Deal Case Study: Partnering with the Competition to Make Money

Mike DeHaan: [0:00] What is going on, guys? Welcome to today's collecting keys Friday focus. If this is your first time here, my name is Mike DeHaan, and I am the host of collecting keys. I have been a full time real estate investor for coming up on six years, and I've done hundreds of deals. Mostly, I do wholesaling and flipped and direct to seller stuff, but I also own a pretty decent rental portfolio. And on these Friday episodes, we like to do a deep dive into a recent deal that we have done. Over the years, one of the most common requests that we get is people wanna know specifically more details around deals that we are doing, kinda how we find them, how I put them together, what some of the nuances are of the different deals. Because off market real estate is a very challenging thing to kind of, like, figure out and grow, mostly because every single deal is different. And so it's important to understand kinda like what's possible and how real estate works and how you can, like, use your network to really maximize your opportunities. So for this one today, I'm gonna talk about a deal that we did this past fall that was an interesting one because it was, like, kinda like a, I don't know, a little bit of collusion, I guess, with one of our main competitors here in town.

Mike DeHaan: [1:09] It was one where it could have gone two ways. It could have ended up basically going the way that it went, where we both made a little bit of money, or it could have ended up with us kind of bidding against each other and one of us buying a crappy deal or basically making way less money than we both ended up making. The story with this one is it was a pretty major fixer upper house here in Spokane. And we got a call from the seller. Of course, it happened to be a Saturday. I always feel like the most desperate tell sellers tend to call on the weekend when people don't really wanna be working. But he called us, and he said that he was calling everyone in town, and he was trying to get offers on this fixer upper rental that he had just gotten his tenant out of. And our guy was on top of it. He just happened to have some openings and availability, which was great. And so he went straight to the house, which the seller was open to doing. Went straight to the house, meet with the seller, with the goal to be the first one there. Ideally, so that we could get a contract and have it not go through the weekend since we knew that most of the larger companies or other people in town here would not be working over the weekend. They would be probably following up with that on Monday. So we're trying to get ahead of it. So anyways, our guy shows up, and sure enough, one of our competitors who is a kind of one person operation, we know very well, he's actually a decent friend of ours.

Mike DeHaan: [2:24] He was also there, and he had the exact same thought process as us. And so my guy and him kinda saw each other, friendly acknowledgment, went and talked to the seller, did the walk through, everything was going fine. And then the seller made it very clear that he was going to be taking the highest and best offer and that he also wanted to have everyone come through on Monday. Right? And so it was like a whole thing where he was basically trying to drag it out, and the seller's objective was basically to be able to pit get everyone's offers against each other and, you know, so we could get the highest bid. So go through the weekend, nothing really, you know, that necessarily happens. We kind of have a basic offer. We call back the seller on Sunday. He didn't really want him accept offers, he wanted to wait for everybody else to come through. Anyways, we get to Monday afternoon, and it turns out that there were no other people that he actually called in that came out to the house. And so it was our rep and then the guy that was there, and he essentially told us that the other party had offered x amount of money. I think it was, like, a 130,000. I wanted to know if we're gonna be able to beat that. And this is where our guy got real crafty, so our sales guy. So instead of saying, like, yes, we could or no, we can't, he said, here, let me just run some quick numbers really quick, and I'll call you back.

Mike DeHaan: [3:35] So he went and instead of going and running numbers, he basically called their competition and said, hey. This is what the seller has told us. Is that true? What are you planning to do with it? What's the full situation here? And our competition said, no. I actually offered him a 120,000. So he is basically trying to bluff to try and get a higher number here. And so this is where it got a little bit sneaky. So we decided that what we were gonna do working with our competition was to hold our ground at a nice low price. And then whoever was able to get the contract was basically going to work with the seller to get the deal done. And then the other person was going to work outside of closing to help find a buyer and help facilitate the wholesale deal. And then the contract holder would get paid at closing, and then whoever found the buyer would just basically just get written a check outside of closing. Right? And so there's a ton of trust that goes into this. It isn't something that I would recommend you doing with someone that you never met before or that you don't have a lot of trust with because they could absolutely screw you over. And so what we did is we went back to the seller, and we said, hey. That's great that he made you that offer. You should definitely go with him. We would be closer to, like, 123,000.

Mike DeHaan: [4:42] Right? And seller was kinda like, okay. Umed and odd. Hung up, whatever. We didn't hear anything back for a little bit. Anyway, ended up calling us back. I don't know. Maybe, like, couple hours later, wanted to take our offer of 123,000. We got it signed. Now we are working with the seller to get this thing done. So we started carrying the seller through, making sure all the due diligence was there. You know, we had actually the property, all sorts of things worked with title. Our competition went out and found a buyer. He was able to find one for, I think, 135. And numbers might be off a little bit. I'm kinda going off memory. This was in, like, August that we did this. 135,000. Buyer was all good to go. We were able to help work with the seller to get access. So we were both basically doing our wait for the deal. Went through, assigned it to the buyer that our competition found, and then we split our little 13,000 or was it basically a $17,000 fee on that thing. And so we actually received the money into our bank account and got wired to us by a title company. We wrote him a check for his 50%. And lo and behold, we both made money instead of us, like, beating each other up. One of us saying, I could do one thirty, you know, and now one of us is only making $5 or, like, you know, he goes to us with $1.30, then back to him $1.32, and now we're each making small stuff. Point being is we're able to play a little bit inside baseball and overcome the seller thinking that he was sneaky, trying to make false claims around offers and bid us up when it wasn't necessarily true. And instead, we were able to work together and, you know, let investors support other investors and get this deal done. We both made net quite a bit more money than we would have if we had sort of chased each other's offers. So the big lessons on this are don't be afraid to collaborate.

Mike DeHaan: [6:21] Right? Especially if you have people that you know that are in the same industry and that you're friendly with. That's a very underrated thing, I think, in this industry is, like, the level of collaboration that you can have. Also too, it's really important to ensure that you have a good reputation because there are other people in town and not just, you know, here, but everywhere, you know, all different markets we've been into, that don't have a good reputation. And if we run into these similar instances, we would not be willing to work with them because of that. We don't trust them. We don't think that they will do the correct thing. And so what would have happened if that if it had been one of those people, we probably would have ended up chasing it to the top, and nobody would have made anything. I'm gonna have been a giant waste of time. So protect your reputation. Make sure you're networking, and you kinda know who people are in your market. And hustle respects hustle and these kind of things, and that's important to acknowledge that. And don't get cheap with stuff either and try to, like, cut people out because you wanna make a little bit more money. If you bring people value, they'll bring it back to you. And at the end of the day, in the real estate community, it's very, very small, and it's possible for all of us to do well for ourselves without having to sort of beat each other up all the time.

Mike DeHaan: [7:23] So, anyways, hopefully, that's an interesting one for you. We do this a couple times a year. These kind of deals show up. They're not super often, but every now and then. It's usually when you have a seller that's kind of, like, thinks he's being super smart and trying to, you know, manipulate us in a way that we don't believe is truthful. But it's a great tactic that you can use if you do have a competitive market where you do run into other investors on a regular basis. So hopefully enjoyed that. Please share this show with anyone who's into real estate or sales or trying to get into real estate or trying to grow real estate business. It really helps out a ton, And we'll talk to you guys next week. Thanks so much.