Collecting Payments for Land Sold for Years
Jack Butala: Collecting Payments for Land Sold for Years. Leave us your feedback for this podcast on iTunes and get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.
Jack: Jack Butala with Jill DeWitt.
Jack: Welcome to our show today. In this episode Jill and I talk about collecting payments for land sold for years. What does it mean? How to collect payments for land that you sell for years and years and years. Awesome show today. First let’s take a question posted by one of our members on LandAcademy.com, our online community. It’s free.
Jill: Cool. Matt asked, “I’m looking at optioning a property in Texas and just found that it has a warranty deed with a vendor’s lien. Can you help me out with what this means exactly?”
Jack: Sure. You want to take it?
Jill: Go ahead.
Jack: If there’s a filed recorded lien against a property in our niche here at this asset type, really in any niche, it’s extremely rare to find a rural piece of land with no mortgage on it with a vendor’s lien. Sometimes it’s a vendor’s lien. Sometimes it’s a mechanic’s lien. What I would do … The short answer is this and I’ll give a long answer then. I would run away from this deal.
Jack: What it means is that a vendor probably did some work to the property, maybe started building a house, maybe poured a foundation. You name it, [inaudible 00:01:17] road, and he didn’t get paid. The guy who owns the property, he didn’t pay him, so he filed a lien against it, a contractor’s lien it’s called sometimes. In Arizona it’s called a mechanic’s lien, even if it is a contractor, which is a little misleading. You do not want to buy a property that has liens on it. We should talk about that more.
Jill: I just thought of another important point on this. If you don’t have … The data that we use, we use that data because I can put in there an improved percentage of zero or null. One thing I want to say, Matt, is I’m wondering if where you’re getting your data you don’t have that option because, trust me, we know this. There’s a lot of data out there that you don’t have that option. You might accidentally come across things like this that we don’t because I’m able to put that in there. There might be a structure on there, and so it has a little bit of an improvement value on it, and you weren’t able to clear that out. Does that make any sense?
Jack: No, it completely makes sense. In fact, it’s a great point. This is why I’ve never seen it probably. You’re actually answering it for me. We don’t see this almost ever. In fact, I’ve never seen it because we smoke that out through the data way. They’d never get a letter from us if there’s no improvements on it. Theoretically, it’s possible that you could send a … The approved value is zero because the structure never got completed or he never pulled a permit or a bunch of reasons, but Jill is right. The way that we send letters out, offers out, people with no mortgages get the property at no improvement value.
Jack: That smokes like most of the problems out.
Jill: Right because the last thing you want to be doing is sending offers to these people. How many offers may you have accidentally sent that might have things like this? This is a whole extra bit of work that you have to do that we don’t deal with.
Jack: As far as liens go we get this question a lot. I think this is the bigger question here. How do you check to see if a property has liens? We stopped doing that years ago because it’s expensive and time consuming. On all the deals we’ve done, we’ve never had a lien issue. If your [inaudible 00:03:40] on it, you really want to do it. Just check Google or get title insurance. I think Title Pro 24/7, which is a product that is in our Land Academy membership bundle of tools, has a lien piece to it. In fact, I know it does.
Jill: Right. If there’s a lien against this, I really think that there’s some kind of improvement on it, even just a slab or something. That’s where it’s popping up.
Jack: That’s a good question.
Jill: If you’re looking for that kind of property, okay, but you need to … Yeah, that’s not our number one thing. It’s not in our niche.
Jack: Hey, the first thing you want to do, too, is ask the seller about it. What the heck is this?
Jill: What is this exactly?
Jack: They’ll tell you. If you have a question or you want to be on the show, reach out to either one of us on LandAcademy.com. Today’s topic, this is new to the show, collecting payments for land sold for years and years and years. Jill, break it down for us.
Jill: This is what you really want to do.
Jack: This is why we’re here.
Jill: Exactly. Sure it’s great to buy it and flip it for cash, but you’ve got to keep doing that over and over and over and over again every month to make whatever income and money you want to do. We prefer to buy properties, flip them for cash, have this healthy acquisition fund, so now I can go out and get more and more of the properties that I want to just have in my inventory for years with payments coming in.
Jill: That’s really the goal here. You want to be able to wake up tomorrow and know that payments are coming in. Maybe it’s 5,000 dollars a month. Maybe it’s 10,000 dollars a month, whatever it is. There are probably a lot of smaller transactions, too. You’re probably getting … The way we promote it and help people do it is go for the one hundred dollars a month, two hundred dollars a month, 250 a month. I mean, think about who your buyers are, what they can afford, and that’s really where it is. My buyers, I find a sweet spot. I can find a lot of people, which is [inaudible 00:05:55]. Maybe it’s around 200 dollars a month. All right, 10 of those, now I’ve got 2,000 a month. 100 of those, I’ve got 20,000 a month. That’s how it works. By the way, when you have 200 of those, sure it took you a couple years to get there. That’s okay, but if one or two stop paying, something happens, whatever, it’s not going to sink the ship. That’s okay. Now I’m down to 19,600 this month. Okay, I think I’m okay or whatever it is.
Jack: This is not a new business model. As far as shows go, this might be a little more on the basic side for us, but it’s really, really worth getting down to the level where everyone understands because it’s so important. Let me describe the business model in some other industries and it’ll completely make sense. In the used car business it’s extremely abundant where you walk in and you say, “I’d like to buy a car.” They say, “Great, that section over there. Those are 99 dollars down, 99 dollars a month.” Where did the guy get his inventory, the dealer? He got it from either an auction or some other source. He probably paid 1,000, 1,500 dollars for it, and the buyer is going to pay 100 dollars a month. He accumulates a ton of those. At some point, break point month, it starts paying for itself. He’s got so much money coming in, he’s paying all his bills, and he’s got enough money to go buy new cars perpetuated.
Jack: We have a customer, getting back to real estate, he begs us for property that’s adjacent to a freeway. I mean a freeway, freeway, like I 10 and I 17, I 95 on the east coast. I’m sorry, I 75, I 95. He buys a property for cash from us and he puts a sign on there. He puts a billboard. It’s getting more difficult to do that because of wrecks. He then leases that billboard out to anybody, let’s say Walmart, and has an income stream forever. This guy has tons of these properties. This is our way of doing that. Software does it. If you have any Adobe products, you spend 25 dollars a month to use their software. They update it automatically for you. It used to be not long ago you’d have to go spend 1,000 dollars on an Adobe product and it’s out of date in a year.
Jack: Now you just pay 25 dollars. It’s called software as a service. If you ever say SaaS, software as a service, that’s a payment method.
Jack: The key takeaway from this is this. The buyer base for payments is infinitely larger than for cash.
Jill: I’ve had buyers with all kinds of income streams. I mean, think about it. There’s a lot of people out there that are struggling to pay 600, 800, even 1,000 dollars for rent. Maybe they’re on social security, whatever their financial situation is, and then the thought of … Because this is attainable for them. I can pay 200 dollars a month. I can own a piece of property in 6 years, and I can move my mobile there, which is, I don’t know, maybe I paid 10,000 or 15,000 for it, or something like that. Then I get to own it. There’s a lot of people out there, you’re fulfilling their dream and they can afford that.
Jack: That’s right. Mobile homes, you’ve heard Jill and I talk about it in the past. The properties that we sell overnight retail, not even wholesale, are zoned for mobiles. The country seems to be packed with people who just want to move a mobile onto a property that they own free and clear or that they’re making payments on and get off the grid. They have no bills, so I hope that’s super clear. What you want to do is pay a small amount of money for an asset that you can and then sell it on terms. People love it.
Jill: They do.
Jack: Hey, if they stop paying, and a lot of them do, you still own the asset in most cases.
Jill: That’s true.
Jack: Just reset the clock, just restarts again.
Jill: Yeah. In the majority of the states that we work, or all the states that we work with, you don’t have to record a deed or anything like that when you’re doing seller financing. The property still stays in your name. You have a contract with this person. That’s how they’re bound to make the payments and all that good stuff. Like Jeff just said, if anything happens and they fall off the planet, something crazy happens, you still own the asset. It’s still yours.
Jill: If you have multiple of those, like I was explaining, all those payments coming in, it’s not like you have one or two or three rental houses where like, shoot, now I’ve got to pay it. Gosh, the mortgage is due, and all that good stuff. A, you pay for it out right. It’s cash. You don’t owe any money on it. That’s okay. Then number two, you have 25 of them, so if one person falls off for a few months while you repost it and sell it and everything, it’s not going to sink the ship.
Jack: Exactly. We don’t talk too much about sales because we’re like an acquisition machine here and it’s just so easy to sell stuff. I’m glad we did this show. I mean, I’m glad we’re doing this show. You buy some asset for a thousand bucks, 1,500 bucks, and sell it forever and ever and ever.
Jill: Right. That’s the thing. It’s interesting when you get into this business. You just brought up about the mobile home [inaudible 00:11:21] zoning. Those parcels, there’s so many people out there that I didn’t even realize it until I got until this business, that those properties that we acquire that are zoned for temporary or modular or mobile, commercial type of uses, those go the fastest.
Jill: They really do. That’s what people want. This whole tiny house movement thing, anything with wheels. I say tiny house, but it’s really anything with wheels.
Jill: RVs, mobile homes, any kind of a camper situation that you can just roll right up on there. Hang out for thirty days or thirty months, whatever people want to do. Those really go the fastest and it’s great.
Jack: Join us in another episode where Jack and Jill discuss how to use information. That’s me
Jill: And inspiration, that’s me.
Jack: To get just about anything you want.
Jill: We use it every day to buy property for half of what it’s worth and sell it immediately.
Jack: You are not alone in your real estate ambition.
Jill: You are not alone in your collecting payment ambition.
Jack: In your payment collection ambition.
Jack: That’s awesome
Jill: You’re not alone.
Jack: We’ve have properties, I’ve got properties that 30 … Like a full mortgage, 30 years of payments.
Jill: I have a funny one. I love this one. There was a guy that was totally testing our model. He bought a property from us off eBay years ago because he’s in this business and he’s like, okay, what’s this all about. By the time he was done, he was in for like … It was a quarter acre. I think it was a quarter acre property and he paid about 350 bucks for it all in. What did he do? He turned around, sold it to a woman for 50 dollars a month for two years. She thought she won. Think about this. 50 dollars a month, so 1200 dollars and he paid 350. He’s like, all right, I get it. It was just a simple little test. He’s like I see how that works. Yeah. What was even funnier too, if I remember correctly, I think the down payment was like 350 or something. He got the money back right then, so the 50 dollars for two years was just nothing. It was just like gravy is really how it goes.
Jack: I’ve done a specific 50 dollar test on assets that you paid less than 500 dollars for. If you get the right buyer it’s great. Almost anyone can afford 50 bucks to own real estate. That’s awesome, but the [inaudible 00:13:55] rate is a little bit higher just because I think whenever life circumstances happen it’s just easier for people to blow off 50 dollars.
Jill: Not if you have them on auto pay like I do.
Jack: I mean you’re better at that, way better at that than I am. The 50 dollar model really, really works. That’s my point.
Jill: That’s true. 50 bucks, 100 bucks, 150, a lot of people they don’t even think about it when it comes out of their account. When you get the 200 and over 200, now they’ve got to think about it and they almost sometimes have to budget for it, but those are great. I love them.
Jack: Information and inspiration to buy under valued property.
If you have any questions or comments, please feel free to email me directly at jack@LandAcademy.com.
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