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When Problems Become Opportunities

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People often ask, “what’s your response rate on your direct mail marketing to Sellers?” It seems like a simple question, but the answer is not as simple as one might think. The counterintuitive truth is this: good marketing is hard to measure. In this episode, Jeff explains what good marketing is—and what it is designed to accomplish—and explains that good marketing should be difficult to track because it is relational in nature, not transactional.

Episode Transcript

Problems. They are those things that we all kind of want to get rid of. I mean, isn’t that the goal just to kind of get rid of all our problems? Wouldn’t life be better if we didn’t have problems? Well, I’m not sure that, that is true. In today’s episode, I want to talk with you about reframing problems, because every problem also creates something else that we’re also seeking all the time and that is an opportunity. Now, I’m not just talking about a cheesy reframe of like, ‘Oh, see the silver lining,’ I mean real opportunities that come from problems. So, let’s talk about this because we encountered these types of things a lot as real estate entrepreneurs. Let’s cue the theme song we’ll jump right in.

Welcome to Racking up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting “We Buy Houses” signs are just looking for quote, motivated sellers to make lowball offers to. You see, we are people-oriented dealmakers, we sit down directly with sellers to work out Win-Win deals without agents or any other obstacles and buy properties nobody else even knows are for sale. I’m Jeff from a Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media. This show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Thanks for joining me for another episode of Racking up Rentals. Show Notes for this episode can be found at www.thoughtfulre.com/e112. Please do us a big favor by hitting the subscribe button on your podcast app, it really helps you make sure you don’t miss any shows and it helps other fellow Thoughtful Real Estate Entrepreneurs to find us onward with today’s episode.

I want to tell you a quick story that happened a long time ago now, 10 plus years ago, but it sticks in my mind. I think about this a lot. I used to have, as many of you know a different business before I was a full-time real estate entrepreneur, I was just a part time real estate entrepreneur. But I had a different small business that I owned and ran, which was a branding and marketing consultancy. I had several employees and one of my team members would often you know, leave the office and go get lunch and he would go to a high-end local grocery store kinda like a Whole Foods, but a local version of Whole Foods in Portland. He would go there and he would go to the deli and he would order a sandwich. He’d ordered a half sandwich and sometimes he said this happened multiple times, that a couple minutes later, you know, they’d shout out his name and say your sandwich is ready. He would go up there and they would hand them a whole sandwich. He would look at him and go, Oh, I’m so sorry. I don’t know if I filled out the form wrong or something. But I only ordered a half of a sandwich. And the person who made the sandwich said, well shoot. Sorry, we made that mistake, please just go ahead and enjoy the full sandwich. We’ll make sure you only pay for half of it. Now this happened the first time and he was like, oh, wow, that’s pretty cool. Then it happened kind of a second or a third time and he started to form this opinion that this wasn’t entirely a mistake, that they were intentionally making that mistake so that they could solve the mistake. Now if you were a business, you wouldn’t want to be doing this every single time. Obviously, always, always, always selling whole sandwiches for the price of halves. But if you did want to make an impression on somebody, that’s the kind of thing you might throw in every now and then because guess what? He told me 10 years ago, and I’ve thought about it a million times since then. I’m telling you now about that particular experience. So, if it was a marketing move, it kind of worked, didn’t it? It brings us back to the idea of problems and what our problems mean.

Our brains as humans, they come with them this amazing ability to see things from different perspectives. Our brains allow us to see risk in certain situations, it allows us to see benefits in certain situations. But sometimes we don’t always do a great job of utilizing that ability. You know, we see something that appears to us one way, and sometimes we just continue to see it in that particular way. But problems can sometimes look like problems. I mean, that’s what they look like by default in most cases. But other times, problems can look like opportunities if you walk around the problem and just see it from a slightly different perspective. Let me give you two ideas that I think are very, very closely related. You know, you’ve probably heard the expression for every action, there’s an equal and opposite reaction, right? Well, that is normally applied to physics. But it also applies very much to problems. It sort of suggests that for every problem, there is an equal and opposite opportunity. And here’s the second one. This comes from Napoleon Hill and I’m going to paraphrase just a little bit. But he says in some of his books that every failure carries with it the equivalent seed of success and opportunity. Now, what we’re talking about is a coin with two sides, right, a yin and a yang, something that has a problematic effect, but certainly could also be the carrier of an opportunity as well. Maybe the opportunities like where something disguised as a problem is actually sneaking an opportunity into your life. So let me give you two examples that come from actual real estate scenarios just to sort of paint this picture of what I mean.

I was talking the other day to a coaching client in the DEALS Workshop. She has a great relationship with a seller and she’s already bought a couple properties from him. Now she’s got four more in contract and exactly the same time, and within negotiated is for her to pay an agreed upon price for the properties, she will go out and get a new loan in first position for 75% loan to value, the seller will provide 15% in the form of a second position loan, or sometimes known as a seller carry back. Then she will have a 10% bit of equity herself. She has worked with a particular non-bank but experienced lending company, and has gotten this cleared, but now, now that they’re in the underwriting process, the lender has come back and they’ve caused a couple little problems where they’ve said, “Well, you know, we’re not totally okay with this, or some changes would have to be made in this deal, in order for us to be okay with this seller loan at closing.” So she, of course, like any of us would feels like we’ve got a problem here, we’ve got a little bit of a roadblock, we’ve got an obstacle that could prevent this deal from getting done. As she and I talked about it, you know, we thought well, one of the things that we could do is certainly go back to the seller, who has a great relationship with us, who also actually has tremendous flexibility himself because he owns all of these properties, free and clear, and let’s share with him the problem that we’re facing with the primary lender and suggest maybe a couple alternatives. So, she goes and meets with this person, and just pretty much immediately he says, oh, no problem, I’ll just make the loan for you. Really, as easily as that the deal is getting restructured to a fully financed seller financing loan, that’s not going to require this outside lender at all. So because she saw this problem, but chose to see it as a potential opportunity. Now she’s gone back to the seller, she’s got a very defensible and reasonable rational thing to talk to him about. He says, ‘oh, no problem, I will just be your lender.’ Now she’s dealing with a seller financing loan, which is really what she wanted in the first place, and we’ll be able to buy these properties with greater ease without the headache of the other lender. Now this deal is better because the problem came up. If this problem had not come up, she wouldn’t have had such a great opportunity and a perfect platform to go back to the seller and say, ‘Hey, can we rethink or restructure this a little bit? Can we work together to find a way to get around this problem that the lender is causing.’ So as a result, she’s got a better deal, thanks to the problem.

Let me give you another example from my own portfolio. A while back, I put a property in contract. As it turns out, in hindsight, was within a couple of weeks of when COVID really kind of started to shut everything down. I was of course, a little concerned I didn’t have any idea what this unprecedented COVID situation was going to do to the real estate market. I wasn’t sure how it was going to affect my feelings about the property I was buying. I was planning to flip this particular property. So, I was also concerned about what the resale market would be like, I was concerned about values, and things like that. I started doing my due diligence thinking to myself, alright, I need to tread carefully here because I really don’t know how this whole situation is going to play itself out. And in the due diligence process. We discovered a problem with the sewer line like there are actually two types of problems with the sewer one was the line itself was not in great condition. But secondarily, actually the sewer line itself ran just a little bit into the property line of the neighbor. So this is a little bit of a complicated type of problem, you don’t just call a plumber necessarily and say, ‘Hey, repair this sewer line.’ There was a bigger implication and potentially a lot of cost involved with getting this ironed out. So the problem is, now the deal grinds to a little bit of a stalemate, we have a problem, it’s a little bit unclear exactly how it can and should be solved. And who’s going to pay for it and what degree the neighbor might be involved with participating in resolving this situation, and no one really wanted to write a check for that. So that’s a problem, right? And this, this property that I’ve put in contract that I wanted to buy and make money off of, is now kind of at a bit of a standstill. But what was the opportunity? Well, the opportunity, the equivalent opposite of this exact situation was that this provided a great reason to slow the transaction down instead of a 30 day close, like we had originally agreed to. This provided a perfect opportunity to extend the deal, actually, several times so we could continue to explore and work on this situation and the negotiation and the physical repairs and all of that. And so ostensibly, we were extending only, so we could solve the sewer problem. But in reality, what were what was I doing, I was taking this opportunity to buy time to have a little bit more ability to see how it looked initially at least, how COVID was going to affect the real estate market. And I didn’t see an immediate dive in the real estate market. And now, we all know, in hindsight, it actually really pumped up the real estate market. And that turned out to be a good thing. But in that moment, in April of 2020, nobody really knew and didn’t really have an idea. So the problem was this real sticky sewer situation, which was potentially going to cost me more money, certainly more time trying to get it worked out a lot more effort to try to negotiate with all the parties. But the opportunity was it allowed me to proceed on a different timeframe that made me feel much more comfortable with the overall situation. So, here’s the deal. Problems are problems. Yeah. But problems are also opportunities for solutions and solutions are awesome, because solutions can make things better. solutions can show off your ability to be a problem solver. solutions can show off your relational skills in communicating through difficult times in difficult situations with different people, sellers and other stakeholders, maybe lenders and investors, problems create opportunities for solutions and solutions can make things better and make you look like the person who can create solutions. And that is a very, very good thing. You once you start embracing this, you may actually start to hope for problems. I will say honestly, when I do due diligence on a property that I’m in contract to buy, I am pretty much hoping to find some things that are problems because problems, create opportunities for me to solve those problems to build and further develop the relationship with my seller, to demonstrate goodwill to them, and to tighten up this deal in a way that makes it even better for me as well. So, when you encounter a problem, here’s my encouragement to you take a deep breath, step back and intentionally seek evidence of what the opposite and equivalent opportunity is because in almost all situations, it is indeed there but you have to sort of put on the lens put on the glasses of a goggles that will allow you to see it by stopping focusing so much on the problem itself. But instead put on that lens allows you to see the opposite perspective of what could the opportunity be and once you find that you will oftentimes be glad that the opportunity presented itself because then you will have that chance to make things even better for you, your seller, the situation, the relationship, and everything else.

So that’s it for today’s episode of racking up rental. Again, show notes for today’s episode our thoughtfulre.com/e112. Please do us a big favor by hitting the subscribe button in the podcast app and rate and review the show. Did you know we have a Facebook group for thoughtful real estate entrepreneurs too? It’s called Rental Portfolio Wealth Builders. We’d love to have you join us over there. Just go to group.thoughtfulre.com and the magic of the internet will take you right to that page and you can hit the Join button. If you liked this episode, please take a screenshot and post that to Instagram and tag us we are @thoughtfulrealestate.

I will see you in the next episode. Until then. This is Jeff from the thoughtful real estate entrepreneur signing off.

Thanks for listening to Racking Up Rentals where we build long term wealth by being a win-win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.

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