Real Estates Highest and Best Use. Sometimes its Land (CFFL 0193)
Real Estates Highest and Best Use. Sometimes its Land
Jack Butala: Real Estates Highest and Best Use. Sometimes its Land. 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, Jack Butala for Land Academy. Welcome to our Cash Flow From Land show. We show you how to buy property for half of what it’s worth and resell it the very next day. Great information and instruction from Jack, that’s me.
Jill DeWit:
And inspiration from Jill, that’s me.
Jack Butala:
In this episode, Jill and I talk about real estate highest and best use. Hey sometimes, it’s actually land, so great show today. Before we start, here’s some funny stuff that happened to us recently. Jill, I can’t believe the apartment deal you just cut in Los Angeles for us. It’s half a block from the ocean.
Jill DeWit:
I know.
Jack Butala:
I just think this is how you roll. Tell us about it. Tell us … How did you do this? It’s half price.
Jill DeWit:
It’s called the inside, inside tract.
Jack Butala:
We’re all about half price here in our world here, but Jill makes no exception … Just tell us about the deal.
Jill DeWit:
Vacation deals, housing deals, dream it up. That’s what’s so funny. I can’t wait for the world to see where we’re going with this. You and I are consistently proving you can have any, almost anything you want for half price if you just reach out to enough people.
Jack Butala:
Just work the system.
Jill DeWit:
I know. This one was a little bit of that and a little of having the inside track. My best friend happens to live right by there, so that worked out great.
Jack Butala:
My first gut when we started to do this apartment thing … We’re going to go back and forth for a lot of reasons from Scottsdale to really it’s called South Bay, right?
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
My first gut was like, “How can I get some stuff in the mail to all the people who own …” You can’t … I’ve been saying this forever. It’s not database driven. If it was database driven, it would have been fine.
Jill DeWit:
Right. Well, remember we talked about that. It was like, “Okay, if the average price around here is one-point-two, okay, do I send offers for eight hundred thousand dollars and see what comes back? I’ll close tomorrow.”
Jack Butala:
We have members doing that. I mean, to buy a place would be easy.
Jill DeWit:
Right, exactly.
Jack Butala:
You could get it for pretty close to half … If your sample is large enough.
Jill DeWit:
Exactly.
Jack Butala:
For rent, I mean, you can’t. You just can’t. It’s not database driven. What do I mean by that? You can’t get a good list of people who have stuff for rent because there’s guest houses. That community is very unique. It’s not just send a letter to all the apartment buildings.
Jill DeWit:
That’s true. You have to isolate like I did with the vacation thing that time … That we were right on the beach, on the strand. Yeah … I isolated the group and did a little more work. I narrowed it down to ten … I got one.
Jack Butala:
Three bedrooms, second floor …
Jill DeWit:
Two stories.
Jack Butala:
Two stories, tiny little community. I don’t know if it has-
Jill DeWit:
Big old loft.
Jack Butala:
Ten units. It’s got caged underground parking and storage.
Jill DeWit:
Yeah.
Jack Butala:
Yeah, a three bedroom … Effectively, three bedrooms.
Jill DeWit:
Exactly. Huge, high ceilings …
Jack Butala:
I’m not going to tell you what the rent is because everybody’s … Let me tell you this. It’s close to what half of market rent is for a like kind, for that square footage. Nobody gets two thousand square feet [crosstalk 00:03:15] … If you live at a huge house in Tennessee or something like that, that might sound crazy to you, but two thousand feet in a beach community is unbelievable with all those amenities.
Jill DeWit:
Exactly. Well, what’s funny is too … Shucks.
Jack Butala:
I thought it was going to be two hundred feet and I was ready to go.
Jill DeWit:
Yeah, exactly. I was looking at those. I was like, “Hey, that’s okay.” We had a two bedroom out there before that was eight hundred square feet. We’re like, “Yay.” That’s kind of funny. You’re just going, “All right. We can make this work.” Shoot, I lost that.
Jack Butala:
Hey before we get started, Jill, let’s take a question posted by one of our members in Success Plan, our online free community.
Jill DeWit:
Okay. Jermaine wrote, “All right. We closed on our best seller finance deal last week. Here are the numbers. I purchased this property in April. It was a one-point-seven-six acre property. Purchase price? Six hundred and sixty-three dollars. Title report? A hundred and twenty six dollars.”
Jack Butala:
He pulled the title report.
Jill DeWit:
Nice. “Notary? A hundred and sixty dollars. Total purchase price: Nine hundred and forty nine dollars.”
Jack Butala:
A thousand bucks.
Jill DeWit:
Right. “Seller finance price? Six thousand dollars. Down payment? Five hundred dollars.” He’s already got half of his investment back in the down payment, by the way.
Jack Butala:
Oh, it works.
Jill DeWit:
Yeah, plus a hundred and fourteen dollars rent.
Jack Butala:
Isn’t that funny? First month rent.
Jill DeWit:
The first month rent, so they paid the five hundred dollars … They got six hundred dollars back already on there.
Jack Butala:
I don’t know why, but I love that he’s using the word “rent” in this deal.
Jill DeWit:
Yeah. I love it. It’s so cute. “We received sixty-four percent” – I love the numbers – “of our money back on the down payment. If the buyer goes through with the entire seller finance agreement, the ROI is six hundred and twenty-one percent. Working hard so we can bring more deals like this weekly.”
Jack Butala:
See?
Jill DeWit:
I love it.
Jack Butala:
There’s no question here … I’ve copied and pasted this right out of Success Plan.
Jill DeWit:
You just wanted to share that.
Jack Butala:
Six hundred percent ROI and he’s brand new at this.
Jill DeWit:
Do you know what’s so funny? See, this is the problem … I have a question. How do you keep people from getting greedy? It’s hard … You got to reel it back in sometimes, folks, and know that this is not going always go … This way, you might have two hundred percent. Last time I checked, that’s okay, but this is awesome.
Jack Butala:
Two hundred percent? Well, two hundred percent on a flip, but terms deals like this are not … That’s not uncommon at all. Actually, six hundred percent is kind of low in my opinion.
Jill DeWit:
Isn’t it great? You know what? Here’s the thing … The buyer is thrilled because look what they’re getting. They put six hundred dollars down and then pay a hundred dollars a month for awhile and they get to own that property … They probably didn’t know that that was possible and they are just so darn excited.
Jack Butala:
This is clearly somebody who took our instructions seriously, took our suggestions and instructions seriously, and made it work … Jermaine, I’m proud of you.
Jill DeWit:
Yep.
Jack Butala:
Hey, if you have a question or you want to be on the show, call 800-725-8816. Please don’t be boring. Today’s topic: Real Estate Highest and Best Use. Hey sometimes, it’s land. Jill, you know what highest and best use is?
Jill DeWit:
I do.
Jack Butala:
Go ahead and explain it for all of us.
Jill DeWit:
Well, in the Jill terms …
Jack Butala:
That’s why I want to hear it.
Jill DeWit:
That’s why you want to know.
Jack Butala:
That’s why I love to hear it because … I’m not going to say why … You tend to make everything interesting.
Jill DeWit:
Okay. In Jill’s way of explaining highest and best use, say you have a parcel of land, an [info lot 00:06:53] in Manhattan, New York for example. The highest and best use might not be a parking garage, it might not be a grocery store, it might not be a hospital. It might be apartments. I mean basically in my terms, it’s running numbers and finding out … How you’re going to get the most profit out of that piece of property. That’s how I describe it. Now you’re going to tell me I’m all wrong.
Jack Butala:
No … In your little world of awesome Disneyland and whatever, I mean this totally with respect, that is absolutely one way you could define it.
Jill DeWit:
Okay.
Jack Butala:
In a real estate developer’s world, and both are super important here so I’m not discounting it, but the technical term “highest and best use” is a term that developers typically use. You know how … We’re all getting up in the morning and looking at deals because we sent out mail, it’s all coming back. We got some good deal flow.
What a developer does is he looks around much in the same way that we do for the best property that he can find and then change its use. Imagine this … You’re driving down the street of a large city and you see twenty-two skyscrapers in a row and then you see a silly little church … The church is not … That’s not the highest and best use for that piece of land.
Jill DeWit:
Right.
Jack Butala:
The highest and best use might be an apartment building, another skyscraper, probably a gas station even, but not a church … This is a slightly technical show and I’m trying not to be boring. That’s why I asked you because I love your answer. Sometimes the highest and best use for property is land. In our business when we’re purchasing and selling these properties and not making any improvements, which I just love … You’re not improving it, you’re just … You’re making up for the fact that you’re doing no improvements by the fact that you bought a piece of property for an awesome price. The highest and best use for the vast majority of our members and what we do is already done for us. We don’t have to do anything.
Jill DeWit:
Exactly.
Jack Butala:
That’s my point to this whole thing.
Jill DeWit:
I love it.
Jack Butala:
That’s the meat of the show.
Jill DeWit:
I love it … What about, I don’t know, people who use it for farming or things like that-
Jack Butala:
Mm-hmm (affirmative). [crosstalk 00:09:11].
Jill DeWit:
Okay.
Jack Butala:
Farming’s a great example. I believe that most farmland … That is the highest and best use.
Jill DeWit:
Thank you.
Jack Butala:
Yeah … That’s a great example, Jill. A lot of times you’ll see a farmer. This day and age … They’ll cut up their property. They’ll take … Let’s say it’s a huge farm and they’ve got some road frontage as typically and then part of the property is their house that they’ve lived in for a long time or maybe even their parents or grandparents lived in.
The highest and best use for the road frontage property is not farming. You see a lot of them sell that off or land lease it off to a developer who puts on maybe a subdivision or whatever. In the back, they’re still farming away. They’re going to … Leave it to the kids kind of thing, so yeah … Farmland … That’s a perfect example of highest and best use. Great work.
Jill DeWit:
You know what’s interesting about that? I mean, we’ve all seen this happen and how it changed … Coming from Orange County, I can’t tell you how many things that I’ve seen, how many properties that used to be orange groves and strawberry fields where I grew up that are now housing developments and gas stations and grocery stores. Even one of them became a huge Kaiser Permanente medical facility. Talk about there’s your highest and best use. At one time, it was. It changes, too. I guess that’s my point is what is highest and best use right now could change.
Jack Butala:
Absolutely.
Jill DeWit:
Back then, the highest and best use was a strawberry field in Garden Grove. Now it’s a Kaiser Permanente complex … It changes. Like you just said, they came in and … They isolated that and they changed the use.
Jack Butala:
Right. One of the ways that I go to work is … Up Scottsdale Road, up North Scottsdale Road to our office. It’s, like, three miles away from where we live … Half the time. The other time it’s on a beach, but … Thanks to Jill. Anyway, there’s a huge sign up right on this little … Tiny little garden office building complex building that says, “Redevelopment Opportunity”. That’s exactly what you just said … The best use for that property for a lot of years was that little office community, but it’s not anymore. It’s condos. It says “Redevelopment Opportunity for Condos”. I think the owners might have even put in a zoning change. Anyway, well said.
Jill DeWit:
Thank you.
Jack Butala:
Hey, this is the meat of the show … I’m sorry. This is the technical ten of the show. I’m getting behind myself typically. Ten minutes of property investment advice from our fifteen year, fifteen thousand deal … Fifteen thousand plus deal history and experience. Here is my technical advice. It’s not going to take you even ten minutes because we’re getting these questions a lot. You don’t have to improve this product type.
Jill DeWit:
Right.
Jack Butala:
You only have to buy it right. Buy it right, buy it right, buy it right and sell it for twice as much. If you’re very, very good at it and experienced and you stay like many of our top five, ten members are right now, you just stay the course and plow through. If you’re not getting the offers back that you think you should get back … I haven’t heard of that yet … Don’t scratch your head and change your whole thing, just get some more mail out there. If you have a question or you want to be on the show, call 800-725-8816. Jill, do we have some inspiration today?
Jill DeWit:
Sometimes there is no secret. It’s just hard work.
Jack Butala:
Oh. Oh my gosh.
Jill DeWit:
You know where I got that?
Jack Butala:
Go ahead. For me, I have a Buddha quote.
Jill DeWit:
Oh, you have a Buddha quote? Well, here’s my thing. I was reading … We’re in a Facebook group … We were making jokes about a secret county and one guy piped in and said, “Hey, here’s a list of the secret counties.” He cut and paste the link to every single county in the United States.
Jack Butala:
I saw that.
Jill DeWit:
I thought that was awesome. Yeah, here’s your secret county, which is true …
Jack Butala:
He said … Quote of the month: “There’s no such thing as a secret county”, which … I think he took from one of our shows, right?
Jill DeWit:
Maybe.
Jack Butala:
He did.
Jill DeWit:
I wrote, “Amen” to that one. He’s all like, “You’re so right.” My point is that … Sometimes there’s really no secret … It’s just hard work … It’s not necessarily hard, you just got to stay the course-
Jack Butala:
And organize.
Jill DeWit:
Organize and be motivated … No matter what you’re doing, there’s so many things in life that … There’s no secret. You just have to go do it and follow through.
Jack Butala:
I love it … No, there’s a famous Buddha saying. Buddhists believe that, if that’s your religion, you try to get to enlightenment. It doesn’t happen in one lifetime, it happens in several. Buddha said, theoretically he said, “Before enlightenment, you haul water and chop wood and after enlightenment, guess what? You haul water and chop wood.” Just because you met all your goals and all that stuff, there’s still a lot of hard work involved in everything.
Jill DeWit:
I cannot believe you have that phrase tucked back in there somewhere.
Jack Butala:
Why?
Jill DeWit:
Why? That is so doesn’t … You know, Jack?
Jack Butala:
Here it comes.
Jill DeWit:
Of all the things, the phrases you have shared with me and us over the months and years, I didn’t know that was tucked back in there.
Jack Butala:
I have the most … The dumbest stuff ever is tucked in my head.
Jill DeWit:
I am … Wow.
Jack Butala:
That was actually not a bad quote, but-
Jill DeWit:
That was a fantastic quote.
Jack Butala:
There’s some super, super dumb stuff up there, trust me.
Jill DeWit:
Wow. That’s really good. I don’t think you got that from “Family Guy”. Oh my gosh … That’s very good.
Jack Butala:
You know what I noticed on “Family Guy” lately that they’re putting? Well, I think that’s the funniest show there ever was, but it’s not for women at all. Lately they’ve been sitting there … They interject these little things during the show like, “Why is my girlfriend sitting there angry because I’m watching ‘Family Guy’?”
Jill DeWit:
Oh, they do that?
Jack Butala:
Yeah. All the time.
Jill DeWit:
That’s awesome … Oh, that’s hilarious.
Jack Butala:
I could have a whole podcast, not just an episode, on “Family Guy”.
Jill DeWit:
On “Family Guy”? Do I have to show up for that one?
Jack Butala:
No, not at all.
Jill DeWit:
Okay, because I won’t get it. No, I will. I mean, it’s just not for me. It’s okay.
Jack Butala:
Hey, join us on another episode where Jack and Jill discuss how to use information, that’s me.
Jill DeWit:
And inspiration, that’s me.
Jack Butala:
To get just about anything you want.
Jill DeWit:
We use it every day to buy property for half of what it’s worth and sell it immediately.
Jack Butala:
Get there first.
Jill DeWit:
That was really good … I can’t believe you haven’t shared that with me. What else you got?
Jack Butala:
It’s not like a list.
Jill DeWit:
That’s very interesting.
Jack Butala:
It’s all event driven and reactionary.
Jill DeWit:
How far deep, dark, back, buried are quotes like that?
Jack Butala:
It’s not just me. I think a lot of people have that. You have it.
Jill DeWit:
Yeah, but it’s more … I use it more daily, I guess. I don’t know … That just surprised me. I’m very impressed, Jack. I think that was cool.
Jack Butala:
When we get interviewed on other people’s podcasts, one of the favorite questions I ask, I don’t know why … I do know why. It’s, “Give us a book that you love to read and that’s inspirational.” Why is that? Why do they ask that question?
Jill DeWit:
I don’t know and I don’t like that question.
Jack Butala:
Well, Siddhartha … There’s a book by last name is [Hes-say 00:16:57], I don’t know their first name, which is the story of Buddha and the religion, but it’s brought down into almost like a childhood fable … You could read it to your young child. That’s always been on my list … I go back honestly and read that once in awhile just to read it.
Jill DeWit:
Got it. You know what one of my favorite books was?
Jack Butala:
Mm-mmm (negative).
Jill DeWit:
“Jurassic Park”. I’m serious.
Jack Butala:
I thought you were going to say something like “A Very Hungry Caterpillar” or something.
Jill DeWit:
Oh, okay. Yeah, that’s you. That and “Goodnight Moon”. No, you want to know what my runaway childhood … Okay, all right. Hey, let’s do this.
Jack Butala:
All right, let’s do this … Once and for all, so we don’t have to answer the questions anymore on other people’s [shows 00:17:41].
Jill DeWit:
No, I want a childhood book. Give me one of your … I have probably two that I loved as a kid.
Jack Butala:
You mean teen years?
Jill DeWit:
No, like a kid.
Jack Butala:
Oh, like a little kid.
Jill DeWit:
Like a Dr. Seuss age. Do you want to hear my two?
Jack Butala:
Yes.
Jill DeWit:
You can know where I’m going with that? Okay. I have two. One, because I just love, I can still hear my mom reading it to me. It was one of my favorite books. It was “The Poky Little Puppy” because I thought that was really cool. My all-time childhood favorite book is “Where the Wild Things Are”.
Jack Butala:
Oh, yeah … They made a movie out of that and they destroyed it.
Jill DeWit:
I didn’t see the movie. I refuse to see the movie because it can’t be as good as the book.
Jack Butala:
At that age, I was busy engaging in … What now is considered criminal activity.
Jill DeWit:
Oh, no.
Jack Butala:
Building bombs and stuff. These kids today, they can’t do anything. They can’t build a bomb, you know?
Jill DeWit:
That’s funny.
Jack Butala:
My son came home recently and said several people in – He’s in middle school – a grade higher than he is got expelled … My first action was, “Okay …” My first question was, “What does expelled mean to you?” He said they got kicked out of school forever and they can’t come back. I said, “Well, what the heck did they do?”
Jill DeWit:
What’d they do?
Jack Butala:
They were vaping. They were smoking this vape thing.
Jill DeWit:
Oh.
Jack Butala:
I’m not so sure …
Jill DeWit:
It’s a one strike and you’re out?
Jack Butala:
Yeah.
Jill DeWit:
I’m not a fan of one strike and you’re out.
Jack Butala:
Jill, I’m not, either. I’m right standing next to you on this.
Jill DeWit:
Shucks. I mean, they’re still kids. I mean, yeah, it was a stupid decision.
Jack Butala:
Part of me is like, “Yeah, you should never smoke ever”, but …
Jill DeWit:
I’m sure all of our decisions of that age were all right on.
Jack Butala:
That’s my point. That pipe bomb that I brought to school in third grade in Detroit was … They laughed about it. Everyone laughed about it. “Just take that outside”, that kind of thing.
Jill DeWit:
“We’re calling your dad.”
Jack Butala:
No, they didn’t even … They were just, “Just take that outside and leave it out there until recess.”
Jill DeWit:
Oh my gosh. Yeah. Oh, that’s too bad … Okay. I didn’t get your book. Did you give me your book?
Jack Butala:
I don’t, honestly.
Jill DeWit:
You avoided the book.
Jack Butala:
I just don’t … Nothing comes to mind … At that small of an age, I was not a reader.
Jill DeWit:
Okay.
Jack Butala:
Honestly, it was math and stuff. I was doing math on napkins. Is that weird?
Jill DeWit:
I’ll let you out of it now.
Jack Butala:
Thank you.
Jill DeWit:
Okay. Jack and Jill, information and inspiration.
Jack Butala:
Let’s go buy some property for half price.
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