The Surprising Answer to How to Win Deals in Competitive Real Estate Markets
The competition for landing solid deals has never been higher for active real estate investors. This is especially true for those of us doing business in a market that’s on fire right now like Texas or Arizona. Most properties don’t even make it onto the market before they already have multiple offers on the table. So how can you as an investor actually win deals in a cut throat environment like this? The answers might surprise you. It has nothing to do with your market research, underwriting process, or the size of your team. It has everything to do with how you treat people.
The king of this topic is top producing multifamily broker Beau Beery, who wrote the book Multifamily Investors Who Dominate . If you haven't read it, add it to your list right now. I had the incredible opportunity to sit down with Beau and have an open conversation about what he has seen the top investors do differently when making transactions over the years. If you want to hear the full story directly from Beau, check out the recording here. After our conversation, I reflected on what I’ve learned from my own experience and combined it with Beau’s advice to bring you a concrete set of behaviors that you can adopt to start winning deals in even the most competitive markets and how we’ve seen these play out first hand.
Find a way to always add value
Shifting your mindset to think about how you can add value for other people instead of just how you help yourself may not come naturally. It’s something you need to actively work on. Selfishness is a natural human instinct. When you do, you’ll see though that there are actually so many opportunities that can come from it and actually it will play out in your favor in the long run.
One example Beau shared during our discussion was how a simple approach even new investors can take in exercising this is when they approach a broker. He gets messages every day from investors asking what deals they have for them. And those are the messages that get ignored. What gets attention is when someone offers something of value in exchange for something of value from him. For instance, try reaching out with a helpful podcast episode that you know would be of interest to that person based on their area of expertise or the market they are in. Let them know you were thinking of them, not yourself. Those are the investors who get the attention and are able to build genuine connections.
Here’s a real example from the buyer side perspective where I saw an opportunity where others would see a reason to walk away. A fire broke out at a property that we had under contract. Instead of calling off the deal like most buyers probably would, we worked with the seller to have the insurance reassigned to us, negotiate the terms with the insurance company, and rework some of our assumptions to see if the deal could still work. In fact, we ended up netting a claim that was enough to rebuild and still fully execute our business plan. Of course the seller was happy, and we actually came out ahead because of the insurance proceeds. The key takeaway here is to view these situations as a way to build your reputation in the market as a person that people love to work with and you’ll unlock a ton of future value.
Take care of people
This is one of those age old moral principles that we’ve heard our entire lives. When it comes to real estate transactions though, it can be easy to only focus on yourself and not take the time to step into the shoes of other people who are involved in closing a deal successfully. We often think of brokers as just needing to “do their job” instead of as human beings and equals who are also trying to provide for themselves and their families.
One surefire way to truly become an elite investor is to focus on taking care of the people you work with on a regular basis. Once you do a certain amount of deals, and especially early when you’re doing smaller deals, you may find yourself in a place where a broker you’ve worked with is willing to cut commissions to make a deal happen. You may say to yourself “well isn’t that a win?” But if it’s not a win for one person, it’s not a win for the entire deal. Here’s another real example from a transaction where I was the buyer in this situation. I could have just said thank you and accepted the lower commission, closed the deal, and moved on with my life, but instead I decided to have a conversation with that broker because I valued them as a partner and figured out a way to make it right.
Once we were ready to sell that property, I gave them the transaction and made sure they got an extra bonus at the sale to make up for where they lost out the first time around. That broker and I have a fantastic relationship and he has given me several off market deals since then. They know I care about them and view them as part of my team. That’s how I am able to keep a high deal flow and build up my assets under management.
Respect other people's time
Time is a person's most valuable resource, regardless of what job they are doing. Start by respecting your own time. Have a clear set of criteria in terms of what you are looking for in your next investment and communicate that to your brokers so they don’t waste their time sending deals that you already know you won’t be interested in. If they do send you a deal that meets your criteria, prioritize turning around feedback to them in 48 hours or less.
The worst thing you can do is to respond a week later, or not at all. Imagine the signal that is being sent to your partners when you do that - they don’t deserve a response or your time. Doing this time after time eventually erodes the open communication and reliability you’ve built up and it’s a great way to block that funnel of deal flow in the future.
Be easy to work with
There is so much advice out there about being a hard negotiator during the transaction process that drives an underlying scarcity mindset. As counterintuitive as it sounds, when you focus just on what you want to get out of an interaction, you are less likely to get it. Why? Because the person on the other end is probably doing the same thing. What if you were both able to win, though?
The big mistake myself and Beau see many buyers make is that they nickel and dime their way through negotiations. They think short term, focusing on saving a couple of dollars today not realizing it hurts their future deal flow because no one wants to work with them after that. This industry is small, people talk.
You can still be successful without overburdening other people in the transaction, especially the seller. For example, if a contract says that a certain number of units will be finished by the time it sells and the seller doesn’t have them finished, what do you do? We, as buyers, could make a big deal over them not being finished. But are there other options that will make the process smoother and still work for everyone? Sure there is! You could negotiate a credit and, assuming you can make it work with your business plan, just use that money to do the work yourself, which you were likely already going to do with the other units anyways. In this case, you might actually even get a better result because you have control over how and when the work is done.
An example I had on the seller side was when we went under contract with a clearly “green” buyer. The buyer looked at the inspection report, added up all of the small minutia, and asked for it all in credits. They were being incredibly nit picky and focusing on the pennies vs the big deal. This really made myself and the broker not ever want to work with that buyer again. They may have “won” by saving a few thousand dollars on that transaction but they don’t realize how they hurt their real future gains. Beau’s direct advice is to view these situations as a way to build your reputation. If you do that, you’ll win more than a couple bucks.
Remember, this may sound like very straightforward or even logical advice, but 99% of investors do not do these things regularly. If you truly want to become an elite and stand out in this space, focus on adding value for others, taking care of people you work with, respecting people’s time, and being easy to work with. If you make these changes to your approach, you’ll have an advantage over the majority of your competitors, no matter how experienced they are.
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