Don't Let Your Seller's Problems Become Your Problem

Dan Austin: [0:02] Welcome to the Collecting Keys Friday Focus. Hey there. Welcome back to another episode of the Collecting Keys Friday Focus. You have me today, Dan Austin, as your host. And before I dive in, I just have one special request to make to all you listeners out there, and that is if you've ever taken anything that Mike or I have said, either on the podcast or from social or any other venue where you've heard us giving out content, and it was at all valuable to you, if you don't mind, please go to Apple Podcasts, or wherever you listen to your podcast, and give us a rating and review, that's really what helps grow the show, and we don't make any money selling ads or anything like that. Really we only collect payment in the form of you all listening, getting good information from us, and giving us good positive feedback, or any feedback, we can make the show better. So, please, if you don't mind doing that, I would greatly appreciate it, and in fact, if you do that, snap a screenshot of it, DM me on Instagram at investor mandan, I will give you a free piece of swag, just go to collectingkeyspodcast.com/store, and whatever you want in there, I will send you free of charge, just for the rating review. If And you don't care about the swag, that's fine, that's cool, even though I do think the shirts fit very nicely. I'll give you a thirty minute free consultation, just DM me again with the rating review, and thirty minutes we can talk about anything, I can review your CRM, I can review next steps for your business, how to grow a marketing plan, a sales script, whatever you wanna do, I'm happy to do that, thirty minutes free, just doing that writing and review for us. Okay.

Dan Austin: [1:37] Let's dive into the episode. Today, I want to talk about, I guess, what I'll call the theme of this is, don't make your seller's pain in the ass, your pain in the ass. Basically, don't take other people's problems and make them your problems. Not all deals necessarily are worth going through the pain in the butt that they can become when you're negotiating the deal, and I'm gonna share an example of a deal we're actively negotiating right now, where we've decided, you know, let's step back and kind of make sure that we're positioning ourselves well, so that we aren't taking on this seller's pain in the ass. Because the seller has a duplex, which is a pain in his ass. He has a family member that lives in one unit, always a red flag, and that family member believes that they have a right to this duplex, although they have no right to it. They're not on title, they never have been on title, they just believe, long story made short, due to some family dynamics, and some work this person's done to it, that they are rightfully owed half the value of this duplex, and they're not going to let their siblings sell this thing because of that, and they're gonna make it a pain in the butt to do that. The other tenant, the other side is non paying, right? So the one unit that the sibling lives in has been worked on and fixed up supposedly, the other one is pretty trashed, needs quite a bit of work, and it's a non paying tenant or pain in the butt for this landlord. So you can see why the landlord just wants to get rid of this problem, he's got tons of issues with it.

Dan Austin: [3:03] But the challenge is, is this landlord, he wants about a 15% discount off after restored value. So if this thing was, you know, rented out, was able to rent fully, and was reason in reasonable good shape, it'd be worth about $3.50, he wants 300,000, and is willing to do seller financing on that 300,000 with 10% down. So $30 out of pocket there, we need probably 5,000 in closing cost, and another 30,000 in renovations to get at least what we're suspecting the other unit cleaned out and and good to go. So that's $65,000 in in hard cost there. Well, by taking this deal down, the the seller doesn't want to deal with any of it. They he he just wants to sell it, and then all of a sudden, his problems become our problems. His brother who thinks he owns it, is likely not going to move out. He's gonna be pretty pissed off, and so we're going to have to basically likely evict them or do a large cash for keys. So there's another expense there, and that could probably take, on a good day, a month, likely it's gonna be six months, where we're at in Washington State, the eviction practices just take a little bit longer than other states, and so now we have to sit on that one. Then we have the other tenant who doesn't have a lease, is non paying, that's also going to be a pain in the butt to get them out, because they're non paying, and you think they're gonna leave without a fight, probably not.

Dan Austin: [4:24] I'm a little less worried about that one, we deal with that quite often, that's a solution that we do provide, where we can go in there, give them cash for keys, or get them leased up, or do whatever we need to to get that unit vacated, or at least paying market rents. However, that risk, combined with this seller's sibling who doesn't think that his brother can sell it, that's going to be a problem, that becomes our problem. So we're going to spend $65,000 in hard cost expected to get this thing up and running to market rents, and so there's not a lot of room on it, but because he's willing to do seller financing, and we have negotiated a monthly payment that's reasonable, so we can still cash flow, and we believe over the five years that we'd own this, it's going to increase in value, so we are pushing some more equity. And so I'd feel comfortable doing that, except for the fact that in this market, I'm gonna have to deal with a fight with this person to get them out of the property that they think they own it, it's gonna be a headache. I have other opportunities out there, it's not that great of a deal, 15% off, knowing we have to do the repairs, and knowing we're gonna have some eviction costs, and some other, you know, litigation costs, potentially with this, with one of the tenants. It just all of a sudden becomes a glaring red flag. Although, not knowing all that information about the one tenant, this deal actually could come together for us. However, we know that, the seller's been forthright with that, and essentially he wants to give us his pain in the ass. Yes, I will buy his pain in the ass, and there is a price, but it's not a 15% discount on the deal, it's probably a 25% discount with the seller financing.

Dan Austin: [5:56] If not more, we're at least coming out of pocket very little, other than maybe just closing costs, so that we can actually have a good piece of the pie, a good stake in the game, so to speak, because of the cost, essentially the cost and the risk of carrying this guy's pain in the ass tenant. And remember on seller finance deals, typically you're not trying to refinance, unless you've worked with a seller to say, hey, I'm just going to carry, if you can just carry the loan for six months or twelve months, I can refinance, get you out, that's a different negotiation. In this situation, he wants mailbox money, so typically it's not okay to just go and refinance this deal right away, and get our money out, so we know we will be parking money into it, which is also another thing that we're taking into consideration on this, and another reason why we're stepping back to kinda refocus, and maybe there's different time that might align with this guy that that will work for him, or something else will happen in the market, or with the tenant situation that would actually open the doors to this same exact negotiation, these same numbers. But instead, we pivoted our negotiation and said that we can list the property as one of our services that we provide for, which got him excited, because he felt that that might actually be easier, the more we plan to sign in the yard, to actually get his brother and the other tenant to realize the place is going for sale, and to get the conversation going. Although, I am tentative as a agent to actually take this pain in the ass listing and do it, because I have tons of other opportunity in my time, so it's something I'd probably pass off to another agent that's a little bit more hungry, and looking for a little bit more income, regardless of the pain in the ass they're taking on. So, moral of the story here is, just because it's seller finance, just because you think it's a deal on the surface when you first start negotiating it, don't get this sunk cost bias to where you feel like to get this deal, you've gotta get this deal done, and then go take on someone else's problems. We're in the business of solving problems, not absorbing and consuming people's problems.

Dan Austin: [7:53] We don't want their problems to become our problems, especially in a stagnant market where there is money to be in, there are deals to be made, just sometimes not on the deal you're actually negotiating. So take a step back, look at it from a 10,000 foot view, and say, am I actually taking on this seller's problem, or am I solving their problem? So, just something to think about, hopefully this was valuable to you, if if not, let me know, if you thought this was silly and wasteful, I'd still love to hear that. In the DMs, hit me up at investormandan. If you are curious to know more about our group coaching program, if you've heard about it from social or from another podcast, go ahead and head over to collectingkeyspodcast.com and click the button that says become a millionaire or something like that, and that will take you right into our site where you can actually look at our different programs, and you can book a call with Mike or I, and just see if it's a good fit. If it's not a good fit, it's not a good fit. We like to interview all of people to see if they're a good fit for our group, and sometimes it doesn't work out. So anyhow, I'll stop here. I hope you all have a great weekend. Thanks for listening to this Collecting Keys Friday Focus.

Dan Austin: [8:59] Be sure to subscribe wherever you listen to your podcasts.