Jill Gets Miffed about Access with Jason Hartman (CFFL 0022)
Jill Gets Miffed about Access with Jason Hartman
Jason: It’s my pleasure to welcome Jill DeWit and Jack Butala. They are the principals at the Land Academy and host of the Land Academy Contest. Was it Will Rogers that said, “Buy land, they’re not making more of that.” I could be misquoting, I don’t know who said it, but anyway, welcome guys. I’m anxious to hear about what you do and talk to the audience about that as well. Welcome, how are you?
Steve: We’re great, Jason. Thank you so much, it’s an honor to be on the show.
Jason: Good to have you. Tell us a little bit about why land? I got to just prefix this with saying that until recently, I’ve never been a fan of vacant land. Like so many investors, I like cash flowing properties, but I interviewed someone on my show, another land guy recently and he kind of move the needle quite a bit I must admit. I was pretty interested and I have a feeling you’re going to move it even more. Next time I get a tenant calling me saying something is broken, I’m going to think, “If I owned land, I wouldn’t have any tenants.” I know the model is different, it’s a different strategy, so why don’t you tell us about it?
Steve: I’m happy to. This is probably the top 1, 2 or 3 questions that I’ve gotten for the last 15 years since I’ve been in this business and it’s a misconception about rural vacant land that doesn’t cash flow or that it’s unwanted, that there’s no real market for it. In fact, I think it’s quite the opposite. Vacant land is a very, very asset type to retail customer who just want to get away from it all. Vacant land is incredibly inexpensive to purchase because there’s a general lack of financing that’s available for it, so sellers are very … Because there’s no financing associated with land, it’s very easy to negotiate a very good price, if you know what I mean.
Jason: Right. It’s not really a credit based asset, when you buy it, you pay cash but when you sell it, you turn it into a credit based asset, and the old saying is, you can either have price or terms, but you can’t have both. That’s the strategy to increase the value was turn it into a credit based asset, right?
Steve: Right. For the most part … It’s a little bit ironic but people who were very seasoned to real estate investors like you seem to have that opinion, and I guess it’s been accumulated over years that vacant land doesn’t cash flow. We purchase ton of it and we sell it on terms for years and years and years, so we have made it cash flow and it’s been a great niche choice for us for more than 15 years for us Jill, right?
Jill: We actually tested other models like doing renovations and flips and I’ll tell you Jason, every time we stood there, scratched our heads going, how much time we spend on this, I could have made so much more just flipping some land. It’s easy and it’s fun and it’s very profitable.
Jason: Interesting. Tell us about your typical deal like … There may not be a typical deal. First of all, how many transactions have you done in the world of land?
Steve: I’ve completed 15,000 … Almost 16,000 transactions now since 1999.
Jason: Flocks, listeners, I have to apologize, we’re talking to couple of amatures here. That’s a little bit of experience for you, right?
Steve: Yeah.
Jason: That’s a lot of deals, tell us about the typical deal, what’s it look like?
Steve: The typical transaction that we complete is, we purchase a piece of property for cash, that’s anywhere between 5 and 40 acres, usually west to Mississippi, for anywhere between, I don’t know 500 to 4 to $5,000 depending on the quality of the property. That’s not the down payment, that’s the actual total cash purchased for the property.
Jason: Say the price again?
Steve: Between $500 and and about $5,000.
Jason: Between 500 and $5,000 total price of the land, west to the Mississippi and between, what’d you say 5 and 40 acres?
Steve: Exactly.
Jason: Good. Go ahead.
Steve: That’s typical, there’s a lot of different variations but that’s typical, and then we sell the property … We make sure that we can sell it. If it’s a cash sale, we look at the asset and we decide before we buy it. Whether this is going to be a cash transaction that we’re going to sell or it’s, we call it terms transaction where we collect payments.
Depending on the quality of the asset, we either double or triple our money, cash money when we sell it. If it’s on terms, there’s no real typical deal there but it ends up being an income stream for us for a minimum of 9 years and a maximum of let’s say about 17 years. In 1 or $200 payment per month.
Jason: You [inaudible 00:05:22] big, really I’m a lone [inaudible 00:05:26] business, if you will. The land is this underlying thing but … Are you servicing all those lands yourself or you’re using a servicing company or [crosstalk 00:05:37]
Steve: We’ve gone back and forth on that over the years, but yes, we do now service all of them.
Jason: What kind of software do you use to do that?
Steve: We use [MotCare 00:05:45].
Jason: [MotCare 00:05:47], like mortgage right? Okay, got it. You sell these properties, do you want to tell us more about the typical deal then I’ll ask questions or does that cover it?
Steve: That covers the typical transaction. I don’t know, Jill do you have anything to add, Jill’s more on the frontlines from the sales standpoint than I am these days and I … You know how things change a little bit. What do you think Jill, what is our typical deal?
Jill: No, that was perfect, but sometimes I know I’m dealing with a couple Jason that are … I once sweet little lady in Texas who’s got 253 acre properties and 106 acre properties I’m about to pick up, so it’s all over the place. Sometimes, I have great little [inaudible 00:06:30] there in California that I’ll pick up. The price is right and whatever it’s going on I’ll grab them.
A lot of them, keep a health cash balance, so I have it for acquisitions, so a lot of them, I’m just quickly doubling, tripling my money and getting out. A lot of the other ones, the really good nice ones, those are the ones that will sell on terms and have a down payment and do payments for years, that kind of a thing, I do a lot of both.
Jason: What type of land is this? What is the zoning of this land?
Steve: That’s such a great question because the very few competitors that we have I really think miss the mark on this. It’s all over the map. Zoning, for us, we send a tremendous … We generate these transactions, our acquisition deal flow largely by through direct mail. Zoning or property is use something that I take a real good careful look at before we handle all the data to send the mail out. Except for industrial and some really special use type property like cemetery or something really upbeat like that, we stick to single family residential, vacant land or any type of … Except for-
Jill: Recreational.
Steve: Recreational, sure. Except for-
Jason: Okay. Go ahead, except for?
Steve: Industrial. We really stay away from that for a lot of reasons.
Jason: You don’t like that because of I assume the environmental liability concern, right?
Steve: That’s correct.
Jason: A lot of land people are out there, they’re buying and selling land, is ranch land a natural zone, is that a zoning … Are things defined in the zoning law as this is ranch land?
Steve: That’s a great question.
Jason: Or they just call it that?
Steve: It’s a great question and it really varies state by state here in Arizona, we’re in Scottsdale, Arizona. Ranch is a use for land, I’m not sure if it’s an actual zoning designation but we see ranch as a use very often. I also see really low associated text assessments on that type of property sold. We’ve purchased a lot of ranch land over the years, so yeah.
Jason: [inaudible 00:08:52] land is [inaudible 00:08:54] in the middle of no where, and I know it’s right way out there. Some of the [land 00:09:00] deals I’ve looked at, they are in the middle of no where. I don’t know what people would actually use them for, some of them don’t have access, they’re land locked parcels. I don’t know what the easement structure is or anything like that. I mean, should I even be concerned about this stuff or the deal’s so cheap that you just buy them and sell them like I would over a larger deal?
Jill: I’m raising my hand on this one.
Steve: You sound like a very logical person who might want to purchase our education program.
Jason: There you go. I’m experienced and with experience comes caution.
Steve: Jill, go ahead.
Jill: It’s so interesting. I, a long time ago thought that myself Jason and I gave up trying to figure it out. What I think is really out there and crazy and you can only get to with a 4-wheel-drive, I can’t tell you the people that love it. Is it because tiny homes are getting cooler or it’s be off the grid, or the whole, there’s some interesting proper groups growing.
Jason: Collapse of civilization [bug 00:10:14] out. I host Survival show too, the whole 6 Survival show, so I’ve talked a lot of these people. Some of them are pretty out there.
Steve: Right.
Jill: Right. They love this and that’s the thing. I tell [Pete 00:10:28] I have both [fan 00:10:29] people calling me and I tell them, all right, have a GPS and a 4-wheel-drive to find it and they’re like, great no one’s going to bother me.
Jason: That’s an interesting perspective. I’m just wondering, does every piece of land need to have an easement providing access to it? I would assume so, or are there parcels of land … Again, this is not my world, I don’t deal in vacant land. Are there parcels of land that really are land locked and the only way you can legally go to your land is with a helicopter or an airplane? Or you’re trespassing?
Steve: This is a very good question. It varies state by state and in some cases by each governing municipality, but there’s physical access and legal access. By law in Arizona and I’m pretty sure in California, you can’t restrict access to a property. The property owners around it can’t restrict it, but I’ll tell you, in the thousands and thousands of deals that we’ve done, this specific topic has never come up after someone has purchased-
Jason: You’ve got to be kidding me, that’s amazing. I’m guessing, this is why it’s never come up. With your level of experience, that is mind-blowing, that question has never been asked, and I’m guessing the reason is they never actually used the land. They just buy it, they never even go visit it, it’s just gone and just sits there, is that what happens?
Steve: We’ve got stories and pictures of how happy our customers are with the use of their land. I haven’t really checked the statistic but I’m sure that that’s the case for a certain percentage of it. It get’s unused.
Jason: Is it fair to say then, that this whole question of easement, you don’t check into that when you buy something, you just buy it.
Steve: We absolutely do and we value that. We pass on numerous properties because access issues, specifically in south eastern California. For some reason, I don’t know what happened or what the story was in the 60s and 70s when a lot of it got subdivided, but access was not on their radar. If it’s on the side of the mountain, there’s some extreme situations that we won’t touch that but in general, the better access, physical access that it …
We teach what’s called the 4 As. For us to buy property and this is what we talk about with our members all the time, it has to have some version of the 4 As, and 1 of them is access. Access, affordability, attribute and Jill, what’s the 4th one?
Jill: Acreage.
Steve: Acreage, yeah.
Jill: Acreage.
Steve: Access is very, very important and we generally steer away from non physical access property.
Jason: Go ahead.
Jill: I was just saying, here’s the thing Jason, we have so many … I have so many sellers to chose from, it’s not even funny. You would crack up if you could see my acquisition list of things I need to go through, I can’t get to them fast enough. If I have any issues, and I’m glad that you’re bringing that up because it’s near and dear to our hearts too. We would never, ever touch anything that someone cannot legally get to.
There’s a lot of things, like in Arizona, after it’s like 8 or 9 years, if I’ve been driving through your backyard Jason, [crosstalk 00:13:59] I automatically have access. Little things like that and we do take that very seriously and that’s something that I think while we have a lot of repeat buyers over the number of years we’ve been doing this is because there will be access, there will be no issues. We don’t buy it if there’s not.
Jason: Good stuff. Tell us about how you acquire these properties. When we were talking a little bit off air, you said that you do a lot direct mail and you mails offer to people, offer to buy rather than mailing the good old yellow postcard with [white prints 00:14:34] any saying, “I’ll buy your land.” We’ve all seen that one and that’s like a trade, it’s just a common practice. You actually send them an offer the owner of than land?
Steve: Yeah, through a tremendous number of trial and error and failures, we have come up with what I think is a very effective way to purchase property from people who own this asset type.
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