on it as, a relatively small business. But a lot of that is because we have the ability to have the same cost of lead indicators. Right? Same cost per lead, cost per deal Mhmm. But hit home runs on those. Yep. Whereas, like, most businesses don't have that. Totally. So but, yeah, you could do it. It's just it's just different.

Dan Austin: [30:29] Yeah. I think you could, and I think you just have you have to have a different expectation for what that business looks like, because it might not actually look like the solopreneur business.

Dylan Koch: [30:37] Oh, there's no way it would. Know what I mean?

Dan Austin: [30:39] As far as how you operate, like, has to be different. Like, know on the last podcast, think, Mike, you mentioned like, maybe New Western, although we all hate them, might be the only like nationally recognized, technically wholesale business that is sellable. And when you and there's a big question about people like, well, if I can build this business, can I sell it? And I heard this Alex, it wasn't Alex from Mosaic quote, but he quoted somebody else saying, if your business isn't growing, it's worthless. Meaning that it's not worth anything because there's no growth or there's no growth potential when you look at how companies trade, technically speaking, it would be off a multiple of income, and if your income's not growing, well technically you aren't actually growing because you're losing profit to inflation every year. It's just an interesting way to look at it, but in this business, going after growth is almost unsustainable, so you get to a spot where maybe you're making top line a million dollars a year, taking home $2.53 hundreds, you're picking up a few rentals, that's pretty freaking good. Do you wanna change that? And if you do, then you probably need to double that to doing 2,000,000 in revenue, having a key employee that's making a 150 to 200, but now you have an asset that you probably could sell if you're into that kind of thing, but you're also getting kind of that you're that owner's share, and maybe doing ten hours a week to your point, don't.

Mike DeHaan: [31:49] Yeah. And and I would say the trade off to the fact that you can't hit home runs in this business is that there's also more room for people to be less efficient. Right? Because you can't just directly control the return on Aspen quite as easily. So like, going to your point on the notes that you put in for the the recording, Dylan, about how, you know, your realization that you're doing more deals right now because you hired an ad, but now your fees are lower. Yep. Right? This happens to everybody.

Dylan Koch: [32:14] Totally.

Mike DeHaan: [32:15] You said you went from, what, 18,000 a deal to 8,000 a deal, but you are, like, doing more of them. And I can't think of, like, a good way around that because the problem is you're now kind of, like, not fully, like, in line. Like, your goals for for you versus the AM are, like, slightly different.

Dylan Koch: [32:33] Well, his is to get the contract, and mine is to get the steepest discount I can get.

Mike DeHaan: [32:36] Exactly. So if it comes down to him, the option is getting no money versus getting some money. He's gonna get some money all the time. Yep. And having been like a sales rep in a company before, I totally understand that. It's like when I had my

Dylan Koch: [32:50] I'm not mad at him for this. It's just a realization that I'm having.

Mike DeHaan: [32:53] Yep. Like And that happens with every level of individually out of the business. If you go and add a dispo manager, the exact same thing is gonna happen again. Of All a sudden, instead of making 8 k today, you're gonna make 6 k a deal.

Dylan Koch: [33:05] Literally just closed on one yesterday where my net proceeds after I pay him will be like $3.

Mike DeHaan: [33:10] Nice. I'm like, yeah.

Dan Austin: [33:11] Yeah. That sucks.

Dylan Koch: [33:11] I'm like, isn't even worth it. But you know, it is because now he's happier. He's gonna do more deals like Mhmm.

Dan Austin: [33:18] He's getting paid the same and so he's happy to get that thing out. Yeah. I'm assuming he's getting paid the same but

Dylan Koch: [33:23] Yeah. He is.

Mike DeHaan: [33:24] So And that happens in every business. Right? With every level of of new individuals involved, you have some inefficiency that happens. Mhmm. Especially on sales. You know? The only way to get around that is if you have, like, super hard, like, rules around, you know, what your options look like and underwriting everything else. But the problem is with that is real estate's extremely subjective. You know, values are gonna vary. Like, five people can look at the same property and have a different offer price they're gonna pay for it. That's like perfect for them. Right.

Dylan Koch: [33:54] And I and I used to like look at all these properties myself before I'd offer them. And so there's a little bit more retrading now than I like to do because it's just learning curves along the way. Yeah. That's part of this.

Mike DeHaan: [34:03] Yeah. I mean, like, that's a huge part of it. But also too on the on the same note, what'll kind of ultimately start to happen is and like this kind of business especially because it is really small, is if your expectations are kind of unrealistic. Right, or you're constantly trying to need to get, like, I need to make $30,000 per deal. Because you're a two or three person business, eventually, guys are like, I wanna go make my own fucking $30,000 deal. Yeah. Right? Like like, there's no actual, like, IP that protects the business. Like, could just go and sign the contract himself with the seller and go and dispo it if you wanted to, you know? And so it creates this funny dynamic that I think is really hard to get out of.

Dan Austin: [34:41] I would cap it off also or by adding, how long have you been in this business before you hired? Like two years, like actual like running your own business?

Dylan Koch: [34:48] Yeah, I was probably It was close to like twenty months Mhmm. Essentially. Okay.

Dan Austin: [34:53] So twenty months, but and you'd have been in real estate a little bit before that, and all that stuff, and so, like you wouldn't go start a hardware store and or a restaurant and be like, yeah man, I've been in it a year, I've hired out all the things, and I'm just like a owner operator that's or an owner that just doesn't have to do any operations. So, but for some reason in real estate, I don't know what it is, but we get our heads wrapped around this timeline, you need to faster where you think you can exit your business early, just have people run it for you. It's like, that's not how it works in any business, especially if you're starting it from scratch, like Yeah. From literally zero. If you went and opened a restaurant from zero, I guarantee you any of these restaurateurs here would be like, yeah, I work twenty four hours a day for like five years. You know what I mean? To get to a point to where they maybe don't have to work every day. And so it's

Dylan Koch: [35:35] There A couple of years ago, there was a We Buy Houses franchise that are trying to sell, like the biz buy sell for like 50 k. I don't know if they're ruin them selling either. So. Well, Dan, I know you haven't

Mike DeHaan: [35:44] been hanging around with the buy business crowd too much, because they would completely argue against you.

Dan Austin: [35:49] I know. I'm sorry. I'm sorry. Well, I'm just gonna buy it, and I'm gonna put an operator in place, and I'm gonna make like $500 a year.

Dylan Koch: [35:55] Yeah. Well, there's a CoBundance guys that proves that's not the case.

Dan Austin: [35:58] Yeah. Yeah. They're losing their ass.

Mike DeHaan: [36:00] I'm gonna use AI to build the business plan. I'm gonna hire some VAs to basically do it. I'm gonna hire an operator on the ground, pay them $37,000 a year. They're gonna have a lot of, you know, joy working for

Dan Austin: [36:11] me as a slave. They're gonna love it. They're gonna

Dylan Koch: [36:13] love it. Make sure they fill out the culture index first.

Mike DeHaan: [36:15] Yeah. Exactly. Yeah. Yeah. Yeah. Can you please do my DISC assessment for my 40 Yeah. Thousand dollar a year

Dylan Koch: [36:22] Go on, man. Is this I was just at a we can actually, this is a good thing, and maybe we're tied off after that is the Go Bunnets I'm not a champion, but I was at a champions event on Wednesday and Thursday. And so there's a lot of high net worth people there. And I realized at that event that my problems are a lot smaller than some of these other guys' problems.

Mike DeHaan: [36:39] Oh, yeah.

Dylan Koch: [36:40] Yeah. One guy, like, his business partner basically went psycho and took $3,000,000 out of the business bank account, put it on his own personal account.

Dan Austin: [36:47] Oh my gosh. That's wild.

Dylan Koch: [36:49] He has to like sell his rentals to keep the business going, and they're gonna have to go to arbitration, and like all this kind of stuff. I'm like, oh my god. That sounds freaking terrible.

Dan Austin: [36:57] That's wild, dude.

Dylan Koch: [36:58] But and then that was just one. There's many more, but I won't I won't come to that.

Mike DeHaan: [37:01] Yeah. I mean, business does not come without problems. I can't tell you the last time that I met a business owner that was like, everything is perfect. It literally never happens. You know? But the thing is is like the the speed bumps do make all the good stories. Right? And that is where growth ultimately happens.

Dylan Koch: [37:19] Totally.

Mike DeHaan: [37:20] You know, even, like, the biggest, most, like, experienced business owners out there will always have something that happens. And because that's what happens when you're, you know, kinda paving the way. You know? And the funny thing is if you're an employee, whatever company you work for still has that same shit. You just don't see it because you're you're in the the whole right

Dan Austin: [37:38] You don't see it exactly.

Mike DeHaan: [37:39] Like, you probably are the speed bump.

Dylan Koch: [37:41] Yeah. You're the one that is the problem.

Mike DeHaan: [37:44] You're there. Like like, every every day your boss gets to his office and goes, fuck. I should fire Craig today. He's so fucking annoying. I do not want him to be in here.

Dan Austin: [37:52] Goddamn it, Craig. That's true. Yep. So

Mike DeHaan: [37:56] alright, everyone. Well, thanks for tuning in with us today. You guys have a great rest of your week. We will not have a Friday, folks, this week. So sorry, everybody. We we wrapped that up. Last week was my last one.

Dylan Koch: [38:07] Mhmm.

Mike DeHaan: [38:07] So if you guys wanna check that out, I did do a little breakdown of my my third session on acquisition.com. The Akshay Mosey's crew. People liked it. I actually got, like, a shocking amount of outreach on my Instagram from one. So Nice. Go give it a listen. Get our last Friday focus that we do for a little bit. Maybe we'll bring it together sometime in the future. But for right now, man, we're just trying to make some more money with real estate because, like we were talking about during the show, I think that's where a lot of the opportunity is right now. So cool. Keep building, everybody, and we'll talk to guys next week. See y'all. 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.