Choosing the Good Bad Areas to Buy Land (CFFL 331)

Choosing the Good Bad Areas to Buy Land

Jack Butala: Choosing the Good Bad Areas to Buy Land. 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 Butala: Jack Butala with Jill DeWit.

Jill DeWit: Hello.

Jack Butala: Welcome to our show today. In this episode Jill and I talk about choosing the good or the bad areas to buy land. It’s a topic that comes up all the time. Where do I start? Which area do I choose? Good show today, Jill. First let’s take a question posted by one of our members on landacademy.com online community. It’s free.

Jill DeWit: Cool. Richard asks, “How seriously should I consider total tax delinquencies when selecting a county?” Good question.

Jack Butala: Great question; it’s actually right on topic with our topic today. What Richard’s probably referring to is a three step process that we go through to choose an area to send offers to. Number one, you pull the population density census maps and you try to find the most rural area that’s relatively close to an urban area. In California, like out of Los Angeles it gets very, very rural just to the east of LA county. That’s step one.

Step two is take a look at, and this is what his question is, if there’s any tax delinquent property in that county, we use [etaxellists.com 00:01:13] and there’s lots of places you can go for free to review that information. If there’s lots of delinquent tax property that might be an indication that there’s a lot of unwanted property there. If you send a bunch of really low dollar amount offers, they’re going to be responded to well. Then number three is to check the pricing on Land Watch and Land and Farm and certain areas, just to see how the properties are selling for. You want to come in way lower than what you think you could sell it for wholesale. It’s a three step process.

To answer his question directly, it’s not that important. In fact, Jill and I right now at this level in our career, we don’t check at all. We purchase and sell pretty high dollar properties, large acreage high dollar properties and I stopped checking the county delinquency scenario quite some time ago. If you’re starting out and you’re doing the low dollar thing, and you should be. This is the right way to start before you get into bigger deals, you really need to check. Is that clear?

Jill DeWit: Thank you.

Jack Butala: Am I talking out of both sides of my mouth?

Jill DeWit: No, it’s kind of funny. Thank you, you got an A for share your presentation today. Just kidding. Thank you Mr. Butala you can take a seat now. Next? I’m just kidding.

Jack Butala: Was it that stiff? Oh my gosh

Jill DeWit: No, no. It was a little bit like you got up in front of the classroom and gave a presentation. I didn’t know what to say. I just was kind of listening.

Jack Butala: It’s a Monday thing, I guess.

Jill DeWit: I know, you’re just like focusing.

Jack Butala: Let’s try it again.

Jill DeWit: Then you’re looking at me like a teacher, like, “Did I miss anything?” No, you did great.

Jack Butala: Let’s try it again. I’ll answer it Jill’s way. Ready?

Jill DeWit: Oh no, ready.

Jack Butala: Hey Richard, check the taxes if you want, but it doesn’t matter that much.

Jill DeWit: Yeah. Here’s my answer. Richard, why are we focusing on just that? Think about this. Yeah, like you said Jack, you want to look at the area as a whole and consider that/however, send everybody an offer, don’t just send those guys an offer.

Jack Butala: That’s not what his question is. His question is, there’s three steps in the whole thing. His question is, how much do I seriously consider the second step? The answer is not that much.

Jill DeWit: It’s not going to be …

Jack Butala: Here’s the thick of it, and this is now we’re getting into the topic. This works everywhere. We’ve tested it. It works on apartment buildings, it works on houses, land, all types of real estate. Works on long term care facilities, which is how I developed this whole program in the very early ’90s. It works with all types of real estate in all areas. For land, when you’re just starting out and you want to buy a property for $1,000 or $2,000 and sell it for $4,000 or $5,000 you really need to … Checking the tax delinquencies, that’s very important I think.

Jill DeWit: Yep. Hey, you know what? We should bring that up more often. I think that’s really good, talking about how you came up with this idea, with the nursing home facilities.

Jack Butala: We could make the whole show about that.

Jill DeWit: We should do that at some point. That’s super interesting, and talk about a different product type. Someone thinks it’s a really different product type, but it in the end it’s not. It all works.

Jack Butala: I’m going to write this down right now. How we got started.

Jill DeWit: Thank you, I love it.

Jack Butala: How we got started. 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 is choosing the good or the bad areas to buy land, and we just alluded to it a little bit in the question before. This is the meat of the show. Go ahead Jill, take it away. Since I’m Mr. Stiff today.

Jill DeWit: No. Is it my turn, teacher? Can I stand up now?

Jack Butala: Let’s just start this. You don’t really choose the areas, do you? I do.

Jill DeWit: You are the best, hands down. Yeah, this is true. In our world that’s always been your role in our business. You choose the areas, I handle it all when they start coming back. Yeah, that’s your thing. I wrote down three notes if you want me to touch on …

Jack Butala: Yes, yeah. I have a bunch of stuff to say too, but yes, I want to hear your stuff.

Jill DeWit: Here are my three notes that I made about the good/bad areas. One is, some really are bad. People say, “Oh, you say they’re all good, right? Just for the right price?” No, no. No, there really are some that are bad.

Jack Butala: Hilarious, I want to hear this, because I don’t think so. I just think you adjust your price, but go ahead.

Jill DeWit: No, no. There are some that we really don’t like. People go, “Oh come on, you just buy them all for different price.” No, I don’t want something that’s … People have tried to give me property and I politely turned it away.

Jack Butala: Oh yeah.

Jill DeWit: Yes.

Jack Butala: I see what you’re saying. There’s bad property, for sure. There’s not bad areas, I don’t think. It’s all pricing. Go ahead.

Jill DeWit: That was what I was trying to say is that, I don’t take everything that comes my way.

Jack Butala: I’m disagreeing with everything you’re saying, you’re not even noticing.

Jill DeWit: A lot.

Jack Butala: Go ahead.

Jill DeWit: You try to shut up. No, just kidding. [crosstalk 00:06:34]

Jack Butala: [crosstalk 00:06:35] Marital argument on the show.

Jill DeWit: Oh, no. Great way to start off a Monday. No. Some properties are bad. Maybe not areas are bad, you’re right, but some properties within areas are bad. Let’s talk about an overall area. This is something I tell people all the time. Don’t let your personal preference dictate a good area or a bad area. People do this, “That’s so far out there. That whole West Texas, there’s nothing there. Gosh, who would drive that far north in the country, it’s so cold up there. Who would do that?”

Jack Butala: I hear that every week, I hear that.

Jill DeWit: Right?

Jack Butala: Every week for my whole career I’ve heard that.

Jill DeWit: Right. People put their own personal whatever on it, and I’m telling people constantly, “Don’t let that sway you because there are a lot of people that like that area, the people that want that rural. It’s not a bad area.” People want to drive far or people want to be in the hills, or whatever it is. My third note is, once you’re past all that and you have some property that, gosh, you’re not sure about the area or whatever it is. It is really rural or it’s right next to, I don’t know, whatever. It’s hard to get to or the terrain’s kind of rough. Maybe it doesn’t have a lot of trees, maybe it has too many trees. Properly advertise what it is, that’s my thing. Make sure you say, “Hey, you’re going to need GPS coordinates to find this,” or, “there’s not a lot of people out here,” or whatever it is. Those are my things, Jack.

Jack Butala: I mean, really what this show is about is you choose it based on data. You don’t choose that on trees or any of that.

Jill DeWit: People look at them differently, right.

Jack Butala: Depending on where you’re coming from, there’s a few people in our group that have taken … For instance, we have a member in our group, I’ve learned so much. I swear, I learn more from our Land Academy members than they learn from us. There is a member in our group, she only sends mailers out to places that she’s vacationed and liked. That’s her criteria, and she’s killing it. That’s cuckoo, I think, but she makes it work. The way that we choose it, the good areas that we choose, it’s all based on data. Like, right now we’re working on some pretty pricey counties in California, and they’re not areas that I have considered in my career, but we’re getting high dollar ranch requests from certain people, so we’re out there buying because we already have a buyer now. We have buyers. We’re going to go buy some under value property and we’re filming the whole thing.

Here’s the thing. This works everywhere in every single county in this country. I know it sounds like a sales pitch, but it does. What’s the variable is, is not whether it’s a good or bad area. The variable is how you price it. What we found over the years is that when people that are new getting into this business, they want it to be as cheap as possible. People that are buyers, they’re new land buyers, they want to buy it as cheap as possible. We gravitate toward those $100 an acre, I call them $100 an acre west of the Mississippi counties. Does it work in Northern Michigan to buy vacation properties? Heck yes. Does it work in Los Angeles county to buy houses? Heck yes. You’re going to spend $1 million to buy a house that you’re going to sell for $1.2. There’s no bad areas. Let’s leave it at that. There’s just some other considerations to take.

Jill DeWit: Thank you.

Jack Butala: What else you want to talk about today?

Jill DeWit: We’re done. Just kidding. Choosing the good and bad areas, I’m trying to think. I feel like there’s some other questions people have asked. It’s like you said, you’ve got to look at it on a spreadsheet. That’s really, I think, the key. Don’t get hung up on the area. To really branch out …

Jack Butala: If I were listening to this show, I would just ask these questions. All right, smarty, you guys obviously have this figured out. That’s still not answering my question. I’m ready to mail a county, what do I do? How do I know it’s going to work? First of all, this. I have never mailed a county and struck out where I never got any responses and it was just crickets. That never happens. What you want to do is spend a tremendous amount of time, I talk about this in Bigger Pockets all the time. Long before you ever push the button on the bulk mail button to get it out in the mail, you want to price it properly.

Let’s say there’s a county right next to you wherever you live. Let’s say you live in, I’m just pulling it out of a hat, Montana or Indiana or Illinois. There’s a county next to you, it’s a little bit rural. Go, do a tremendous amount of pricing research on what properties are for sale for and completed sales. If you find that lots are selling for $1,000 an acre in Illinois, let’s say, one county over, it’s probably agriculture, that’s actually a pretty good number. Agriculture, I don’t know too much about it, but it ranges depending on what you are from $1,000 to $10,000 an acre. You want to be at about 40% of what you think the immediate value you can sell it for. If the going price is $10,000 you want to sell it for half of that, $5,000. Go in at around $2-3,000 an acre, and it will work. That’s the real answer.

Jill DeWit: Can I ask you a quick question?

Jack Butala: Yeah.

Jill DeWit: Will you please define for all of us, because you and I look at this differently. When you say tremendous amount of research, I look at it like, for you it’s like hours. I don’t want someone to spend weeks or months on it.

Jack Butala: Oh yeah, okay good, I’m glad you’re [crosstalk 00:12:52] that.

Jill DeWit: When you say tremendous, I want you to please clarify for people. Spend a Sunday afternoon …

Jack Butala: That’s right.

Jill DeWit: Look at this, that, this and that. Okay, thank you, because you say tremendous, some people might go, “Well I spent a month on it, because Jack said to.”

Jack Butala: No. I will. Here’s the steps. I’m so glad you asked that, because I’m sure that’s what people are asking in their heads. Either get the completed sales from the MLS if you know a real estate agent or you are a real estate agent, or other resources on the internet; there’s tons. Redfin is a fantastic resource. Real estate agents have IDX feeds to their sites, so you can sometimes see exactly what’s for sale just like they do. Not in the same amount of detail, but if you dig around, call the county, you can find completed sale information.

Take a look at what all the [lifetime 00:13:45] property recently, let’s say the last year, has sold for. The more rural you get the harder it is going to be to find comparison values that have sold and comparison values that are listed. Land Watch is the very first place that I go, only because there’s so many listings there. You’d be hard pressed to find any county in the country that doesn’t have a few postings there, like vacant land postings. Unfortunately they’re not land guys there, they’re just computer people, so they don’t have completed sales which I’ll never understand. Jill and I could do a whole show on why the people at Land Watch are dingbats. We won’t, we’re going to just use their information.

Jill DeWit: Yeah, we’re not even going to go there.

Jack Butala: I don’t think completed sales are on there, I haven’t checked. I usually look for the MLS. That’s it. You check completed sales and you price accordingly. Our whole model is, go in at about 20 to 40% of what the completed sales are. That’s cutting to the chase. Yeah, Jill, that’s a great point. Not in three weeks, and don’t go there. You don’t have to go there. It’s all math, you know? If you’re terrible at math, I mean awful at math and you hated it all the way through school, and you’re not married to somebody like me or you have a business partner like me, this probably isn’t for you. Jill’s going to kick me under the table.

Jill DeWit: Get a partner. No, that’s not bad. You do need to know how to do math, but that would be for any business.

Jack Butala: Yeah.

Jill DeWit: It’s very helpful if you can do math.

Jack Butala: If you own a drug store you should know math.

Jill DeWit: You kind of should. You own a dry cleaner, you should know math. I agree.

Jack Butala: Does that answer it?

Jill DeWit: Yeah, it does.

Jack Butala: She’s writing index cards and flashing crazy stuff. That’s awesome, thank you sweetheart.

Jill DeWit: You’re welcome.

Jack Butala: You’re the best. We’re good partners. All the stuff I don’t want to do you do, and vice versa I think.

Jill DeWit: That’s part. That’s true, you need to … Boy we are lucky. You know how to do math and I can’t say no. Whatever you need I’m like, “Okay, I’ll take care of it.”

Jack Butala: Here’s the summary. If you’re brand new at this, stick to the $100 an acre areas, maybe just for your first mailing. If you’ve done a few deals already and you want to use this program to buy some info lots one county over or vacation properties as we call it in the program, go for it. You’re not going to strike out. The way you’re going to strike is this, if you even could strike out, is not pricing it properly. You don’t try to buy property on the island of Manhattan for $500. You just don’t.

Jill DeWit: Both Manhattans.

Jack Butala: Yes.

Jill DeWit: [crosstalk 00:16:27] Another Manhattan.

Jack Butala: That’s the real point I’m trying to make. Join us in 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 everyday on flashcards to buy property for half of what it’s worth and sell it immediately.

Jack Butala: You are not alone in your real estate acquisitions. Good show, Jill.

Jill DeWit: Thank you. I’m going to put up another card and see what you think about this one.

Jack Butala: Oh my gosh. Can’t say that stuff on the air. It’s marital stuff.

Jill DeWit: Since we’re [inaudible 00:17:11] … Hey, we haven’t done this in this format.

Jack Butala: I know. This is the kind of stuff that the kids just shake their head and walk away. It’s that kind of stuff.

Jill DeWit: Exactly. You’re going to make me throw up in my mouth again.

Jack Butala: Yeah, that’s what the kids say.

Jill DeWit: Exactly. That’s good. I love it. That was good, thank you. That was a good topic and good question that that guy had, too.

Jack Butala: It’s a really valid topic. Even really experienced acquisition people, we’ve got a couple commercial real estate acquisition people in our group that have tons of experience buying big properties, buying commercial properties, structures, like hospitals and stuff, and they still ask that. They still say, “Where do you do it?” It’s a real valid question. Don’t feel bad if you’re a member or not a member and you’re wondering where the hell you start, geographically. It’s real.

Jill DeWit: Yep. Thank you.

Jack Butala: Information and inspiration to buy under value property.

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