3 Steps to Becoming a Property Investor (CFFL 0126)
3 Steps to Becoming a Property Investor
Jack Butala: 3 Steps to Becoming a Property Investor. 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:
Jack Butala here from Land Academy. Welcome to our Cash Flow from Land show. In this episode Jill and I talk about the three steps it takes to become a property investor: education, experience, and independent success. Jill, great show today. Let’s tell it like it is as we always do. before we do, let’s take a question from a caller.
Jill DeWit:
I’m excited about this show. I’ve got to tell you, it comes up a lot. I hear people doing it the wrong way and then just making all the mistakes. I’m really excited to have this topic.
Jack Butala:
Me too. It’s fun to put together short little lists and this show is great for that, just giving an overview.
Jill DeWit:
It is. All right, here’s our question. Belinda from Phoenix called in and asked, “How do you define market value?” I love this. “I know some investors, including myself, define it as the price the property will sell for on the open market in its current condition regardless of what condition it is, and I know an investor should define it …” this is a long one, “and I know an investor should define it as the price it will sell for on the open market after repairs or a full renovation.” This is good because what we do is so many types of properties. That’s why I want to include this question because when you decide, improvements, when you say repairs or renovation it’s any kind of improvement.
Jack Butala:
Right.
Jill DeWit:
I like this question.
Jack Butala:
This is a tougher question to answer than it really it sounds like. Market value is an interesting reason. It depends on the market type first of all. There’s two or three ways to value property in the universe of real estate. There’s the income approach. This is like the technical answer. The income approach, that’s how you value, with capitalization rates, that’s how you value an apartment building or an office building that’s producing income. There’s the emotional approach, which that’s how you value a house that you’re going to live in. I can’t remember what the third one is.
Jill DeWit:
How about comps?
Jack Butala:
Yeah, probably comparison value. That’s one of it. It’s been so many years that I just pulled that from the way back part of my brain.
Jill DeWit:
How far back was that?
Jack Butala:
It’s as far back as it goes.
Jill DeWit:
Is it dusty back there? Is there other scary things back there?
Jack Butala:
Yes. It’s not pretty.
Jill DeWit:
Oh, I don’t want to go back there.
Jack Butala:
Not a pretty place to go.
Jill DeWit:
Yeah. Sorry. Belinda, this was not a good question. I picked wrong. Just kidding.
Jack Butala:
With land I tend to start with what I know I can sell it for, which is probably close to half of what the cheapest like kind property out there is listed for, and then I go down from there. That’s how I value it up when I’m buying it, but market value is I think purely just what somebody’s willing to pay.
Jill DeWit:
That’s what I think too.
Jack Butala:
That’s a round about way to answer that. I’m glad this came out. We don’t, in our organization, and I really try to explain this to our Land Academy members. Please don’t try to maximize value. It goes against your human being intuition. We want to buy it as cheap as we can and we want to sell it for as much as possible. That takes a lot of time. Wouldn’t you rather just double your money?
Jill DeWit:
Yes.
Jack Butala:
If somebody has a business model where they constantly double their money, constantly, I’d love to hear about it. I don’t, double and triple your money very quickly over and over again.
Jill DeWit:
I agree.
Jack Butala:
That would set the market value for me.
Jill DeWit:
Do you know what’s so funny, what you didn’t mention which I agree with is, assessors values, those are always off. They can be super high, super low. Market value and assessor’s value are often so different. That’s just the tax thing.
Jack Butala:
They have nothing to do with one another.
Jill DeWit:
I know, but people think they do.
Jack Butala:
Yeah, and there’s a thing out west called full cash value which is really the assessed value. That freaks people out sometimes. They get a notice in the mail that their full cash value is thirty-five dollars.
Jill DeWit:
Exactly. I’ve been wanting to bring that up because people think that that’s what the value of the property is. It says this so that’s what I want to get out of it. Oh, boy.
Jack Butala:
Assessed value, everywhere it’s different. Sometimes it’s state specific. Sometimes it’s county specific, but whoever’s defining it, it’s very different. Incredibly different from the east and the west coast. That’s way beyond the scope of this but it has nothing to do with market value at all. I’m super glad you brought that up.
Jill DeWit:
Thank you.
Jack Butala:
I get that question at least once a week.
Jill DeWit:
I do too. I do a lot of acquisitions here. I still take a lot of the calls and the people will flat out say, it shows on here fifteen seventy-five or whatever it is. That’s what they think that they want. I’m like, oh gosh.
Jack Butala:
I can see where the confusion would come. That must be a little scary for anybody. I was trying to bring it back to owning a car. What if somebody all of a sudden tell you your car is worth fifteen dollars and you just paid three grand for it.
Jill DeWit:
Which is really kind of true. You drive it off the lot …
Jack Butala:
It goes down to fifteen.
Jill DeWit:
You know what I mean, to lose it. Let’s all be honest.
Jack Butala:
That’s a little scary.
Jill DeWit:
You buy a brand new car today for thirty and you sell it in one year and it’s probably twenty. It really makes no sense.
Jack Butala:
What’s the moral of that story, princess?
Jill DeWit:
I do know. How do you like my dress today?
Jack Butala:
[inaudible 00:05:38] I think you look great.
Jill DeWit:
Thank you.
Jack Butala:
Is it brand new?
Jill DeWit:
My dress?
Jack Butala:
Yeah.
Jill DeWit:
Yeah. It’s not my car.
Jack Butala:
Buy new dresses, buy used cars.
Jill DeWit:
That’s it.
Jack Butala:
that’s words to live by by Jill DeWitt.
Jill DeWit:
That is by Jill.
Jack Butala:
No, you look great as always.
Jill DeWit:
Thank you. I appreciate that. Cool. Good question. Please share with us, Steven, more about what you were thinking with today’s topic.
Jack Butala:
Yeah. Like we said right at the beginning of the call, there’s three steps to becoming a property investor. I just did a blog on this topic and there’s, in my opinion, the same three steps to really succeeding at just about anything. I mean the bare bones, thirty-five thousand foot elevation view of this whole thing. Number one, get some education. There’s a lot of different places you can get education on all kinds of topics. In fact, in my blog, I said look, if you’re going to become a wielder, a medical doctor, a ballerina, it’s all pretty much the same process. You’ve got to go through an education process first.
You have to get some experience and hopefully during getting some experience you can chose an environment where you know you’re going to fall down and fail a little bit and somebody’s going to be standing there to catch you. In my blog I use the example of a medical doctor who goes through an internship. Then the third one is independent success.
Jill DeWit:
I have something to say about, are we going to talk about each one more?
Jack Butala:
Sure.
Jill DeWit:
That’s not it, right? We’re not done?
Jack Butala:
We can end it right there. We can talk about jokes and stuff.
Jill DeWit:
No, here’s what I want to say. This is so valuable. The thing about education, the first one, it’s so important. How long do you want to spend ramping up on your own? That’s something that I hear and I see and I know it’s true, because I know the people in our world that we have helped give a leg up and shown the ropes, based on what we learned over years and years of doing things right and doing things wrong. You think that you’re wasting money sometimes but you’re not. You’re saving money. By getting educated you can save yourself so much time and so much money.
Jack Butala:
I’ve heard Jill give a different version of this talk probably three hundred, four hundred times. This is how I learned in this business. I failed at it for a really long time, and when I was done making some pretty big mistakes we kicked out this Land Academy product. You can learn from me or you can spend fifteen years like me making some mistakes.
Jill DeWit:
Exactly.
Jack Butala:
Is it worth the money that we’re charging? Probably.
Jill DeWit:
Yeah. Oh my gosh, yes.
Jack Butala:
Here’s another thing. During the education process I think it’s important to use the tools that you’re actually going to use throughout your experience and then eventually in the success portion. I don’t think a medical doctor, if they’re going to become a surgeon, I think they use the same tools during their education and experience phases of this. They probably use the same scalpel they’re going to use when they’re done. Or the same MRI machine or whatever. That’s one of the gauges for me to pick an education, make sure it includes the actual tools you’re going to use so you can practice with them.
Jill DeWit:
Good advice. They don’t get plastic knives. Plastic stuff is so, I’m joking.
Jack Butala:
I halfway regret using that medical doctor [crosstalk 00:09:16].
Jill DeWit:
How about an automotive technician? How about that? Say you’re learning to work on cars. I know this from people. you start buying your tools one year in school and they’re not cheap by the way. You start building up your arsenal of tools while you’re in school. Then when you’re done and you graduate you have your tools, because they all have their own tools, that you go work at, whatever, Ford dealership or something. There you go.
Jack Butala:
Yeah. Education’s imperative. The other thing is that, how many times have you ever heard this? This has happened to me. I’m sure it’s happened to you too. How many times did you have a real bad teacher at some point in your education process and it’s like, I hate math. No, you don’t hate math. You hate that teacher.
Jill DeWit:
Right.
Jack Butala:
Or the teacher’s ninety-nine years old and they’re just done. They’re waiting to retire. Find the right teacher, I guess is what I’m saying.
Jill DeWit:
You bring up something else that’s interesting. There’s always negativity, no matter what you’re dealing. There’s going to be people who think you’re crazy, or think it’s silly.
Jack Butala:
How do you like my dress? A girl only ever asks you, how do you like my dress, with that kind of enthusiasm because she’s feeling damn good about her dress.
Jill DeWit:
Yeah, I am very confident about my dress.
Jack Butala:
If they say something like, does my bottom look big in this dress, that’s not the same question at all.
Jill DeWit:
Thank you.
Jack Butala:
You want to get out of that fast.
Jill DeWit:
Thanks. It’s a Saint Patrick’s Day thing.
Jack Butala:
I see.
Jill DeWit:
See where I was going with this?
Jack Butala:
Here’s the truth. Jill and I are about to embark on a, it’s a several day vacation in Utah, skiing with our boys. She’s in a darned good mood.
Jill DeWit:
I’m in vacation mode. I’ve already mentally checked out. I’m just here.
Jack Butala:
I interrupted you just to make light of it a little bit.
Jill DeWit:
No, it’s good. We’ve covered education. Experience. Experience, it’s good if you have a mentor to guide you a little bit. A lot of it you’ve still got to figure out on your own, but once you’ve done the education, now you’ve got the tool. You’ve got a idea of how it should go. You just got to get out there and do it.
Jack Butala:
You got to see it in action and you want to really try to do it alongside somebody that knows exactly what they’re doing. The ideal scenario, it doesn’t always happen this way, is make money while you’re doing it or get paid while you’re doing it. It’s like a paid apprentice. I like to think we offer a pretty good version of that here. Yeah, all three points are real critical. Of course if there’s a big problem you’re not going to make it to number three which is independent success.
Jill DeWit:
I think experience is the biggest area you’re going to spend time in. You’re going to do things right. You’re going to do some things wrong. You’re going to reach out to your mentor and go, what happened there? They’re going to probably say, you paid too much.
Jack Butala:
That’s the root of all problems actually, almost all problems with real estate, you paid too much.
Jill DeWit:
Or, you know what I find, honestly with our group? It’s not so much that as they’re impatient. They are not marketing it as they know what to do. Just a little bit impatient. Take some time. You need to put it there many different ways. You can’t sell it if no one knows it’s for sale, by the way. I can’t drive around with my car hopping someone’s just going to stop me in the parking lot and say I want to buy your car. You know?
Jack Butala:
Yeah.
Jill DeWit:
You have to put a sign on it and maybe advertise it and have your phone number there and answer it. There’s a few key things to selling something. There you go.
Jack Butala:
I would like to even say that, in the beginning of your career, if you’re flipping houses or whatever, and honestly I’m guilty of this. I’m guilty of not accomplishing this properly. You need to have a marketing plan. This is what your marketing plan should look like. I’ll give away tons of secrets right here. Not secret. I will share my experience with you, not give away secrets. You have to post it in multiple places, as painful as it is. You have to create good graphics. You have to spend the time to do that, learn how to do that, or hire somebody if that’s not your thing and post it. Jill, let’s list it off. Post it on Craigslist.
Jill DeWit:
Land Watch.
Jack Butala:
Land Watch. Land and Farm. Eaglstart.net.
Jill DeWit:
Your own website.
Jack Butala:
Your own website. That’s extremely important.
Jill DeWit:
Maybe do an eBay Buy It Now.
Jack Butala:
Possible eBay.
Jill DeWit:
Even just for marketing, advertising reasons.
Jack Butala:
Zillow, Trulia. Now, does it sound like a lot of work? No it’s not. You write the text once and you do a map or two and a picture or two, one time, and you just run around the internet posting it all over the place. Copy and paste. No, it’s not a lot of work. What you’re going to do, what ends up happening, and everybody misses this. Jill, I’m glad you brought this up, is you’re collecting buyers. You’re collecting potential buyers that are reaching out to you. You’re putting them in a data base and you’re building a list.
I left out one super important one, is direct email. You’re not only collecting all these buyers, the thirteenth property that you do, you’ve got ten, fifteen, twenty buyers from each of the property that eventually got sold.
Jill DeWit:
You know they’re interested. Right.
Jack Butala:
I’m just thinking out loud here. You might want to consider leaving that property up there for a little while even after it’s sold. Do you ever notice when you’re driving down the street, the house has been for sale but it’s sold and the sign’s just still out there?
Jill DeWit:
Uh-huh. (affirmative)
Jack Butala:
That realtor’s still taking calls on that. They’re trying to get a listing around the block and they’re going to take it to all those buyers too. Is it ethical? I think so. I don’t think you’re messing with anybody’s head.
Jill DeWit:
Put a sold sign on it. Be honest. You see a sold sign and the signs still there, under contract.
Jack Butala:
We do that too. We say sold or under contract but leave the property up there for a while.
Jill DeWit:
Exactly. That’s honest. Sometimes too, you never know. Especially in the housing world you need backup buyers because sometimes things fall through at the end. It’s not unethical. It’s a good thing to do.
Jack Butala:
If you paid the right amount of money for the property and you reach the right people, you’re going to sell it really quickly. We don’t spend a lot of time on sales, Jill, because it’s just so natural. You just have to follow the formula. Problems that we see where people aren’t selling property is, it’s because they’re not going through the steps.
Jill DeWit:
Exactly. The last thing I thought for the independent success, you just got to do it.
Jack Butala:
You got to get those deals under your belt.
Jill DeWit:
Do it. Don’t be afraid.
Jack Butala:
For better or for worse, it could be a big huge mess. Everybody’s got a thing that’s stopping them. I don’t like calling a county for some reason. I’ll talk to planning and zoning all day.
Jill DeWit:
That’s your thing?
Jack Butala:
I got a lot of things.
Jill DeWit:
What else. We’re digging deep here. What else you got?
Jack Butala:
You know what it is?
Jill DeWit:
I never had a dog. Here it comes.
Jack Butala:
It’s not the county people at all. It’s the paperwork piece of this. I’ve never met a guy that really enjoys paperwork.
Jill DeWit:
Steven’s emotional baggage. That’s what we should’ve called this show.
Jack Butala:
Yeah. Then six people would listen to it instead of twelve.
Jill DeWit:
I love it. All right.
Jack Butala:
We’re not supposed to say that anymore.
Jill DeWit:
No. Why is it that, I would really love to know, what holds people back? It’s like, I gave you all the pieces. Here’s all the tools. Here’s all the instructions. We’ve gone through it three times. You have a hammer in your hand. What is it that keeps them from doing it?
Jack Butala:
It doesn’t happen very often, Jill, but you’re right. It happens.
Jill DeWit:
It does. Here’s what I noticed. Some of the real estate forums that we’ve gone to and we spoke at recently and I see it in bigger pockets. I see people in there that do stuff for years. They’re talking about it for years and doing nothing.
Jack Butala:
Really bright people, too. That’s actually worth doing some pretty serious research on, what is the root of analysis paralysis?
Jill DeWit:
Right. What’s holding them back?
Jack Butala:
What do you think? Right off the top of your head [inaudible 00:17:45] what do you think?
Jill DeWit:
Emotional baggage.
Jack Butala:
What?
Jill DeWit:
No, I have not thought about this off the top of my head. I would just have to say that there’s some, I don’t mean to pick on people, but some insecurity that’s holding them back. It’s not them. It’s not what they know. Then once you take that one little baby step, you go, I got this. Then it’s all okay.
Jack Butala:
I don’t know. I would call it something like, I don’t think the root of it is lack of self confidence. I think that that’s important to have. I think they’ve touched the stove a few times on maybe something else and they’ve burned their hand and they said, last time I did this real estate deal, I see this in bigger pockets all the time. They just don’t know if they’re doing the right thing, and they don’t want to get burned. They know what that feels like. They don’t want to lose money on a deal.
Jill DeWit:
Then do it right.
Jack Butala:
Jill, jeez.
Jill DeWit:
I’m just kidding.
Jack Butala:
By the way, for everyone out there … Okay, you know I adore you, right?
Jill DeWit:
Uh-oh. Here it comes. Ready.
Jack Butala:
I helped you rocket your career into where it is …
Jill DeWit:
I know you did.
Jack Butala:
Your land career. I made a lot of mistakes. By the time you got involved here stuff was worked here.
Jill DeWit:
I know. It was pretty easy for me.
Jack Butala:
Look, no one had a bigger impact on how positive this all is than you. I’m not taking anything away from you at all. I’m just saying, people might have legitimate concerns about buying and selling assets.
Jill DeWit:
Are you saying I have a big head, Steven?
Jack Butala:
No. I’m not saying anything bad about you. This is more for the listeners than about you and I at all. That’s all.
Jill DeWit:
Thank you.
Jack Butala:
Join us in another episode where Jill and I discuss your all important success in property investment and in life. Really is fun to talk about the big picture stuff, isn’t it?
Jill DeWit:
Uh-huh. (affirmative) I think people get a lot out of that and I know I get a lot of those questions. I really do. People call in and they ask and they’re on the fence and we’re communicating like in Success Plant and stuff. What’s interesting is there’s people that get hung up on even taking that very first step. I know I want to do this. Why don’t you get educated on that?
Jack Butala:
Everybody’s got a hangup. Maybe we should be a little more proactive, Jill, and people being real honest up front, after they join us and they’re in a Success Plant and everything. List your hangups. Mine is paperwork.
Jill DeWit:
We do talk about that. At least we do with our members. We talk about figure out what your weakness is and then sub that out or get a partner that can handle that part. Like you and I.
Jack Butala:
Right. You know what I should do is I could make a checklist. I could make a list of the nineteen things that it possibly could be. I see a lot of really new members. They’re very concerned about not knowing enough about the asset to explain it to a buyer, and boy I don’t have that hangup.
Jill DeWit:
Isn’t that funny?
Jack Butala:
I understand that. They’re being very thorough about everything else. They want to be thorough about the actual assets. I’ve always said this a million times. This is not so much about that piece of property, whether it’s a house or any other type of land or whatever. That is really secondary. It’s all about the transaction that you’re doing and the person that you’re doing it with. Jill, you fill that blank.
Jill DeWit:
Thanks.
Jack Butala:
You make that person feel great.
Jill DeWit:
I think what people sometimes get hung up on is they don’t realize it’s okay to say, I don’t know, I’ll find out. I have no trouble saying that.
Jack Butala:
My take on an actual asset is if that’s a big hangup for you then maybe you’re just a natural wholesaler, so you surround yourself with people who are real smart about packaging things up and sending it to people like rehabers or the end user. If you just want to do the deal quick, get out of there, make some good money, and get on to the next thing, because you’re really good at locating property, like I think that’s my real strong point. I’m not a big sales. That’s what ends up happening. We wholesale it. [crosstalk 00:22:24] houses and land and the whole thing.
Jill DeWit:
Exactly.
Jack Butala:
It’s just faster. It’s lower profit margins and faster.
Jill DeWit:
Good advice.
Jack Butala:
Let’s go buy some of that property.
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