Start Your Career with Land, then Buy Houses (CFFL 0057)

Start Your Career with Land, then Buy Houses (CFFL 0057)

Jack Butala: Start Your Career with Land then Buy Houses. Every single month we give away a property for 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 even have to read it. Thanks for listening.

Jack Butala:                   Hey, this is Steve for Land Academy. Welcome to our cash flow from land show in this episode. Jill and I talked about getting your feet wet in a real estate investment world with land just like we did. You may want to end up flipping houses or owning apartment buildings like we do, land is a fantastic place to start and learn. It’s also extremely profitable in the long haul as we’ve proven over and over again. Jill, I think this is again one of those shows that could potentially help people instead of-

Jill DeWit:                            Oh, I think I know what you’re going to say. This could potentially be our downfall.

Jack Butala:                   Oh, this could be our last show too.

Jill DeWit:                            Exactly.

Jack Butala:                   Every show could be our last show.

Jill DeWit:                            That’s what I thought you were going to with that. Oh, my gosh. This is really good.

Jack Butala:                   Let’s make this our last show.

Jill DeWit:                            Yeah.

Jack Butala:                   Let’s just say all the stuff we’ve ever wanted to say.

Jill DeWit:                            Yeah, that’s right. Let’s drink. Imagine if we were taping this recording, we’re doing this drunk, that would make it our last show.

Jack Butala:                   Little do you know.

Jill DeWit:                            Oh, gosh.

Jack Butala:                   You should see what’s in my desk.

Jill DeWit:                            No. You know what’s funny as I read this because I’m thinking let’s start with land then buy houses, and I keep coming back to but why would you want to? At the end of the day, this is so much easier because we’ve done both.

Jack Butala:                   I love wholesaling houses. You know we still do that.

Jill DeWit:                            Oh, yeah.

Jack Butala:                   It’s more me than anybody else.

Jill DeWit:                            Okay.

Jack Butala:                   I don’t like renovating houses.

Jill DeWit:                            That’s a part I liked but it was the writing the checks part that was awful.

Jack Butala:                   I snuck this topic into our long list of podcast topics because so many people come to us after being disappointed with house flipping.

Jill DeWit:                            Right.

Jack Butala:                   It’s not a hard sell because house flipping sucks.

Jill DeWit:                            The only thing that’s a bummer is they’ve had not good experiences so they think all real estate is bad.

Jack Butala:                   Right.

Jill DeWit:                            Not all real estate is bad. Some you can actually be calm, cool, collected, and slowly make a nice living doing this.

Jack Butala:                   I have a lot to say about this.

Jill DeWit:                            Uh-oh.

Jack Butala:                   My whole career at a cocktail party or anywhere, when someone says, “What do you do?” I say, “I own a real estate investment company.” Their first reaction is houses.

Jill DeWit:                            Isn’t that funny?

Jack Butala:                   If you go in bigger pockets, everybody is talking about houses. Let me tell you, this is my 20-year opinion in this business, the single-family residence, detached residence house that we all know about, and we all grew up with our parents saying, “Buy a house as fast as you can,” is maybe the most inefficient investment vehicle, not only in real estate, but ever.

Jill DeWit:                            Right.

Jack Butala:                   It is set up to fail in my opinion. If you want to buy a house and own it as a primary residence, and you’re not really into that, it’s silly that when you start adding up the interest expense and all kinds of stuff. Unless you’re really a professional and you know about single-family residences and rentals, I’m not saying there aren’t incredibly successful people out there, I just think that real estate and houses is synonymous with a vast majority of people, and I think it’s not right.

Jill DeWit:                            And that’s why the show will be over after this, I’m just kidding.

Jack Butala:                   You just sat there and waited for me to say that.

Jill DeWit:                            I got it, but here here it goes. Remember how often you and I sit and talk about … This is what I think about. No, I don’t mean to dump on this other side thing because yes, we still do stuff like that, we do that anyway. Okay, the typical return on investment percentage for our land transactions versus those transactions, very different.

Jack Butala:                   Yeah.

Jill DeWit:                            Remember we talked about this? Remember our friend Dennis who was really good. He’s the model renovation flipper, doing it himself. His mom’s in there mopping floors.

Jack Butala:                   He kills it. The kid makes a ton of money every year.

Jill DeWit:                            He does. He is a beautiful example of how to do it right.

Jack Butala:                   Right.

Jill DeWit:                            Even when he sits and talks about his numbers, I go, “That’s it?” He’s excited about it.

Jack Butala:                   Yeah, he does probably four or five, maybe five or six deals a year, and he makes between $20,000 and $40,000 a unit.

Jill DeWit:                            Right.

Jack Butala:                   There’s so many variables and things that can go wrong, but that’s about it.

Jill DeWit:                            But he’s swinging a hammer.

Jack Butala:                   Yeah, all in all.

Jill DeWit:                            He’s living there.

Jack Butala:                   Yeah. Oh no, he doesn’t have any employees. He doesn’t have an office.

Jill DeWit:                            That’s the property. Right.

Jack Butala:                   He lives. He moves in most of the time.

Jill DeWit:                            Right.

Jack Butala:                   The guy makes a quarter of a million bucks a year.

Jill DeWit:                            Jill, when do I do this? Is he married?

Jack Butala:                   Dennis isn’t married for a lot of reasons. Real estate has nothing to do with it.

Jill DeWit:                            Poor Dennis. I love Dennis. I think he doesn’t listen to this show.

Jack Butala:                   Do you think he even knows we have a show? I bet he doesn’t.

Jill DeWit:                            He’s going to be bored to see for the next couple of days, we’re going to start giggling, and he’s not going to know why. Poor guy.

Jack Butala:                   My favorite house deal is this, you sent out a mailer, and you only send the mailer out to people who own houses that have no mortgage on them which is one of the reasons that our land flipping business does so well because when you have a mortgage, your hands are tied about how much you can offer. You can’t offer half of what … You can’t accept half of what it’s worth if their mortgage company … If there’s a mortgage on it.

Jill DeWit:                            True.

Jack Butala:                   You send it out with no mortgage, and then you buy it for a lot less than it’s worth or a lot grossly undervalued. You have a person that you’re going to sell it to immediately in your back pocket, a handful of people that renovate houses or they buy them, and they rent them out, and it’s really easy to find those people I your market. You can do it in eight to ten hours. Actually I discuss it in blogs. If you want to know all the secrets, just check on my blogs and bigger pockets or the Land Academy website. You never really outlay any cash. There’s tons of money to be made flipping houses, not renovating them.

Jill DeWit:                            Can I ask you about something because I love this blog, will you please bring up the blog that you wrote, the five rentals will feed a family for generations?

Jack Butala:                   Yeah, five good rental properties will feed a family for generations.

Jill DeWit:                            Will you please explain that?

Jack Butala:                   That went viral.

Jill DeWit:                            It did, I know. Will you reiterate that whole concept because it was awesome?

Jack Butala:                   Yeah. All you really need is five good rental properties to just retire. When you really do the math, but everybody goes into it, I think, incorrectly. What you need to start with is forget about buying property. What you need to learn to do is how to send out a great mailer, and to identify from a data standpoint where and how, and what these properties look like, not visually look like, but what they look like from a data standpoint. Now here’s the secret, they can’t have a mortgage, they typically are owned by people who would … They’re owned by an entity that has an out-of-state mailing address, and all the data is available at the county, and they send him a letter.

You send them a letter that actually contains an offer that is substantially less than what you think the property is worth, and that is how you start in the real estate business, that’s how we buy land here and houses, primarily land, every single month, every single week. When you go to buy it, you don’t even … The first one that you snag, you don’t buy it. You align yourself with somebody who’s local in the area, and you purchase that property with them as a partner, and you take ten grand out of the deal, and then you do it again and again. Now you’re learning and learning, and making mistakes and stuff, it’s not costing you a dollar, you never put a dollar into that thing.

After you’ve accumulated $150,000 with 10 or 15 deals you’ve done, you buy one for cash. You pick the best one that you’re working on. You pay cash for it, make sure it’s cleaned up and you rent it out. There’s a whole process about who you rent it to and how you do it to maximize the fact that they’re going to stay there for a long time, and be a good tenant. There’s no mortgage. There’s no real estate agent involved. There’s no mortgage insurance. There’s no contractor really involved. There’s no inspector except the guy that you maybe pay in beer. There’s a way to do that, so that really, really works well.

Jill DeWit:                            Exactly.

Jack Butala:                   You do it five times, and now you’ve got about five to depending on the market that you are doing this in, five to … Boy, this is not the podcast I thought this was going to be.

Jill DeWit:                            No, but this is good information because it really is.

Jack Butala:                   5,000 to 8,000 bucks a month coming in. $8,000 a month coming in, and if you can’t live on $8,000 a month, you’ve got to ask yourself a lot of other questions.

Jill DeWit:                            Right.

Jack Butala:                   You own the stuff. If something goes really sideways, the economy goes bad, maybe somebody gets ill that you like and you got to generate some cash real fast, you have complete control of your life. You can sell one of the properties. They’re legacy properties. Your kids can own them forever.

Jill DeWit:                            Well, I’ve heard of people that-

Jack Butala:                   Wait, just to wrap this up, Jill, before you make the comment, don’t borrow money in the beginning. Do not leverage property, you’re asking for trouble. That is not how you do zero down. I just told you how to do a zero down deal. It doesn’t require any money to get involved in that. Hit the rewind button if you need to listen to it again because that is the way to do a zero down deal, and end up with a ton of money a couple of years later.

Jill DeWit:                            I’m sorry.

Jack Butala:                   Go ahead.

Jill DeWit:                            First I’ve got to say, did you just say, “Hit the rewind button”?

Jack Butala:                   Well, yeah because it’s a lot to take out of it.

Jill DeWit:                            I’m like because this is on your cassette? Yeah, and you go “click.” What the heck? Do you remember that?

Jack Butala:                   Zero rewind.

Jill DeWit:                            A rewind button?

Jack Butala:                   Is there a rewind button in a podcast?

Jill DeWit:                            There’s no rewind button. Wow. Okay.

Jack Butala:                   What if they’re listening to it on an iPhone?

Jill DeWit:                            I don’t know. I’m sure they’re listening to it on their eight track deck in their car, their cassette. On your cassette, make sure you pop the little things out because you don’t want to record over this accidentally.

Jack Butala:                   Oh, who’s showing their age now?

Jill DeWit:                            What did you just say? Oh, my goodness. It’s not a big point now, the moment’s gone, but just kidding. One of the nice things too is when you pay cash for something-

Jack Butala:                   Oh, yeah.

Jill DeWit:                            You pay cash for it so any weird fluctuations, it doesn’t matter. One of the things, now and then, you hear about tenants needing help. Maybe you have a tenant that lost their job, and they need a little break on the rent, you don’t want to move them all the way out and move new people back in.

Jack Butala:                   Yeah.

Jill DeWit:                            You could afford to reduce it for $200 for six months or whatever it is, when they get back on their feet, and that’s okay because you’re not scrabbling to pay a mortgage which I like.

Jack Butala:                   Right.

Jill DeWit:                            I’ve another point in fact. This is the funny thing that you and I have talked about and we need to do this. Our whole strategy about finding motivated sellers does not only work for land, it does not only work for homes and apartments and whatever it is. Think about it, an RV, a boat, a cabin, a mobile home, whatever it is, remember we laughed about we maybe want to buy that boat in San Carlos. We’re not going to do it the normal way. We’re going to go the sideways way, and we’re going to reach out to motivated sellers, and you can use it for all kinds of things.

Jack Butala:                   Never buy anything that’s for sale.

Jill DeWit:                            Right. Oh, that’s good. Oh, I’m writing that down, that’s really good.

Jack Butala:                   You don’t buy property from the MLS, that’s for sale property. You don’t buy a boat that’s for sale by some yacht company, or an RV in a dealership, jeez.

Jill DeWit:                            That’s too late.

Jack Butala:                   That’s somebody else’s business that’s all set up to make money. What you want to do is contact a ton of people that have something that you want, you don’t do this for toothpaste, but you do it from real estate for sure, and just use your imagination. Imagine how many people right now today stumbled on some reason why they want to get rid of what they have.

Jill DeWit:                            Yeah.

Jack Butala:                   There’s lots of reasons. People need money all the time.

Jill DeWit:                            Wow. Well, that’s so much easier, that’s the whole point. Boy, I would love somebody to come up and take a car off my hands right now, but I haven’t put it, you know?

Jack Butala:                   This car comes up so often.

Jill DeWit:                            It does.

Jack Butala:                   We got to get rid of that thing.

Jill DeWit:                            Well, think about how many people are that’s it, that’s just a good example of what you just said. I’m driving around in a vehicle I don’t want right now. I haven’t had the time to do this and everything, if someone came along and gave me a halfway decent offer, and I don’t have to advertise it, put a sign on a window or post it anywhere, I’d be like, “Done. Take it, it’s yours. Here’s the keys. I just filled up the gas tank. Have fun.”

Jack Butala:                   Right. To get back on the topic here, there’s so many technical things that go on with real estate, and buying and selling land just takes all that stuff out of it. It takes all the silly learning curves, I guess, maybe the problems and the headaches out of it, it’s so simple. It’s literally like buying a used car.

Jill DeWit:                            Why is this overlooked?

Jack Butala:                   I’ve tried to figure that out for a lot of years, but I think in the end, it comes down to one simple fact. It makes people really uneasy to think about buying property, very rural property. They’re sitting there saying, “Who the heck wants to live out there?” I’ve heard that sentence or some version of that sentence a million times. The fact is there’s tons and tons of people that want to live out there. I don’t want to live out there. You might not want to live out there, the person who’s about to get involved in Land Academy or any of this other stuff, but man, let me tell you, there are people scouring the internet to find a 40-acre property that they can buy for 12,000 bucks, $200 down, $200 a month, scouring the internet to find a deal like that because they’re done.

Jill DeWit:                            Yeah.

Jack Butala:                   They’ve got some internet-based job where they’re working home anyway, and they just want to build a little shack.

Jill DeWit:                            They’re commuting.

Jack Butala:                   Right.

Jill DeWit:                            Maybe not commuting, but they’re tired of the traffic.

Jack Butala:                   When I started in this, that concept was way more prevalent than it is now because the internet was just getting started, and you had to go to a job. Now it’s really easy to put up an RV or a mobile-type home on a property which is many, many, many, many, many people’s dream.

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