Setup a Release or Take Down Multi Unit Deals (CFFL 332)

Setup a Release or Take Down Multi Unit Deals

Jack Butala: Setup a Release or Take Down Multi Unit Deals. 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 how to set up a release or sometimes it’s called a take down on multi-unit deals. One of my favorite types of most profitable deals to do in our business.

Before we get into it, let’s take a question posted by one of our members on LandAcademy.com, our online community. It’s free.

Jill DeWit: Cool. David asks, what is a patented claim title? Is this a homestead title? Is there any value to it when I resell it? I have a big parcel under contract to buy that has a patent deed. It’s been in this guy’s family since it was homesteaded in 1900. This is amazing, how many times this comes up. I talk to these people and they’re like, well I’ve owned it since … My family’s owned it since 1930 something. I’m like, wow. You can go back and do your title work, you’re doing your due diligence and you can pull it up and go, “Yep, he’s right.” It’s really cool.

Jack Butala: I have to be incredibly honest here, I had to look this up because I really didn’t know this strict definition. I’ve only seen it a few times too. It’s from a land grant. He’s exactly right. I believe that the source of it is that he’s the first person to actually buy it from the family who homesteaded it. I can read the legal definition but I think really what he’s asking me is should I be concerned about this? Is it okay to buy it? If it’s a large deal, and I’m sure it is because land grants and patents … When property got homesteaded, I did a whole blog on this actually quite some time ago, when property got homesteaded it was either given to or it was deeded in exchange for money, very small amount, like 5 cents an acre, or in exchange for the promise that you’re going to actually work the land, be a farmer. They didn’t land grant or homestead 5 acres. They land granted or homesteaded thousands and thousands of acres or 640 acres or whatever, so chances are this is a pretty large deal. You should be going through title. What’s our rule?

Jill DeWit: Five thousand bucks.

Jack Butala: If you’re buying a property for more than 5000 dollars you should generally go through title. I brought this up on a recent membership call we had recently and they said, it’s too expensive. I can’t afford the 800 bucks and there’s not enough spread to make any money. My answer immediately is, that’s silly because if you’re buying it the way that we all do in our group at 20 to 40 percent of wholesale value, there’s totally that much room in it, and title insurance makes it more marketable. My answer straight up here, David, is yes, that patented claim is homesteaded from the research that I did and I really highly suggest, almost demand, that you would go through title on it.

It’s a good situation to be in. I’m not sure I ever purchased a property from the original homestead entity.

Jill DeWit: I don’t think I have either. Just that they’ve had it for years. I’m just thinking from a title agent perspective, they’re probably familiar with these and I would think this would be like what we’re thinking is like gold. There’s not much research to do, you know what I mean? It’s not like it’s changed hands 20 times. It only changed hands twice.

Jack Butala: This is the most insurable situation there probably is. You’re buying it from the original owner. It’s like buying a car from the original owner. Like a classic car though, like a Model T from the 1910s or 20s.

Jill DeWit: Right.

Jack Butala: Sweet.

Jill DeWit: Yeah, I think that’s awesome.

Jack Butala: I’m going to reach out to him. I want to see how this goes. This is the … The title agent’s going to get this in and they’re going to walk around the office showing all their colleagues. This is what a patent … I don’t even know what a patent claim, what the title actually looks like. I’d like to see a copy of it.

Jill DeWit: Yeah, you now what? We should have him post it in there. That would be really cool to share. That’s good.

Jack Butala: Turns out this little LandAcademy online community is packed with cool stuff. I had no idea anyone would even use it. Did you, when we started it?

Jill DeWit: I had a gut feeling. Isn’t that funny? Based on [inaudible 00:04:33] before we even went live and did everything, remember 6 months … We were 6 months after we came up with this and we’re working on it, leaking out, this is what we’re kinda doing, it was a real small group, but there was like, “Are you guys ready yet? Are you ready yet?” Remember that? It was so cool, and the day that we said, “Okay, here it is,” we went live and able to offer something, everybody went bananas.

Jack Butala: You know what you should do is, you should describe how and why and the circumstances around us developing this online community. Then I’m going to tell you what my version is.

Jill DeWit: Oh. How and why?

Jack Butala: Tell us the story, Jill. How and why did we start? It used to be called SuccessPlant.com, now it’s the online Land Academy community.

Jill DeWit: Oh, that part of it. Oh yeah. The day we, pretty much within days and weeks after us having our LandAcademy education program, the Cash Flow from Land program, the first thing people said was, “Okay, you guys said we can ask you questions, we can talk to you. You said bring it so we’re bringing it.” I’m like, oh my gosh, there’s a lot of you. I was 18 different directions like, okay, yes, no, no, yes, and then I came to you, Jack, and said we gotta do something here. I can’t possibly … I’m answering this same question in an email and these are good things we want to share. We need a way to communicate. We’ve got to have a way that we can all communicate and this was your coming up with, “All right, I’ll put something together. Give me a weekend.”

Jack Butala: Right.

Jill DeWit: I went off to … I happened to be in California that weekend, we did not have a home here yet, and I’m visiting my girlfriend. I remember you telling me, “I’m going to spend my weekend on this.” My job was to write a couple blogs that weekend because I was goofing off. Can you at least come back with something? So I wrote some blogs that weekend and came up with everybody and, boy, you threw together SuccessPlant is what it was, and it rocked. It was awesome. Everybody liked it. It was immediately …

Jack Butala: You went on vacation and I got stuck developing a product that I know nothing about. That’s my version of the story. All the other stuff is totally true.

Jill DeWit: It was so good.

Jack Butala: I geek out on that stuff though. I like it. It’s all good. What a good idea, Jill. It was your idea. I’m going to credit you a hundred percent. I was actually against it, and man, what a resource. What a free resource for everybody. Where else can you go and find, if you’re new at this, or a new member, and you can go and ask all these other members that were 2 months ago right where you’re standing or sitting. You can say, “Do I do this? Do I do this? Do I do …” It’s all free. I’m not plugging it, I’m just saying it’s awesome. I learn stuff. Like this question I’m learning stuff.

Jill DeWit: Mm-hmm (affirmative). Exactly. That’s not something we would’ve thought. You can’t possibly. It’s like, heck, I don’t care what you’re learning to do, you’re learning to become a pilot, there’s situations that come up all the time that are new, you can’t possibly have every single thing in your training. It’s an ongoing process, so SuccessPlant and our online community is now, it’s our ongoing learning environment really, because things are coming up and new things, it’s great. We’re never outdated, we can answer the question for everybody, and everybody benefits.

Jack Butala: Exactly.

Jill DeWit: Thank you.

Jack Butala: 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 how to set up a release, sometimes it’s called a take down, on multi-unit deals. Like I said earlier, this is one of the most profitable types of real estate transactions that you can put together, specifically in the land business. This is the meat of the show.

Jill, do you want to define what this is before we get into it, because from the title it looks a little cuckoo.

Jill DeWit: Mm-hmm (affirmative). What this is, I’m going to give you an example. We did this with a guy in Canada 2 years ago, I don’t remember. It was the biggest one that we did. He got a hold of our inventory and he wanted to buy a hundred units but he didn’t want to buy them all at one time. He liked the price, we negotiated all that, and he was able to do, he wanted to do, it was like 20 a month for 5 months. You know exactly the person I’m talking about.

Jack Butala: Yep.

Jill DeWit: What we did was great. We spelled it all out in writing and he’s in Canada, I’m down here. We did this without a title, and you’re going to talk about that I know, or about an escrow. We just did this off the books, so this is just an easy way to explain it. Basically, he negotiated a price with me for all these units, there was all in one big subdivision. He wanted 20 a month so he would wire me the money and I would have one deed come out to him with 20 parcels each month and then in 4 weeks we’d do it again and then again and then again. That’s how it worked.

Jack Butala: Why would he want to do that instead of just buying it all at once you think?

Jill DeWit: Two reasons. One is to spread out the cash …

Jack Butala: Yep. He didn’t have all the money. He doesn’t want to front all the money, exactly. That’s fine.

Jill DeWit: … And two … It was actually part of an organization. It was a big company that was buying these units. Then two, to not overwhelm posting them and all that good stuff, getting ready to resell or whatever he was doing with them. He did a chunk at a time, I’m sure did all his engineering work and all that good stuff at 20 a month which was doable for them.

Jack Butala: Yep.

Jill DeWit: I loved it. Then I knew by 5 months, it was nice for me too. I know I had this amount coming in every month, it was consistent. It was great.

Jack Butala: Well said. Jill’s all sales and i’m all acquisitions in our organization so she comes at it that way, but I come at it … Here’s a deal that I did recently. We purchased in a county in New Mexico. As always, we sent a ton of offers out and a guy called me back and said, “Thanks for sending this letter. Turns out I have 150 of these properties, not just one, and I really don’t want to sell you one, I would like to sell them all, so how can we do this?” I set up a release. I call it a release, some people east of the Mississippi call it a take down.

We signed a deal exactly like Jill said, through escrow, where we purchase 10 properties a month. In this case it was like 15 months. It was 150 properties. All you really ever do, here’s the beauty of it, here’s the math, is fund the first deal. I think we purchased each property for a thousand dollars. I funded 10 thousand dollars up front and we immediately resold them because they were priced properly, and I took in 20 thousand dollars. Next month rolls around, I fund the next round with 10 thousand, but I’m taking it out of that 20 thousand dollar proceed. Next month, 10 thousand dollars, same thing, and on and on and on. If they’re priced properly and your marketing machine’s in place, there’s no reason that they should not be priced properly and there’s no reason that your marketing machine shouldn’t be in place because that’s what we teach here. We have all the answers.

I ended up making 10 thousand dollars times 15 months, 15 take downs. That’s a ton of money, man. A hundred and fifty grand. All I had to do was front the first 10 thousand. Multi-unit releases and take downs are beautiful. Go ahead.

Jill DeWit: I was going to give some numbers too. If I remember correctly, these units that they bought, we picked up at a bulk thing and I think they were the 11 dollar or so [crosstalk 00:12:23].

Jack Butala: It was part of a [inaudible 00:12:23]. I don’t even want to bring it up. Jill and I together a lot of years ago purchased, I think, 11 hundred properties for next to nothing, for literally next to nothing, and we’ve been selling them ever since. We still own some I think.

Jill DeWit: Mm-hmm (affirmative). Here’s my math because I think this is really interesting. A hundred properties at 11 dollars a property, that’s 11 hundred bucks out, big deal. When I sold these to this guy, he was trying to get them wholesale from me, which I’m cool with. I want to say I sold them at 250 dollars a property, which is still a [crosstalk 00:13:01].

Jack Butala: I thought it was 500. I remember that deal. I thought it 500.

Jill DeWit: Five hundred? Either way, it’s still great. Eleven hundred dollars out, 25K back or 50K back, that’s what we sold them to and these … What’s interesting too is this area in southern Arizona pops up now and then and the property values have gone up. I don’t know if you’ve looked at it recently, Jack, but I’ve been playing around in LandWatch. I’m doing some working with our people on specific little areas and properties sometimes, helping just with little things, and I was looking at some of the properties in this area and they’re really up right now. I’m pretty darn impressed. I’m going to go back and the ones that we have right now for sale, I might want to go re-look at that price again because I can bump it up a little bit.

Jack Butala: I know, absolutely.

Jill DeWit: The values have risen. I’m like, hey, this is nice.

Jack Butala: Exactly. This is a good time for me to bring up equitable title because inevitably, especially, like what happened with us, how the deal ended with the deal I’m talking about, not the one Jill’s talking about on the acquisition side in New Mexico, what ends up happening is, somebody’s going to call you and say, “I notice that you keep selling these things, how many more do you have because I’d really like just to put a deal together with you and buy them all.” Now without outlaying the cash we have equitable title in the properties. We control the deal because we put a phrase in there in the agreement that says we agree to … You’re not going to sell any of these properties at all. We’re buying them all. Just in case we want to, at some point during the deal, buy the rest of them, not just wait on an monthly basis. We have the right to do that, and that’s what happened. I think 7 months in somebody found us and said, “I love this area, I bought a property from you, I went out there and I want them all,” or “I have some family members, I want my brother in law to have one.”

We have equitable title in the deal. Equitable title means you control the transaction but you don’t own it which is a great position to be in. It’s like an option. If you lease a house and you have an option to purchase it for X amount of money, you have equitable title in that house. If somebody comes to you, you start marketing it … Jill and I have a friend who just did this. You start marketing it and somebody says, “Heck yeah, I’ll buy that house for that,” and it’s 200 thousand dollars more than what you … It’s a lease option.

Jill DeWit: … Negotiated.

Jack Butala: Right. You win.

Jill DeWit: Exactly.

Jack Butala: Equitable title is a beautiful, beautiful thing. You control the deal but you don’t own it. A lot of times you don’t even have to pay for it. That’s what our options are. That’s a little beyond the scope of this.

Jill DeWit: And again, you get another … Wait, wait, wait.

Jack Butala: I was almost going to close it. Go ahead.

Jill DeWit: Wait. Here you go. Jack. You get an A.

Jack Butala: I get an A? Jill’s in California and I’m in Arizona. We’re doing this over Skype and she’s flashing … Well I’m not going to tell you.

Jill DeWit: I’m to flashing you, but I was flashing flash cards. It’s funny, I talked to a pilot the other day, which is funny because he listens to our show faithfully. Here’s a quick little funny thing. I met this guy the other day, really cool. He’s an aerial pilot but he’s actually going into the commercial flying world and he, in the air when he’s flying around and doing some of his training and stuff, he listens to podcasts and we’re one of his podcasts that he listens to faithfully.

Jack Butala: Wow.

Jill DeWit: I thought that was really cool.

Jack Butala: That’s cool as hell actually. Is he a member?

Jill DeWit: He’s about to be. We talked. We’re all good.

Jack Butala: He can buy us all property from Asia. You can do it from an airplane I guess.

Jill DeWit: Yeah, we talked all about that. He’s got a lot on his plate right now with his training, but he’s in. He’s just figuring out the right time so it’s all good.

Jack Butala: That’s great.

Jill DeWit: Good guy. Smart guy. Really smart guy.

Jack Butala: He’s a pilot.

Jill DeWit: That’s right.

Jack Butala: I guess there’s dumb pilots too, I don’t know. You’re a pilot. You’re smart.

Jill DeWit: I don’t know any. I don’t know.

Jack Butala: You don’t know any like, oh my God I can’t believe that guy flies people around? Has that ever happened?

Jill DeWit: There’s always a few of those, yeah. There’s a few that squeak through, but on an overall whole, no. It’s a really good … It’s like the boating community. We talked about that too.

Jack Butala: Yeah, it’s really similar.

Jill DeWit: It’s a very different, it’s an interesting mindset that these people, we all, you included, Jack, have and it’s a good group of people.

Jack Butala: 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 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. I like that phrase a little more recently.

Jill DeWit: I think we should change it up a lot.

Jack Butala: Really? So it’s not …

Jill DeWit: You are not alone.

Jack Butala: It’s all about acquisitions, man. It’s all about acquisitions. You make the money when you buy it, not sell it.

Jill DeWit: Oh my gosh, yes. Where did I write that? Did I do that in a blog?

Jack Butala: No, somebody reached out to me or us, I don’t know if it was on a call, and said, “I’ll never forget that you said that. ‘You make your money when you buy it, not sell it,'” and started thinking, I’ve been saying that and I heard it a really long time ago, I’m not joking, in the 70s I think, or 80s and I’m sure people have been saying it long before I heard it, so I’m glad we’re reaching the right people and that’s my point.

Jill DeWit: Right. That’s very true. The right people, they get it. You know it when you buy it and it feels … The whole running to the bank thing, that’s the most exciting part, not the selling part, because I knew that was going to happen, you know what I mean?

Jack Butala: One we buy it-

Jill DeWit: I knew what I was going to price it, I knew it was going to sell in 2 weeks, and I knew I was going to get that much money. It was way more fun buying it.

Jack Butala: Yeah, I get almost … I literally get high off of buying real estate. I do not get high off of selling it. I don’t care. Isn’t that strange? Do you get high off of selling it?

Jill DeWit: You know …

Jack Butala: You used to. We’ve had this conversation.

Jill DeWit: I used to.

Jack Butala: We’ve had this conversation a few times since we’ve been doing this together as partners. I think you used to really get high watching the money come in. It’s ironic, but I get high watching the money go out. Isn’t that weird?

Jill DeWit: Yeah. I like both, but I do like the acquisition stuff now. That is the fun part.

Jack Butala: Information and inspiration to buy undervalued property.

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