How to set your Offer and Sale Price
Jill DeWit: Welcome to the Cash Flow From Land show. In this episode, Steve and I talk about how to price your land when you buy it, when you sell it, and everything in between. Welcome, Steve. How is everything going in your land world?
Jack Butala: It’s fantastic, Jill, as always.
Jill DeWit: Or your e-mail world?
Jack Butala: Well, I was going to ask you that, actually. I think you had some e-mail trouble yesterday?
Jill DeWit: Oh, no. Nothing I couldn’t tackle.
Jack Butala: [inaudible 00:00:25] awesome.
Jill DeWit: Even when I called you at ten o’clock at night, almost in tears.
Jack Butala: On Saturday night.
Jill DeWit: Oh my gosh, about to rip GoDaddy’s head off.
Jack Butala: I don’t think there was almost anything about the tears. You were in tears.
Jill DeWit: I was. I really, really was. Oh my gosh. I don’t think that guy believed me when I said I had been working on this since four o’clock. At that point, it was after nine and we weren’t done.
Jack Butala: Hey, the reason I brought this in, I wrote it into the show, is because sometimes no matter how much equity you have or … There’s only a very small percentage of people that can just say, “Yeah, I’m not going to deal with any problem I come across in my little company.”
Jill DeWit: Right.
Jack Butala: You just have to spend til ten o’clock on Saturday once in a while, no matter who you are and how far you are with whatever you’re doing.
Jill DeWit: Oh my goodness.
Jack Butala: To get it done, right?
Jill DeWit: Yes. You know, I was talking to my daughter about that this morning. I said, “Trust me, there are much better things I’d rather be doing on a Saturday night than … I wanted to be out goofing off too, but it needed to get done. There’s times you just have to make some sacrifices.” That was the whole conversation. It was not about her, it was actually about someone that she works with, who works for her. Making sacrifices sometimes when you really … Yeah, we all want to be goofing off, but it needed to get done.
Jack Butala: Right.
Jill DeWit: That was it. It was so funny because part of my frustration is I’m sitting over and the guy, he could hear me, I’m heavily [marking 00:01:57] things on my desk. I explained what I did, “I am right now crossing off everything I had written down that I was going to tackle tonight and get done on my way home, because none of it is going to happen. It’s all going to move to my Sunday list.” It was really funny.
Jack Butala: Well, maybe we can make up for it on a Wednesday, because that’s what’s nice about this business model, we can do it pretty much whenever we want.
Jill DeWit: That’s true, yeah. Sorry, you put me right back in that mindset. Sorry. You know what? It’s still fresh in my mind. I’m still a little hurt. Not hurt, but I’m still a little worn out from the whole e-mail mess event, which is now resolved, thank you very much. The point is: yeah, I stayed late on a Saturday night, because why? Because I’m taking off Tuesday, Wednesday, Thursday, Friday, Saturday and Sunday, by the way.
Jack Butala: You’re taking off what?
Jill DeWit: Because I can, so there you go. I didn’t have to save up sick time, I don’t have comp time, any of that. Yep. All right. That’s enough about me. What’s going on with you?
Jack Butala: I’ve been paying an incredible amount of time to my listening audience, this new podcast we just launched here, it’s, I don’t know, twenty-five episodes old, an overwhelming positive response we’re getting. Actually, an extremely positive response. One of the things that I’ve heard between the compliments is, you guys are horsing around a little bit on this one, and not really answering as many questions as you did on the last one. I wrote a series of fifteen or so episodes that are a little bit shorter, same format, but we try to answer direct questions.
Jill DeWit: Cool.
Jack Butala: What’s the name of the show today? There’s a direct question in this, I think.
Jill DeWit: It is. This is me, I get to ask you. This is me interviewing you. Steven, how do you price your land, on the buy side and the sell side? Would you share that with us?
Jack Butala: Well, Jill, that’s an excellent question. I’m glad you asked.
Jill DeWit: You know what’s funny? I don’t usually get to interview you, and even when we say we’re going to do it, you always just take over as the host, so I’m going to try to keep you in your place right now. I am the host. Would you please answer the questions?
Jack Butala: I saw Oprah Winfrey being interviewed on the Ellen DeGeneres show, and that’s exactly what happened. It’s just so in her bones to be the talk show host, that Ellen, she talked for about a minute and a half and then Oprah took her whole show over. I bet it was one of the best rated showed ever.
Jill DeWit: Mm-hmm (affirmative). Didn’t we see her just a couple weeks ago on … What was the channel? 5 for us. ABC Morning News, Charlie Rose and Norah and Gayle.
Jack Butala: Yes. Same thing there, right?
Jill DeWit: That’s right. Oprah’s sitting there and before you know it, it’s not their morning show at all.
Jack Butala: She bought the radio station. I mean the television station.
Jill DeWit: Right. It’s not even that Oprah’s demanding everyone’s attention-
Jack Butala: Everybody loves her.
Jill DeWit: You’re just drawn to her.
Jack Butala: It’s the Oprah effect.
Jill DeWit: Yeah. You have the Oprah effect.
Jack Butala: Oh my gosh. I have the Oprah effect for fifteen listeners.
Jill DeWit: Steven, you’re my Oprah.
Jack Butala: Oh my God! That’s yucky beyond discussion.
Jill DeWit: Okay, okay, okay. Steven, back to the point, will you please walk us through how you price your land? What’s important to you and how do you do this?
Jack Butala: Excellent. This is how I have priced our land since ever, since the nineties. You always start with what you’re going to sell it for. It takes a bunch of research, go out on the internet, go on certain websites like LandWatch, Land and Farm, and eBay let’s say, Craigslist maybe, if you really want to get serious about it and you’re new at this, I would do all of those things all the time. Zillow and Trulia too. What is that? Five or six sources. You see what other properties are selling for or what they’re listed for and then you work your way backwards.
My theory is, especially when you’re new in this business, you always want to be half of the price of the lowest comparison value. Let’s use a real quick example, forty acres in Northern Arizona, they’re all selling for generally twenty or thirty thousand dollars, but there’s some rogue guy out there that wants to sell his for ten, or let’s say twelve. Twelve’s a great number. If a property, the lowest price comparison value they can find is twelve thousand dollars, you want to sell yours for six, but you want to double your money, so you want to buy it for three. Three acres for forty thousand dollars?
Jill DeWit: Wait, did you do that backwards?
Jack Butala: No.
Jill DeWit: Three acres for forty thousand dollars?
Jack Butala: Oh, forty acres for three thousand dollars.
Jill DeWit: I went, wait a minute.
Jack Butala: Hey, as the host of this show …
Jill DeWit: Wow!
Jack Butala: Thank you for correcting me. My dyslexic math.
Jill DeWit: I’m going, I didn’t tune out, did I? I thought that I-
Jack Butala: You totally tuned out.
Jill DeWit: No! I heard that right. It came out wrong.
Jack Butala: I’m sorry.
Jill DeWit: It’s okay.
Jack Butala: Forty acres for three grand. My whole point is this: it starts with what it’s selling for, and then you move your way backwards. Okay, great, so how do you do that? You’ve got a long list of property, you’re going to send a bunch of direct mail to people who own these properties, and you’ve identified them as people who don’t want their property. They’re probably going to call you back and say, “Yeah, please right me a check for three grand,” or whatever.
You can price it on a price per acre basis; in general, we never pay more than a hundred dollars an acre. Or you can price it on a price per lot basis, and I generally try to price the lot types at a static price, regardless of size. If it’s a quarter acre, it’s three quarters acre or maybe it’s an acre, maybe it’s just a really cool lot in Michigan that’s got some waterfront access or it’s got some attribute like that, than I’ll do a static price of maybe five hundred dollars, maybe a thousand, maybe fifteen hundred, depending on the issue. I always, always, always, and my point in this is this: I always make sure to check it out based on what’s being sold right now.
Jill DeWit: Got it.
Jack Butala: That, in a nutshell, is really how we price property. We price it based on other people selling properties in the area, and then we try to have our sell price half of what’s at the lowest comp. Why? Why do we do it? Why is it so cheap?
Jill DeWit: I was just going to say, wait a minute, what if I don’t want to sell at that price? Why would I do that? Why wouldn’t I try to squeeze more out of it?
Jack Butala: That’s an excellent question; I answer it twenty times a week probably. The rest of the world believes in maximizing value on any piece of property that you own, so why the Hell would I price it so cheap, and it sells so fast, and leave money on the table, right? That’s what you’re intentionally doing. You’re intentionally leaving money on the table. You’re doing it because you want to turn inventory faster than you can imagine. You have a couple of choices when you own a piece of property. You can price it real cheap, sell it really fast, and get in to the next deal as fast as you can, which is what we choose. Or you can sit around for a year, get maximum value. What we teach is: keep churning and churning and churning your real estate portfolio so that you can jam pack as many properties in as you can.
Jill DeWit: Sounds to me like there’s a lot less headaches that way too.
Jack Butala: Well, what ends up happening, the intended consequence is that you start to develop a list of A-list buyers. Jill, you know actually more about this than I do now. You develop what we call an A-list of buyers, maybe five or ten people that are … They sell retail. Now we’re turning property, we don’t even market it anymore. Almost all of our property we don’t market, we just call people that we know and say, “Look, we’ve got a property. I know you’re going to buy it because you bought the last thirteen that we sent to you just like this.” We’re turning it and doubling, tripling our money, and we know it’s a great deal long before we even send out the mailer, which is how we run our acquisition program, by sending direct mail. It really takes all the guesswork out of this, in my opinion. Our members have been always responding to this very favorably.
Jill DeWit: Got it. Is there anything different now, now that we all got a good idea of how you determine value and set a price to make an offer and purchase the property, is there any glaring difference when I’m selling it? Might I be selling it different ways and have different pricing structures, depending on how I’m selling it? You know where I’m going, cash versus terms.
Jack Butala: Yeah. That’s a great question. There’s a healthy balance between selling property for cash and property on terms, which is collecting payments. Let’s use the forty acre example again. Let’s say you had three forty acre properties and you’re into all of them, each, for three thousand dollars, right? We implemented what I said earlier. You’ve got three forty acre properties, you spend three thousand dollar on each property. One you want to sell on terms, which is collect the payment for allotted years; one you want to sell for cash retail, to keep your cash balance up to do more acquisitions; and the third one you want to sell that day to your A-list buyer.
How do you price them? The first one is easy, the terms property, you go on the internet and you see what the market can bear. If you have a forty-acre property for three grand … These are real numbers, by the way. Jill buys forty acre properties for two or three thousand dollars every week. You’ve got the property, you go on the internet, specifically I would go on LandWatch, and I would see terms properties are generally selling for about fifteen to eighteen, maybe twenty-five thousand dollars. I would price it right around there, and I would make the down payment incredibly low, probably a hundred and ninety-seven dollars a month, and a hundred and ninety-seven dollars down. No one does that. Now you’re immediately the cheapest person in the market, and if it the property looks good and you’ve done your job about doing the maps on the internet, doing a good description, making sure you’re getting the word out, it’s going to sell very quickly.
The second property-
Jill DeWit: I was going to say, okay, so these payments, how long am I … I’m going to get two hundred dollars a month for how long, typically?
Jack Butala: Many, many, many years. That’s one of the million little details that we teach in our Cash Flow From Land program. If you want to get into this business, check it out at landacademy.com, there’s ROI analysis and a lot of people struggle with that, actually. I’m glad you brought that up. Lot of people struggle with how to price things and the math piece of this and what return on investment is, ROI. We provide all that information. If you go the resources section at landacademy.com, we’ve got several ways to figure that out. If you want to e-mail me directly, I’d be happy to send it to you, at service@landacademy.
Jill DeWit: [00:13:14]
Jack Butala: Oh, you were going to do a plug? Go, go, go.
Jill DeWit: No, I was going to give out your personal e-mail address, like you did to me once!
Jack Butala: You were going to throw me under the bus?
Jill DeWit: Hey, if you really want to be part of this, call Jill! Here’s her number! What the heck?
Jack Butala: You’re probably still getting calls.
Jill DeWit: I’m like, “What are you doing to me?”
Jack Butala: To finish the thought, that takes care of the terms property, then there’s the cash property-
Jill DeWit: Wait! Can I ask another question based on that, though?
Jack Butala: Yeah. Yeah, sure.
Jill DeWit: This is one of the things that’s my perception and I just wanted to say this for everyone, for both listeners, is that I don’t know if it’s human nature or what, we tend to over think this and-
Jack Butala: Yeah. Excellent point. You’re a good host!
Jill DeWit: Thank you, I appreciate that. It’s not that difficult, but it’s really interesting when I’m having this conversation one-on-one with our members about terms and wrapping their head around the whole thing, and how am I doing this, and do I charge interest? What do I do with this and that? They’re really sitting there trying to find a problem, or not really a problem, they’re just over thinking it. I’m like, “You know what? Relax. You paid for it. You’re the bank. What you’re happy with, what your seller’s happy with, that’s it.” We help with all the details of how to really get the transaction on paper and all that, so everybody’s on the same page, but my big picture is: don’t over think it, it’s not that hard. Wait a minute, I can buy it for this, and I sell it for this, and I just sit back and let the payments come in and don’t have to worry about it? Yes. The answer is yes.
Jack Butala: Yeah, if you understand that and you want that to happen-
Jack Butala: Every single month we give away a property f or free. It’s super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don’t have to read it. Now go buy some property.
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