Our Seller Was Abducted At Closing?

Speaker 1: [0:02] Welcome to the collecting keys real estate investing podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:25] What's going on, everybody? Welcome to episode four of the Collecting Keys Real Estate Investing Podcast. My name is Mike DeHaan. I am here with Dan Austin. And how you doing Dan?

Dan Austin: [0:38] It's been a good week. It's been a busy I

Mike DeHaan: [0:42] mean, this has been the most turbulent week of I feel like it really emphasizes the insanity of running a full time wholesale business like this and the kind of people that we work with. Hold on. I'm gonna pause this. Okay. Sorry about that. Just got on top of this crazy week, just got a phone call from my from our acquisitions manager who was out at a house and got attacked by a dog.

Dan Austin: [1:10] Oh, nice. Yeah.

Mike DeHaan: [1:11] So that's that's one. Yeah. That's just cream on top of the week. He's okay. Didn't get bit, but he said he tried to get you know, approach his property, could knock on the door and hasn't really been able to get to the door because there's a crazy dog in the yard that attacked him. And yeah. So he he said he's been calling the seller. The guy hasn't answered, but they were able to, like, go around the side yard and look in the window and the house is a complete gut job. So now the asking price that the guy has is extremely off what it was anyway. So, yeah, anyway, that's just the current situation of of our stuff. And then, you know, as as I was going to before, we had the most insane situation that we've ever had in this business where a seller in, you know, a pretty rough property, pretty rough situation was signing with a mobile notary and a another investor I still don't know who this person was. Some kind of other wholesaler investor basically kicks in the door to the neighbor's house where the seller is signing and proceeds to pretty much abduct the seller of the property because he wanted to buy it instead. And, you know, when realtors complain that investors make too much money, I'm gonna say when was the last time your seller was abducted from a signing? But here's the fucked up thing. So James and Judd and our guys went back there today trying to track him down.

Mike DeHaan: [2:43] Nobody's seen him. They don't know where the seller is. So they called the cops and stuff. Should do that thing because it's terrible because like literally nobody knows where this guy went. Like he has disappeared.

Dan Austin: [2:57] So this is our first official kidnapping. Wow. Yeah, this is a complex situation. I mean, maybe those squatters did something too. Were known squatters on this property. I'm wondering if they have them tied up in the garage.

Mike DeHaan: [3:12] Yeah, I mean like honestly though, don't know. And then say they called the cops, like Crime Check is investigating it. But it's also tough too because of this type of situation and this neighborhood. The cops are like, well these people like, you know, they just go wandering about sometimes, you know, and so they're not taking it seriously at all. Yeah, don't know. It is super, super wacky. But, yeah, we were literally about to sign. You know, it was a little wholesale deal for us. It's a terrible property, like, terms of just, like, condition in a very rough part of town. And the the problem is, like, a lot of complexities came because the owner has been taking been been taken advantage of by a bunch of squatters who are living in his garage, who he's terrified of, and he wants to get out of the property, but they're basically not allowing him to sell it. Know? And and we're like so talking to James, our our sales guy, he's pretty sure that, you know, the squatters were privy to this other person. And so I guess the details on this other person, roundabout way I found out he had a contract to buy this property back in August and failed to execute on it and has been trying to like figure it out but he's just, I don't know, he was a rookie. He can't figure out how to put together a purchase. And I'm guessing that the squatters alerted him because for him to roll up literally mid signing makes no sense.

Mike DeHaan: [4:39] Like that is too coincidental.

Dan Austin: [4:40] Yeah. Very coincidental. Very weird too.

Mike DeHaan: [4:44] Super weird. And to just come in and be hyper aggressive like that. Our dispositions guy was out there. He's a young guy. He's not overly intimidated by people I don't think but when somebody comes in and they got their crazy eyes and they're now like manhandling your seller and then I know. And then on top of that, there's the poor notary who's like a, you know, a legal professional that was just there and was just like, oh my god. And so our escrow company called me after and chewed me out for even having the mobile notary go to this place. I was like, what else are they supposed to do? Right. Like, I don't know. If she doesn't feel safe, then say that and we can meet somewhere else.

Dan Austin: [5:20] Yeah. I mean

Mike DeHaan: [5:22] Yeah. It's so ridiculous. It's tragic, but it's also insane. I don't know.

Dan Austin: [5:34] I hope it closes. I hope we find the guy.

Mike DeHaan: [5:37] Honestly, hope the guy's okay. I have no idea. He's about to lose all of his equity in his property because he's going to tax foreclosure anyway. Yeah, this is tough. So you know basically now these squatters are making it guaranteed so that he's going be walking away with nothing because they're not allowing him to buy his property because they're trying to be terrible people.

Dan Austin: [6:02] Gosh, there's a lot of other garages they could squash. It's not like the market's limited or capped anywhere. Mean, it's

Mike DeHaan: [6:10] not like there's a lack of space or empty lots. You can just show

Dan Austin: [6:16] up too. Can just show up and pull up with all your crap. Yeah. You can do that anywhere. Yeah.

Mike DeHaan: [6:20] And one of thing that sucks too is before all this went down, we kinda like sensed the the issue there. So we called the we'll call Crime Check, called the police to try and be like, hey. These people are, like, causing a major menace in this neighborhood. Like, you know, they are causing all sorts of problems. And they were basically just like, well, do you own the property? And we were like, no. Not yet. We're trying to. And they're like, okay. Well, until you own it, we can't do anything. And so basically the current owner had to call the police. But, you know, this particular social class, right, like, know, is from the kind of upbringing where he's had run ins with his with the police his whole life, he's never gonna call the police. He's the kind of guy like if you have a problem like that, you deal with it. You don't get the law involved. Yeah, don't know. And it sucks too because we've kind of got to know the neighbors across the street a little bit in Zitherbery's and they were just like, please figure out this house. Like, they're getting their stuff broken into, getting stolen all the time and now we're literally not gonna be able to because these people have these insane protections here and there's just nothing that can go on about it.

Dan Austin: [7:32] I have faith. We'll figure it out.

Mike DeHaan: [7:34] Maybe. Well, I have faith. Assuming he's okay. Yeah. That's true. That's been my last twenty four hours because that all started conspiring yesterday and it's been just like a whirlwind with that. Yeah.

Dan Austin: [7:53] There's a lot of good wins this week too though. We're looking for Oh yeah.

Mike DeHaan: [7:56] Oh yeah. I mean we got a great new wholesale deal while all this was going on with our our dispo guy in that transaction. Our our sales guy locked locked up a great one, which we ended up joint venturing with actually our main competitors. And, you know, people always get kinda funny about that. Like, why would you split something that way? But when it's a situation where the seller's pretty educated and they're trying to basically text the other company's offers, you know, by texting the company's offers to each other, trying to get them to bid If you're ever a motivated seller, realize we all know each other. We're smarter than that. You know, and that's kind of the route he was going. And we we the other company called me pretty quick. And we decided basically just to agree on like a lower price. And they actually pulled out of the the race for it and we were able to get it signed around at a price that left plenty of room for us to get a sign around. And, yeah, we got that one assigned today. So we'll, you know, we'll be doing pretty good on that even though it is a fifty fifty split.

Dan Austin: [8:58] Let's just agree this is not an antitrust violation. This is just the business.

Mike DeHaan: [9:04] Yeah. Totally. A 100%.

Dan Austin: [9:08] Business.

Mike DeHaan: [9:11] I guess what do you mean by that?

Dan Austin: [9:13] Well, you know, antitrust, right? So it would be like colluding with competitors to set prices and all that stuff.

Mike DeHaan: [9:18] It's not setting prices if it's not like a one on one transaction. And also too, we technically didn't set the price. They they withdrew their offer.

Dan Austin: [9:27] No. No. No.

Mike DeHaan: [9:29] As a reward for withdrawing their offer, we decided to split the proceeds with them.

Dan Austin: [9:32] Yep. Yep. And that will I mean, it just speaks to also that this this part of the industry is not regulated by that. Right? You know? And it's good for business.

Mike DeHaan: [9:44] Yeah. Exactly. Well, I mean, also too, one of the big things that I think a lot of people don't understand in this business, especially when they're getting started is, you know, because it's not regulated, it's easy to have poor ethics in a lot of stuff that you do. You know, in this I wouldn't like, this sort situation where say poor ethics with the seller, was like, I don't know. He was bitting us against each other. Right? That's like us Yeah. Using our advantage. But I think the bigger thing is it emphasizes the importance of being sure you're doing right by other investors and other companies. Yeah. You know?

Dan Austin: [10:18] Well, and everybody in general. Right? Like your point is really valid because it's like, so nobody wins here because that's essentially what happens in those situations, right? Nobody wins.

Mike DeHaan: [10:29] Exactly. And you know, and then even from like the seller standpoint, right? If they end up getting at like a higher price but then somebody's not able to close now because that price is too high because people in the heat of the moment bid it up and now it's a loss for everybody. Which I mean has.

Dan Austin: [10:44] It'll be a thirty day delay before they find out that, oh by the way, we're not closing on it.

Mike DeHaan: [10:49] Yeah, which has happened. We've been part of deals like that where we've seen it get bid up and then, you know, we'll see it get sent out in like an email list or we'll see it hit the market or whatever and then it doesn't sell and now the person has wasted a bunch of time and gotten their hopes up. And in some of those situations, people have, like, moved out of properties and that sort of stuff. Mhmm. And now they're back at square one. So, yeah, it's yeah. It's a I know it's interesting. But I'm I'm curious how often that happens in, other markets. I feel like Spokane's pretty unique because there's only, you know, a handful of us businesses here that do the vast majority of the deals. You know? And I I feel like talking to people down Phoenix or Texas or things like that it might be a lot more cutthroat. I feel like they wouldn't be sharing stuff like that.

Dan Austin: [11:36] Yeah, maybe. Yeah. I mean, it definitely seems like because we got a pretty well we're 7,800,000 people across our kind of area that we're operating in, right? North Idaho, Eastern Washington, of the Greater Spokane area. But it's pretty small town. And to your point, there's not that many competitors. We've got a lot of people out there kind of doing this. But then the top competitors, we all know each other and it's part of the real estate industry if you can get into a good group, right? Like everybody wants to help each other. But yeah, I don't know that I've heard of other people purposely JV ing deals in the market that they know. You know, there's a lot of times you JV just because it's easy transaction and it's a benefit for you. But like a mutually beneficial, it's not always the case when it's like, okay guys, let's step away and like half of a deal is better than no deal.

Mike DeHaan: [12:24] Yeah, exactly. But I mean, I don't know. I feel like I'm sure realtors do that like a little bit. You know, if somebody lists a lot of properties and there's somebody that has a lot of buyers and they know that working with the other person is a super easy transaction, they're probably gonna encourage their seller or their buyer to go with that individual.

Dan Austin: [12:44] Definitely definitely happens. Right?

Mike DeHaan: [12:45] Yeah. But I don't know. I don't I don't do the retail space. But yeah. So Yeah. Anyway, it's been a been a fascinating week between that and then I felt like we had something else happened this week. I can't remember what it was.

Dan Austin: [13:00] Yeah. Nothing as crazy as a kidnapping. I will tell you that much.

Mike DeHaan: [13:03] I think the problem is that

Dan Austin: [13:05] An alleged an alleged kidnapping. I don't want throw anybody in the bus here, but

Mike DeHaan: [13:10] Yeah. Just insane. But yeah. So got our I guess, probably our largest official property under contract over this past weekend, with that eight unit. So we're doing the inspection for that next Monday. I'd be curious to see how that one sort of comes together. The problem

Dan Austin: [13:32] the problem one. Yeah. This will be fun one, like, just because it's kind of treating it as a virtual. It's not that far from where we're at but the way we're doing it and treating it as virtual. Like this is like how are we gonna do the inspection? How are gonna do all these things virtually so to speak?

Mike DeHaan: [13:47] Yeah. And I mean

Dan Austin: [13:47] it's just a it's a

Mike DeHaan: [13:48] little eight unit apartment complex. It's nothing too crazy but it's just you know, it's large enough that it's considered a commercial property. And I forget you know, everyone always says, like, the lending's easier. But once I start getting into it, I feel like it's easier if you have, like, a if you're doing it traditionally and you have, like, a seller that's put together. Mhmm. But even now, you know, I've been talking to these different lenders and they're wanting all this stuff from the seller. You know, with how we market, we market to people that have recorded motivations. Right? And it's like, well, I hate to break it to you, but this seller that we got off a bankruptcy list, their bookkeeping is really bad. Hence why they were filing bankruptcy.

Dan Austin: [14:24] Yeah. Reading some of his messages, it's like, I don't keep books. Like, oh, nice.

Mike DeHaan: [14:30] So then it's like, how the hell are we supposed to fund this thing? Right? Because, know, we go to get a, write a typical commercial loan and they're they want, like, tax returns. They want p and l's. They want so they can analyze the asset, which makes sense. Yeah. So I get I know that think this is why people, you know, have funds and, like, raise money and then look to refinance it after it's stabilized. Right? Lot of thing. I know that's why they do it. But it's, you know, such a such a different process, you know, whereas, like, at least with our residential stuff, you can run comps off of, like, kind properties. But this one too is kinda rural. There's not really any other like little apartments like this up there.

Dan Austin: [15:08] Yeah, there's not gonna be any really good comps. Don't think so. I mean down a little bit further south that you know talking to the property management company there's some handful of you know decent like numbers of units but how often have they changed hands? Who knows right? Probably never. Yeah. Twenty years ago maybe. So yeah that'll be tough. And then I'll also like I feel like when you're working with a lender and you're if you're trying to do it traditionally and you're buying below market value, they're like, Well, there's something wrong here. What is

Mike DeHaan: [15:35] it Always.

Dan Austin: [15:36] Let me find what's wrong and then I'll deny you. But it's like, No. Like, just like we're getting a below market value.

Mike DeHaan: [15:42] I know, right? Yeah. And then people never see it. They were like, Well, why is he selling it for that? It's like, well, because we offered him that and he said, yes. And that's why, like, does there need to be more reason than that? Not necessarily. But yeah, that's interesting.

Dan Austin: [15:56] Yeah. I'm excited to get the inspection report back and see how it goes and get to see some photos of this place because we haven't even seen it. We've seen outside the outside pictures. Right?

Mike DeHaan: [16:04] Yeah. Don't think so.

Dan Austin: [16:05] Like, we know where it's at. We we haven't actually been in it. It'll be kinda cool to see these pictures and see where the value add's going to be on it.

Mike DeHaan: [16:11] Mhmm. Yeah. I mean, there's a couple options even even right away. Like there's no laundry on-site. Right? So adding something like that is a is a potential benefit if you're able to figure out a way to do that. There's only a certain number of parking spots. You know, everyone else has, like, street parking. You know, I think that I think that he currently pays water sewer. So, you know, if there's a way to submeter the water, that's kind of a traditional he'll bring down expenses, brings up that net operating income and then the value of it. So, yeah, we'll figure it out. I I think it'll be pretty good.

Dan Austin: [16:44] Let's call Thatch's son. He runs a coin op laundry for all of his facilities. Let's see how how do we get coin op laundry in there, man.

Mike DeHaan: [16:53] I don't I always say that's so funny. Like, my god. This is this is my my son's passive income. I was like, yeah. It's nice that you gave him a 100, apartment complex to do that in. Respect that.

Dan Austin: [17:04] Do too. You gotta learn somehow, right? If you have afforded the opportunity, take advantage of it because you and I would. Yeah, right?

Mike DeHaan: [17:11] Yeah, for sure. But yeah. Speaking of hustle though, I that it's when I was thinking about so we have this Airbnb that we've been kinda stressing about getting the furniture figured out for. And I don't know how you found this person, but she basically came in, had, like, an idea and offered to go and buy all the furniture, install the furniture, do the whole thing for us for, a small fee. And, like, very and it was, like, Airbnb specific too, which I feel like is the kind of distinction. Whereas, like, if you went and got, an interior designer, they're gonna be doing, like, high end stuff probably. It'd be a lot more expensive. But I feel like if somebody wants to get involved in the real estate space and want and, like, you know, enjoys shopping and designing aspect of it, this is a great way to do it because we're paying her what? Like, I think a couple thousand bucks or something. 100. $1,500. She could charge more than that. Don't ever listen to this and keep I targeting

Dan Austin: [18:09] hope she does not.

Mike DeHaan: [18:13] So it's basically just go shopping with our credit card and buy a bunch of stuff and we don't even have to worry about it.

Dan Austin: [18:18] Yeah. Great and it's cool we found her. Granted, she's probably working with us because she wants to break in and do this stuff and we have other opportunities and but yeah, it's just something like you and I like that's that's not our specialty. I don't want to spend all this time shopping around. I don't know how to get the best deals on furniture. She has supplier discounts too and all that sort of stuff. And so when she came to us with a budget and it's just like, you know, I text you, I like, hey, what are you thinking? Like, yeah, let's do it. Right. And it is when you talk about the fee that to do that and like, we're basically she she's like, well, you know, have lot of clients that want to pick colors. I'm like, I don't I this is why I told her I said, I want to walk into that place and be amazed that it's already done. Like, that's all I care about. Like, like, just do that. So when we're done, I can just put the key in the lockbox and it's ready to go. And so that is yeah, that is some cool hustle too. You know, she's got, I think, three kids, three like small kids, like husband that works and all that. She's just and she's a real estate agent too. So she she really yeah, yeah. So she she works for an agent, a brokerage here in town and then does interior design for varying levels of clients. Super stoked that we got her because we got that second Airbnb coming up that we'll need to do something similar to right.

Dan Austin: [19:33] As opposed to like what you and I would do is like hodgepodge all of our furniture we don't want our house and throw it in there. You know, and and for that for for some Airbnb's that's totally fine. For this one, I think where we're trying to go, I mean, we've talked about a remodel this thing. It's really modern looking. It's in a really hot location. And so you just want that if we're gonna maximize the dollar amount because of the location all that, it just makes sense.

Mike DeHaan: [19:55] For sure. Yeah, totally. Yeah, mean especially because I feel like this isn't necessarily gonna be an Airbnb property but probably more like a People don't want like short term stays for like an extended period of time. Like, you know, weeks or months. With its proximity to the hospital and the park in downtown. Whereas our other one I think is much more Airbnb potential. Because it's walking distance to the downtown scene, the restaurants and all that sort of stuff.

Dan Austin: [20:22] One thing that reminds me, we should probably, speaking of that, probably have an office space or desk space in this thing thinking in that model with people traveling and wanting to work.

Mike DeHaan: [20:32] Oh yeah. Well I mean that's the the downstairs little nook. Yeah. Make that in.

Dan Austin: [20:39] Just making it functional. Right? So that they they can it can go to that type of market, I think, is huge.

Mike DeHaan: [20:44] Yeah. Now that that's a good point. Like, honestly, for doing I think I think for doing short term stuff, that is there's definitely different criteria that we have to look for. It'll be interesting to see how the feedback comes back on this after people use it for a little bit.

Dan Austin: [20:59] Yeah. Well, and and it's different space too. Right? Because usually, like, we're pretty good landlords when it comes to long term rentals. Somebody has damage, we fix it right away. We're usually pretty responsive on things and we have pretty nice units. But like we don't get a five star rating for that, right? We just you know, they're happy they stay longer and that's kind of our rating. But for like the short term space, especially if you're on Airbnb or something like that, like your rating matters. And so little things matter within that space and you can get bad reviews for things like, this place wasn't clean. It's like, oh crap. You know, like that's a new system.

Mike DeHaan: [21:34] I mean, I've been guilty of that. I left a four star review once because the place didn't have a coffee machine, like at all, but they had coffee and that was just rude.

Dan Austin: [21:47] I see, bought a coffee machine and tea bags for this place so we should be set on that end of the evening. Definitely have to leave extra booze there just in case people get kind of upset. Like, Oh, at least there's free beer.

Mike DeHaan: [21:59] See, we got to be careful, right? Because then the purple, they show up, they're recovering alcoholics and they're like, There was alcohol in this.

Dan Austin: [22:09] Interesting. Yeah, you're damned if you do, damned if you don't. I guess we'll just try our best. Yeah,

Mike DeHaan: [22:13] So no. It'll be an interesting interesting process to figure out. But yeah. The other one should be coming up here pretty soon too. I talked to that seller today. She's gonna be moving out. So Oh, nice. Yeah. She said she's already got an apartment rented. She's in the process of moving. She said she'd probably be out in two or three weeks.

Dan Austin: [22:28] Nice.

Mike DeHaan: [22:29] How it takes someone three weeks to move, I don't know. But something with older people, they just take their time. They're so happy to. I even said, Do you want our guys to come help you move? And she goes, Nope. I was like, Do you have people helping you? She's like, Yeah, one of my friends is. I'm like, Okay.

Dan Austin: [22:47] Very good. Nice.

Mike DeHaan: [22:48] I don't know. Maybe this I've never met this seller. I haven't met any of our sellers anymore, but maybe she's super fit and she doesn't, you know, 85 years old enjoys carrying couches.

Dan Austin: [22:57] She's from a different generation, you know? That's true. She likes to work hard. Yeah, it's funny. Which is good too. You know, I I got a angry call from one of our tenants in our flip. So it's more of a wholetail, I guess we'll call it that we were planning to flip. Mhmm. I think it was Tuesday. I was sitting down in the living with my daughter and I'm like, who's this number? I was like, it's from Spokane, I should probably answer it. You know how it is in this business. She has so many phone calls and like I know. And it's time sensitive. Right?

Mike DeHaan: [23:27] But it's funny because I feel like half the time, you just look at the number, even if it's a 509 number, booking number, you know if you should ignore it or you know if you should answer it. There's like spidey sense that goes.

Dan Austin: [23:37] My spidey sense was ignore it, but I still answered it. And so I've been one layer removed from this property because we have our project manager kind of working on getting the tenants out and all that. Well, you know, I I've been coaching him like, hey, you just need to talk to these people in person. They're an older couple. Like, I don't know if they're a couple, but it's a guy and a lady living in this place. And we've got it under contract to close in December. We bought it in what we were in Hawaii when we closed on it, didn't we? Like we were like it was like July.

Mike DeHaan: [24:11] Maybe I

Dan Austin: [24:12] think so. Or like we closed on right before the Hawaii trip. And so, you know, we're being nice. Nice. It was working out, working out. Then we hired our project manager and told him to kind of take care of the tenants. And, you know, he's from a younger breed. And so texting is kind of his go to instead of calling despite, you know, me like, hey, you need to be in person, but these are trying to kick these people out of their home, right? And they just signed a one year lease. And so we're trying to cash for keys them and all that sort of stuff. Anyways, whatever he was doing was just firing them up and getting them mad. And so he finally got my number somehow and called me and he was really pissed off. But the good thing is, is I was trying to explain to him the process and just be like, okay, here so here's the deal. And he was kinda pushing back and I pushed back, you know, lightly a little bit on some things like, hey, man. Like, we have to fix this house. There's some safety hazards because there were some electrical issues and some broken windows.

Mike DeHaan: [25:03] So to backtrack on that, that's the reason he was upset. So you know you don't bite into that. Because that way we were so we've sold the house, which they're aware of, and we're currently trying to fix things in the house that have been a problem for a while that we didn't fix initially because they wouldn't let us. Yep. Right? And now we are legally obligated to fix it and they're still not letting us fix it. But this is like pretty major stuff too. There's like electrical dangers, know, there's like some water issues in there.

Dan Austin: [25:32] Real stuff that we would have that we were planning to fix when we flipped it, but they're, you know, they're just being really pushy on us and all this stuff and really upset. I was like, hey, I get it. Know, like, it's hard to find a place. And I was like, I can help you out with rental assistance. I was like, like, I've offered you guys several thousand dollars months ago if you packed up and leave and you'd be in a better position, but you haven't, you know, they're in that situation for a reason. And they're like, well, every place we look at the dump of like, you live in a dump.

Mike DeHaan: [25:56] Like, I know

Dan Austin: [25:57] it's just your dump right now. Like, it's not any, you know, anyhow. But getting on the phone with him, calming him down and telling him like, here's the deal. And he's like, okay, that makes sense. I'm not mad now. So it's just like, you know, that communication. But I think there's another moral in the story, too, with this whole deal that is really just a minor detail. But you know, we listed it so I listed it on on the MLS here in town. And what and we were just kind of doing it just to say, hey, if we get an offer, like, let's let's just move. We get an offer at this price because we were kind of just trying to sell it because we couldn't get the tenants out on time that we wanted to. And we got an offer. What was it like 30,000 over asking? And our ask was like stupid, right? It was like nobody's gonna pay for this, right? Even an investor, whatever. We had a ton of traffic on it. But when I when I did the MLS listing, you know, you can select what type of buyers you'll accept. And I always just put all of it just to see. And so FHA, all, you know, all that sort of stuff, because our buyers and FHA buyer, right? And a lot of people steer away from that. They're like, oh, I don't accept FHA buyers. Like you do if your FHA buyer is 30,000 over ask with a $20,000 to what we call 22 a d, which is basically if it comes in on the appraisal 20,000, he'll pay for $20,000 below whatever the appraisal is, right? So if they appraise it at $2.50, he'd pay us $20 out of pocket. That's a great FHA buyer. He wants to move in it, live in it, fix it up.

Dan Austin: [27:27] And okay, so all you gotta do is pass FHA inspection, right? Just like no chip paint, all these little things. And so, so many people get like kind of, oh, I don't want an FHA virus. It's a pain. It's like, it is. It's a longer closing. But I sent some kids out there for $500 to paint the chip paint. I got an electrician in there for $500 to fix the GFCI outlets and a couple of the electrical things like the minor things. You got a window person out there to fix the broken windows. Right. Hot water tank straps, $50, you know, all in. So it's really easy. Now because of that, because our other offers were conventional or hard money buyers that were kind of at our initial offer, but it's like, well, let's just go with the FHA bar. Yeah. There's a risk there. And worst case scenario for us was that we just flip it anyways.

Mike DeHaan: [28:14] I know we're in exactly the same position.

Dan Austin: [28:16] Exactly. We're still trying

Mike DeHaan: [28:17] to navigate the situation with the tenants.

Dan Austin: [28:19] Yeah. But at least, I guess my point being is at least entertain the offer. Don't say I don't accept these because you know and there might be unique situations out there but like at least entertain it when you're to list it because you just never know. And on this one we had no idea. I mean our spread on this thing for doing we're gonna be like $2 into it. You know, like in repairs for this FHA stuff and like we're gonna have a huge spread on it just because of that.

Mike DeHaan: [28:43] I think our spreads are about seventy seventy five or something. Yeah. Yeah. Our holding costs have

Dan Austin: [28:48] been minimal because the tenant's paying for it all with their rent. We might have a where are we negative? Like a $102,100 bucks on the

Mike DeHaan: [28:55] If that

Dan Austin: [28:55] On the loan. Yeah. Yeah. Yeah. It's not bad. Yeah.

Mike DeHaan: [28:59] But I know. It's yeah. It's been an interesting one. And it's always a tough thing when you're dealing with tenants because obviously, you know, I'm always very sympathetic with people that are in that situation, you know, because we bought it from somebody that was highly motivated to sell. You know, it was actually from with a realtor that was involved in it, but they needed to get out of the property ASAP. They didn't even list the property. They basically approached us directly and were like, hey. She needs to sell this house, like, yesterday. What do you like, you know, what can you guys do? So we're able to bail out the seller, but now the tenants have been living in this property that's in barely not livable condition. You know, it's like I guess it's like keeping them warm but that's about it.

Dan Austin: [29:37] Yeah. Not like it's not like we bought worse but it's not a place that you're in. It smells like smoke. It's really bad and it's,

Mike DeHaan: [29:45] yeah, it's junky. Lots of it's unfinished. You know, there's lots of dips in the floor and that sort of stuff. But, know, when you're working with some of these tenants, one the things that's always so difficult is like when they are trying to find somewhere to go, you know, typically they might not have good credit. They might not have, you know, money for a down payment on a place or whatever. And it's, you know, it's just a challenge. Like there hasn't really been a good solution for it, especially with the current like rental and housing crisis, you know, which always makes the the ethical part of this business a little bit in question. But, you know, at at the same time, like, it is, a great neighborhood and it's like also like the worst house in the neighborhood. Yeah.

Dan Austin: [30:29] Yeah. It's bringing down values in the rest of the neighborhood. There's like silver lining and being able to do that. Like, we've never like thrown anybody out on the street, but it's, like, you have to sometimes help them. Like, you've said this, like, with some of these social classes we deal with, like, sometimes you have to be there to help them and sometimes it doesn't feel good right away, but at the end of the day, it's actually better for them. And we've seen that a lot.

Mike DeHaan: [30:51] Yeah, for sure. One also too, one of the things that we've learned is with a lot of these people, not a lot of them, sometimes with these people, if you're too nice, they'll just take everything they can get from you. Know, that's kind of how they've gotten into these situations where they're renting these places that they're either not paying rent on or they're paying super, super crazy low prices because the other owners were too nice to do anything about it. Exactly. You know? And that's also why the house tend to get distressed too is because they've been rough enough with their current owner for so long that nothing's gotten fixed. And then after a decade of that, the house just goes into sort of despair. But yeah, it's challenging. Mean, right now, I feel like every house has tenants because the vacancy rate is so low. So it's just kind of a constant constant issue. But, that's kind of our time. Think it's a pretty good place to wrap up. So I've already did my horror story at the beginning of this episode with our abduction. Any good lessons learned horror story this week, Dan?

Dan Austin: [31:52] I would say like a lesson learned. I don't have a lot of horror stories. I feel like I've gotten over my horror stories for a while, But I I

Mike DeHaan: [32:00] We gotta get you in the trenches again, man. You're you're like

Dan Austin: [32:02] I know.

Mike DeHaan: [32:03] I know.

Dan Austin: [32:04] I I've systematized some of the good stuff and but anyhow, no. My I I was thinking about this early today as we're back to our first, you know, stepping into our first Airbnb Airbnb. And I kind of text you like this random thought, which was like, who's gonna take a garbage out? Like, you know what I mean? On the garbage day, right? And and but it's my point being is it's a whole new system that we're stepping into. And it's like a big system just like we did with wholesaling. We didn't know we didn't know. We kind of we kind of built it and and like now we're at where we're at. Same thing with long term rentals. Like we've got a good system there. We figured it out. We can continue to refine it. Like we know it. We're comfortable with it. This is like we're talking we've got two properties coming up for for short term rentals. These are massive systems that other people have done that that we need to be able to replicate. But when you're pivoting a business like it's kind of an almost like a different asset class. Like we got to spin up and learn something new. So like, I feel like maybe I went into that little naive, but now I'm realizing like, okay, like we need to be way more prepared.

Dan Austin: [33:03] And we typically we finish these rehabs or like, put it on the market to rent. Well, we can't do that right now because we need that system and so working frantically to get that system in place so that we don't get the two star reviews because we are terrible, you know, to our short term rentals. Lesson learned is just like as you're pivoting to something new, kind of go in with eyes wide open and understand what that system needs to look like and work on it early and often.

Mike DeHaan: [33:27] Yeah, well I think that's key too is going into it system minded at the start, which I think kind of comes from our experience having built this business is that because I mean, you know, think about like when we did our first rehab, was that like a year and a half ago, first rehab together and there was no system at all and how much of a cluster that was.

Dan Austin: [33:45] Well, was talking to the contractor and like, know, like, yeah.

Mike DeHaan: [33:49] Yeah, it's such a disaster. So yeah, think that's a good lesson though is to, you know, look at things from that, from that HireVue. And then another lesson for me. I don't know, I think I can actually, I think my biggest lesson this week was to not count your winnings until the money's in your bank count. Like seriously, you can't get any closer than the guy signing the freaking documents and getting dragged out of the plane.

Dan Austin: [34:15] So true, you're right. Yeah. Because we've had that mistake where we're like, got this deal, we got that deal and like, you know, three weeks later we don't have it. Yeah. Like this one like you can't get any closer than at signing.

Mike DeHaan: [34:27] For real. So anyway, alright guys. Thanks for listening. Subscribe if you like the podcast That really those numbers like I said, those numbers for our numbers on all the different platforms you guys listen on. You can follow us at collecting keys podcast on Facebook and Instagram. You can follow me at mike underscore invest on Instagram. You can follow Dan at Investor Man Dan on Instagram. Go ahead and hit hit us up with DM on there, and talk to you guys next week.

Speaker 1: [34:54] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.