What Can Go Wrong Flipping Land (CFFL 0006)

What Can Go Wrong Flipping Land

Jack Butala:                   Today’s show is called “What Can Go Wrong When Flipping Land.” Jill and I share stories and thoughts about the less than great parts of our little Real Estate niche.

Good morning Jill, welcome to your own show.

Jill DeWit:                            Thank you Steven, I’m glad to be here with you on our show.

Jack Butala:                   Yeah. The topic of the show today is and it’s called “What Could Go Wrong With Flipping Land.” I got this idea, partially from you, but then it’s been coming on and off for a couple of months where people say, “Look, congratulations guys, you talk to each other about how great this business is that you’re in, but you never really say this is what could go wrong, or, give us something negative that we could talk about at least.” That’s what this show is all about. Before we get into it though, and I have a bunch of questions for you, and I hope you do for me too.

Jill DeWit:                            Yes.

Jack Butala:                   I want to address a question that I got in bigger pockets today. I’m going to read you the question right out of bigger pockets.

Jill DeWit:                            Cool.

Jack Butala:                   His name is Ravi from Massachusetts. He says, “How are you able of increase the value of the property that you purchased by six times over what you paid, and then sell it?” I love, love love, this question, because and I know you know the answer. Ravi, here’s the deal, we don’t do anything to the property. We, at Land Academy, believe that you should spend all your time and energy doing the greatest acquisition you can possibly do, and then sell it for a lot more than you paid, because the acquisition was so good. It was so undervalued when you purchased it. Which really ties into what I think this show is about, Jill, what could go wrong, and I think that you before the show were talking about, lets compare it to houses, flipping houses versus flipping land, what could go wrong with flipping houses, what can go wrong with flipping land?

Jill DeWit:                            Oh, nothing, I’m sure it’s a piece of cake all the time! That’s why everybody is doing it!

Jack Butala:                   Did I sufficiently answered Ravi’s question?

Jill DeWit:                            Yes, I think you did, which is basically buy it right.

Jack Butala:                   Yeah, buy it right, spend all your time and energy, and resources doing good acquisitions, and not improving the property so to speak, putting stuff on it, or putting in roads or whatever.

Jill DeWit:                            Can I say something, there are two parts though. Yes, buying it right solves all your problems, it really does. Then, depending how you want to turn around and sell it and market it, that’s where you get to decide do I want to sell it for cash tomorrow and make 2 and 3 times as much, or do I want to hold up and sell it for terms, do I want to dress it up with some great photos, do I want to put it all over the internet, there’s things that you can do that will increase the value and make it look more attractive, for whoever your buyer is. That also adds value there as well.

Jack Butala:                   I interviewed somebody a long time ago, and I just described what we did. I said we have this acquisition machine, we buy these properties on the internet, buy these properties through normal channels through sending out mailers and stuff, and then we dress them up just like you said, and put them on the internet. Their response was, “Oh, so you’re kind of like a tech company that happens to sell real estate.” And I said, “That’s exactly it.”

Jill DeWit:                            Who said that, that was pretty smart.

Jack Butala:                   Yeah. It was a long time ago, I don’t even remember which person it was or if we hired him or not. Maybe tech’s not even a word, it was kind of a marketing, I guess there’s a lot of moving parts to this.

Jill DeWit:                            It’s true. There are, but that was an interesting way to say it, and I kind of like it. I think that was cool.

Jack Butala:                   So, what could go wrong in this crazy business that we’re in? Do you have any great acquisition stories first, that’s usually how we start this.

Jill DeWit:                            You just caught me. As I was doing one of my most favorite things to do, which is looking at maps, I really get excited about that, because when I get the inbound call from a seller and I get all their details, the first thing I do is I go to Core Logic real quest, double check ownership, kind of get an idea, double check the size of it, the acreage, see what the taxes are, just get a feel for it, and then I go immediately looking at maps, which for me is so much more fun, I’m like “Okay, pass those tests for me and I have an idea and then I want to see where the heck is this.”

What was interesting is, I got a call this morning from a woman that I had talked to her, gosh weeks ago, and bless her heart, I hadn’t got back to her yet, so she’s calling me again which is yay for me because she’s really motivated, and she’s got three parcels that, she’s in Pittsburgh, and these are in Hudspeth County, Texas-

Jack Butala:                   Yeah.

Jill DeWit:                            And you and I know how well acreage sells there, and check this out, two of them, I have two, there’s three all together, 53 acres, 53 acres, 106.4 acres.

Jack Butala:                   Oh my gosh.

Jill DeWit:                            Right? So I was just doing, this is one of the old school, the survey name, block number, section number, you have to go back to earth point, and kind of work it backwards, which is one of the things we help folks, one of the things that we teach, and you and I have done free things on that too, we did some LATV stuff, and some great things out there, I know that there’s-

Jack Butala:                   Yeah, how to find the property that you’re looking for by legal description, [inaudible 00:06:08] township and the whole thing, exactly.

Jill DeWit:                            Exactly, so I was going old school, finding the centroid, trying to figure out, do my work it backwards to look at these things. It’s in Gunsite Ranch, which I’m like, this is fantastic.

Jack Butala:                   I’m familiar with that. That’s great. Did you get a stock price?

Jill DeWit:                            So, you know it’s one of those, she really didn’t know. Back in the day, we offered $21,000 for her. That was I don’t know how many years ago. And it’s any offer, she said she’s open to any offer. She was so sweet too, she said she had one potential, I don’t know what this means but she said one potential buyer was giving her a hard time. I’m like, “Well that’s weird and that’s not cool,” but that’s part of why I think she likes us, because that’s not how we roll.

Jack Butala:                   Why would you give somebody a hard time if you’re trying to buy some property from them?

Jill DeWit:                            I don’t get it, and she’s just the sweetest thing. I need to call her back, she left me a voicemail this morning, that’s where I stand, and that’s why I’m like, “All right, I have to get back on this.” She’s clearly motivated and clearly open to offers, and she’s clearly reached out to us because she likes us, so I need to get on this, and I know the right people, I already have buyers in mind who would love this. Based on past sales, you know how it is, you and I have a parcel that sells and for two weeks I’ll still get calls, maybe longer, calls on a property that sold, so boy I hang on to those numbers. I have a lot of people already in my back pocket who I know want acreage in Texas.

Jack Butala:                   Okay, lets use the topic today, the podcast topic today, and lets take a look at this example, and you tell me what could go wrong in this transaction. Let me summarize up to this point: We send a ton of mailers out, it is the main way that we purchase land, vacant land. It’s not the only way, there’s tax ways and a bunch of other stuff, but this person called you back on a mailer that we sent out, with an offer. You and I are going back and forth talking about buying this property from this person for what turns out to be, how many acres and how many properties was it again?

Jill DeWit:                            It’s a total of 212 acres.

Jack Butala:                   In three properties.

Jill DeWit:                            Three properties.

Jack Butala:                   50, 50 and 100 acres, or some version of that.

Jill DeWit:                            Exactly.

Jack Butala:                   And what you’re thinking is, negotiate a good price and make sure, at the time that you’re negotiating this price, you have other people in your back pocket that you know are willing to pay more.

Jill DeWit:                            Yes.

Jack Butala:                   Or, to option it but we won’t confuse you with that. Let’s just say sell [inaudible 00:09:16]. What could go wrong?

Jill DeWit:                            What could go wrong for someone who is not familiar with this, or what could go wrong for me?

Jack Butala:                   Well, I know nothing’s going to go wrong for you. You’re Mrs. Experience.

Jill DeWit:                            Thank you very much. All right I get you. What could go wrong? I could spend 8 times more than what it’s worth.

Jack Butala:                   All right, so #1, what could go wrong in this business, you pay too much for the property.

Jill DeWit:                            Yes.

Jack Butala:                   Do you have control over that?

Jill DeWit:                            Absolutely.

Jack Butala:                   You have control over every single deal that you do about how much you pay. So, if you check, I know we’re supposed to be all glum about this, and it’s supposed to be one of these podcast episodes where we say “Uh, well the market could crash, and my lender…” You know what I’m saying. But the fact of the matter is, the reason that we’re in this business is you have complete control over it. Here’s my point, all the stuff that can go wrong, I think is really kind of our own fault.

Jill DeWit:                            That’s true. I completely agree.

Jack Butala:                   So, what could go wrong in that situation, you could pay way too much and not do your homework about how much you’re going to sell it for, before you actually buy it.

Jill DeWit:                            What could go wrong, okay, I could over pay, that’s #1. Another thing is I could market it all wrong. I could be putting it on Ebay when it’s really not an Ebay kind of transaction. It’s worth more than that, it should be on land watch or land and farm, or my buyers’ list that I’ve been saving. I could do that, I could sit on it for too long, because I’m not reaching the right people.

Jack Butala:                   Okay.

Jill DeWit:                            That would be another thing that could go wrong. Again, I could fix that. Let’s see.

Jack Butala:                   What if you bought it and you found out, after you bought it, what could surprise you? You know how if you buy a house to flip it, you see on these shows all the time, you buy a house and you get in there, and even if it’s at an auction or something and you open the door and oh my God, there’s all kinds of stuff and there’s bugs everywhere, and there’s mold and I mean, what could go wrong with the physical asset that you’re buying, the piece of land, the tons and tons of properties that we’ve purchased and millions of dollars worth of land that we buy and sell. Has the physical asset ever disappointed you, like “Oh man, I thought there were trees on it,” have you ever heard a customer come back and say “No, this is not what I expected at all?”

Jill DeWit:                            Not really.

Jack Butala:                   I haven’t either.

Jill DeWit:                            No, I’m really trying to think of a problem. A lot of it is this day and age, look at the things we can do, I can look at Google Maps, and you could see on the bottom right hand corner the date that photo was taken, and you know that was two months ago, and you have a really good idea. You can see when people put pictures in the area, they’re dated, they’re tagged, I mean, I feel really good about that kind of stuff.

Jack Butala:                   Right.

Jill DeWit:                            I’m not pulling a 10 year old plat map from the county, and laying that over who knows what I found on the internet, trying to match it up. Nowadays you get much more current, real time data, and it makes it so much easier on the buy side and the sell side.

Jack Butala:                   Right.

Jill DeWit:                            I love it.

Jack Butala:                   So, I guess you could get burned in this business theoretically, if you just didn’t do your homework. All the homework that you need to do about a piece of property is sitting from your desk, on the telephone or the internet.

Jill DeWit:                            Okay, time out, isn’t that with everything? You could buy a lemon of a car. Sometimes, things do happen. And again you didn’t do your homework, you didn’t take it to your mechanic. I guess that’s it. At the end of the day, what could go wrong is, you just didn’t do your homework, and you learn, you make those mistakes and you don’t do that again.

Jack Butala:                   Yeah.

Jill DeWit:                            I think that’s it, and I think that’s part of why you and I are here, is we are helping as many people as we can, and through our show is one way, so they don’t make those mistakes.

Jack Butala:                   That’s exactly right, I was just going to say that, with SuccessPlant, you know all about it but I’m saying it for our listeners, SuccessPlant is the website that we have to help support new people in this business, for the time being it’s free, it’s where everybody goes, it’s an online community so people that are flipping land can go on there and ask questions about, “Hey, where do I start, what do I do, how does this work, should I buy this asset, am I overpaying for this property?” I see stuff like that in there all the time.

Jill DeWit:                            Exactly.

Jack Butala:                   It’s kind of tough to find something that’s really backwards or where you could really lose a lot of money in this. From my perspective anyway.

Jill DeWit:                            I agree. Absolutely agree. I have something to maybe add to that, that could be kind of funny. I don’t know if you want to do it now, or you want to save it for another podcast, we sure can.

Jack Butala:                   No, no.

Jill DeWit:                            Do you want to do it, when we originally sat down and talked about this topic, I was thinking about not just that example, which worked out perfect, I was thinking of comparing what we do to house flipping, because we’ve done that. Do you want to talk about it now, or you want to talk about it later?

Jack Butala:                   Now is great.

Jill DeWit:                            Okay, so-

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