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5 Mistakes New Land Investors Make. Jack and Jill discuss this today.

5 Mistakes New Land Investors Make (CFFL 362)

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5 Mistakes New Land Investors Make

Jack Butala: 5 Mistakes New Land Investors Make. 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:                               Hey there.

Jack Butala:                            Welcome to our show today. In this episode, Jill and I talk about the 5 mistakes we see new land investors make. Good show Jill. First, before we get into it, let’s take a question posted by one of our members on thelandacademy.com online community, it’s free.

Jill DeWit:                               All right. Luke asks, “With owner financing, who do you have pay the taxes if you’re carrying the financing? How do you structure this?” Great question because some properties would buy and flip for cash and some would carry, $99 down, $99 a month.

Jack Butala:                            Exactly, good background.

Jill DeWit:                               Gosh, okay. I have the property, the guy’s paying me $99 for 6 years, who’s going to pay the taxes? Jack, do you want to tell [inaudible 00:00:48]?

Jack Butala:                            Yeah.

Jill DeWit:                               You’re the number person.

Jack Butala:                            There’s 2 ways to do it. Well 3. One way is you build the taxes into the payment. If you, let’s say … Here’s the deal. We’ll just use a 5 acre property that you purchase for 1000 bucks and you sell it for 5000 on terms, on payments. Let’s say it’s $99 down and $99 a month, so here’s 3 ways you can handle that, paying the property taxes annually on that deal.

You actually build it into the price or into the interest rate or however you look at it, or into the payment and then you pay the taxes, so you take on a note. You basically create a private mortgage and you take on that note and create an income stream. The tax bill comes the next November, whatever the tax time is for that state and you write the check personally.

You take it out, not personally, but your company or whatever. You pay the taxes and you manage it. This is how we choose to do it and have chosen to do it for years because we want to make sure the taxes get paid. We would rather take that responsibility to do that than have the buyer forget to pay the taxes and then we don’t know about it. Pretty soon the county is sending us letters saying, “You have back tax property now,” so that’s one way and I think the best way. To answer your question Luke, that’s how we do it.

Another way is to open escrow and then have either a note manager or an escrow manager manage the transaction all throughout the years that they make those payments. They literally collect the payment, the person writes the check out to First American Title, or whoever managing it for you, then at the end of the month, if you have hundreds and hundreds of notes and they’re all with the same person, they cut them one big huge check. Some people pay, some people don’t, some people are late. They handle all that for you. They also handle the taxes.

The third way, of course, is the first way we mentioned but only the seller actually pays the taxes, so the property is in our name, the sellers name … I’m sorry, the buyer. The property is in our name for the duration of the payment cycle. Then when we get the taxes, we send the bill to the seller and then just pray that they’re going to pay.

Jill DeWit:                               I know. They really did follow through.

Jack Butala:                            That’s the worst.

Jill DeWit:                               Then you’re kind of babysitting it. I don’t feel comfortable, even if they say, “Yeah, done.” I kind of want to check it.

Jack Butala:                            I don’t know anybody who does it that way, by the way.

Jill DeWit:                               That’s why I wouldn’t. Cool.

Jack Butala:                            Yeah, the first 2 ways, sometimes the state will tell you depending on where you are. They will mandate how that happens but in general, the states that we work in, we do it the first way. Does that answer, you think?

Jill DeWit:                               Yeah. That’s good.

Jack Butala:                            That’s a good question.

Jill DeWit:                               Yeah.

Jack Butala:                            Basic good [inaudible 00:03:29] question.

Jill DeWit:                               I love it.

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, the 5 mistakes that we think new land investors make. In true form, Jill came up with her 5 and I came up with my 5 independently, so we’re going to talk about them. I’m almost sure they’re going to be a little bit different. This is the [meat 00:03:52] of the show. Let’s start with you. Let’s start with your number one mistake that you think new people make.

Jill DeWit:                               My number one mistake is I put they’re not ready with the proper funds to mail … Here’s where I took this from. I sat here thinking about the people that I talk to who are brand new, are brand new members or [inaudible 00:04:17] call, “Gosh, I just got their program,” and they’re just getting into this and learning the business. What questions come up and where do I see them stumbling? Even before they’re in and they’re trying to get educated, I see them not being properly ready with some funds to send out a mailer or buy some properties. For me, that’s a … It’s not free. No.

Jack Butala:                            It’s not free Jill?

Jill DeWit:                               It’s not free, no, and you’re not going to get someone just give you all your property and you don’t want to sit there and try to option every single property. No, this is a nightmare. No, that’s one thing, and I tell people all the time, “Do not dive in until you’re ready. If it takes you 6 months to budget and plan,” and, “I’ve got to put up a couple thousand dollars put aside so now I can afford to really send out a mailer and buy some properties and do this right,” then that’s the better option.

Jack Butala:                            2 to 5 grand realistically is what you need. Can you do it with less? If you have a ton of talent and some people behind you, yes. The vast majority of the people that we see that really succeed who are brand spanking new have 2 to 5000 bucks set aside or more. The people who we see who are flipping houses and disgusted with it, or doing some other type of real estate where they have some experience, they usually have a little bit more money and that’s when they really take off. We have several members who are making 6 digits a month, who are former house flippers and they get it. They’re just tired of it.

Jill DeWit:                               Exactly, tired of [inaudible 00:05:48] we’re doing.

Jack Butala:                            That’s an interesting first-

Jill DeWit:                               What’s your first?

Jack Butala:                            Yeah. They go in blind. That’s the mistake I see the biggest, where people, they get it, and they expect some stuff to happen without really getting into the details. Yeah. I said this in a blog a long time ago, and I listed it in a half-joking way. Here’s a list of things that we think we know how to do without any education at all: kissing a girl, you need to look into this before you actually jump right in.

Jill DeWit:                               We asked Google that the other day as a matter of fact. We won’t do it now.

Jack Butala:                            What does she say? I don’t remember the answer.

Jill DeWit:                               It was very lengthy. Are you really going to do this right now?

Jack Butala:                            Yeah, go ahead.

Jill DeWit:                               All right. Okay Google. What’s the proper way to kiss a girl.

Google:                                     According to [Wikihow 00:06:40], gently run very tip of your tongue over the lip a few times. She’ll get the message and [inaudible 00:06:46] mouth a bit more if she’s interested. Take a breather but do it in a romantic way. As unbelievable as it sounds, you will need to take a break or stop kissing at some point.

Jill DeWit:                               “As unbelievable as it sounds,” what’ll happen, you die? Somebody’s getting pregnant.

Jack Butala:                            Oh, my gosh Jill. Maybe it’s me.

Jill DeWit:                               Oh my gosh.

Jack Butala:                            All kidding aside, you have to, you can’t go in blind like this. I don’t know. I see bigger [packets 00:07:29].com is packed full of people saying, “All right. Well, I try this and it’s just a mess.” You really need to spend some time and energy, and not a lot of money, but some time learning how to do this. I don’t remember what else is on my list of things we all think we just can do and then it just ends up being a mess. Can you think of any?

Jill DeWit:                               Your number 2 is like my number 2. It’s like being, like you said, diving in blind and not … I said. “Not being patient to get through and learn all the steps in the process.”

Jack Butala:                            It’s not that complicated.

Jill DeWit:                               Because if you don’t, you’re going to make some mistakes because we do see that often. They’re like, “I’m now in and I already have … I did your Craigslist test and I got someone calling back. I’m just going to buy it.” I’m like, “Well, hold on a moment. How do you even know this is a good property? Have you done your homework?” They’re like, “No, I don’t know what to do.” Well, yeah. That’s because you’re … Don’t make a mistake right out of the gate because like you said, Jack, diving in blind-

Jack Butala:                            Our whole business model is predicated on sending out offers to people who own property to find a situation where they just don’t want it any longer and so consequently, we buy it for a lot less than what it’s worth, sometimes like 10% of what we think we can sell it for. We don’t … If we send the offers out, then they’re priced so that if they sign it or call us back at that price, we’re pretty darn sure we’re going to do the deal. It’s such a smoking deal that, and that’s how we do it.

I see a lot of people doing what we said. I think we said it on the show yesterday, send a bunch of mail out or go driving for dollars. They find some people who are interested in selling their property and then they start to negotiate. That’s a huge mistake. That’s what I mean by going in blind. That’s actually my number one. What’s your number 2 Jill?

Jill DeWit:                               That was my number 2.

Jack Butala:                            Going in bling, okay.

Jill DeWit:                               Well, being patient … Not being patient and not knowing the process and diving in too early, that’s my thing. It really means being educated. It’s like, you’re not going to be a surgeon. You’re going to study under someone. You’re going to get your thing. You’re going to still watch some people, so if you want to be in this business, this is great but don’t just say, “Okay. I’m going to be an investor tomorrow. I’m going to wing it.” You don’t want to wing it and make some mistakes. You want to follow someone.

Jack Butala:                            You need an internship.

Jill DeWit:                               Yeah, exactly.

Jack Butala:                            It doesn’t have to cost any money. That’s what our Land Academy community is. It’s all about asking questions and hanging out with, electronically hanging out with people who are doing it right now successfully.

Jill DeWit:                               Yeah, and seeing-

Jack Butala:                            Or maybe not successfully. That’s the thing, you can learn a lot from people who are screwing it all up.

Jill DeWit:                               That’s true.

Jack Butala:                            Or in a little subsection or a niche of a certain property type that you don’t want any part of. There’s some commercial real estate developers that … I’ve heard many commercial real estate developers say, “At the end of the deal, we were all done with the project,” no one made money except the land guy and the broker. The developer didn’t because of cost overruns and all kinds of stuff that goes on. Very early on, I learned that from commercial real estate.

That was your number 2. My number 2 is I see new people not beginning with the end. What the hell does that mean? It means this: you make your money in a real estate deal when you buy it, not sell it. When you’re acquisition price is so low and you are so overly confident that you can sell that property super quickly based on price that you run to the bank, like we say. I see a lot of people wondering if the price is good enough to buy. They haven’t done a lot of comparison value research that we talk about. Is that clear?

Jill DeWit:                               Oh, totally.

Jack Butala:                            What’s your number 3?

Jill DeWit:                               My number 3 is not posting property everywhere or properly, like with photos and pricing. What’s interesting is-

Jack Butala:                            That’s great.

Jill DeWit:                               I thought of this because I’ve had a number of people that I’ve spoken with, they find us and they’re like, “I already have some properties,” and “Gosh, it’s just not selling,” and I’m like, “Okay, well what are you doing?” “Well, it’s on Craigslist,” and that’s it. I’m like, “Really? You’re wondering why this one property that you have is not selling and all you’ve done is put it on Craigslist?” That’s it, nothing and then I’m like, “Do you have photos?” “Well, no but I put the details in there,” or something and I’m like, “Oh, boy.”

Jack Butala:                            Yeah, you have to have a system.

Jill DeWit:                               That’s my number 4.

Jack Butala:                            Oh, good.

Jill DeWit:                               That’s great, but yeah. They don’t, new investors, a mistake that you could make if you don’t know what you’re doing is just thinking you know where it’s going to sell and how it’s going to sell and not putting enough out there, not reaching the right people. You’ve got it posted everywhere and there’s good postings. Go into any environment right now. Heck, go look on Craigslist. You could find some properties that are like, “All I have is a 3 [line 00:12:43].”

Don’t even think of properties. You know what? Here’s a good example, Jack. I look at cars. Say you’re looking to buy a car, super easy to go on Craigslist, and you can scroll down. There’s people that have no photos and no details and they wonder why their car’s not selling.

Jack Butala:                            Yeah, that’s a perfect example. Exactly, so yeah.

Jill DeWit:                               What’s your number 3?

Jack Butala:                            My number 3 is I see a lot of people thinking that they can just go at it alone. Think of, how many movies have you ever seen where there’s a guy that’s, he’s just a nomad. He’s all built and just a total buttkicker and he’s all rogue. It’s like, “That’s the coolest thing ever. I want to do that. I want to be on that motorcycle with my hair in the wind,” but that guy is usually like some post-military, this is a story now, post-military, special-ops, so he was part of a group that got some formal training.

In the beginning he went rogue after that, after he got out of that. You need to be formally educated or part of a group where you get the basic training so you can go off and be that rogue. We have many, many members that we no longer hear from at all. They got their training, they got their feet wet, did a bunch of deals with us in their group and now they’re just off.

I know because some of them call me a year later or two years later and they say, “Yeah, I’m making like … I quit my job like 8 months ago. I did …” and we never hear from those people. I’m sure as parents, that’s the greatest thing that can ever happen here. You’ve done your job so the kids go off and every once in a while you hear from them and how well they’re doing.

Jill DeWit:                               It’s true. You’re right.

Jack Butala:                            I see that a lot. I see people skipping that step and they just want their here and their when with a bunch of money in the bank fast.

Jill DeWit:                               It’s true.

Jack Butala:                            It doesn’t work that way.

Jill DeWit:                               Exactly. So your number 3 was?

Jack Butala:                            That was my number 3.

Jill DeWit:                               Okay, cool.

Jack Butala:                            Rogue only works after you have some education and some training.

Jill DeWit:                               Right.

Jack Butala:                            What’s yours?

Jill DeWit:                               Well, we did my number 3.

Jack Butala:                            Okay.

Jill DeWit:                               You want to do number 4?

Jack Butala:                            Sure.

Jill DeWit:                               Okay, so my number 4 is not setting up a system early on. It’s funny but it’s not. People that they’re going through and they buy a property, and they’re doing … My favorite story is the guy that put his property for sale on our platinum sellers list and then someone tried to buy it. He’s like, “I don’t know how to take the money.” It was the best thing ever, like, “Gee, good problem to have but this is when you want to scramble and fix right now by the way,” but you just tell the guy, “Well, I’ll call you back in a month when I have it figured out,” no. You do that quick but you want to have a system in place. You want to be … You want to plan this out. You want to be … Have it all lined up, so how do you …

Jack Butala:                            Yeah, said another way and I totally agree. You want to treat every asset exactly the same. Treat a half acre property the same as a 40 acre property. You post it everywhere, you collect a buyers list, you take pictures of it, sometimes you do drum shots, all of that stuff but you want to treat these assets in the beginning the exact same way. You get all the exposure you can get so you’re riding on the coattails of the awesome price of these assets. It’s not just about selling that one asset and making 4 times what you purchased. It’s about making a buyers list, creating a little bit of a social media buzz about yourself and your business and all of that. It’s not-

Jill DeWit:                               Website presence and that kind of thing. I agree. Don’t have you business cards beautiful and don’t spend that much time on it.

Jack Butala:                            Don’t even get business cards.

Jill DeWit:                               Don’t get business cards, exactly but the other stuff needs to be in place.

Jack Butala:                            Yeah.

Jill DeWit:                               What’s your number 4?

Jack Butala:                            Focus. I see people focusing on the assets because this is what we’ve all been taught. This is what our parents have taught us about real estate inadvertently. They haven’t ever sat us down and said this, but this is what we’ve learned. Focus on the asset, clean it up, make it look good and then sell it. That’s not how real estate deals work. How they work, the best real estate deals are a situation, not about the asset.

You found somebody who’s a little bit older and they’re never going to use it again. We talked about it on the show yesterday. I’m looking for a situation, I’m not looking for a actual asset. Once I find a situation or 10 situations because I sent a bunch of offers out, then I’ll go look at the asset and see if it fits. Asset’s secondary, whether it’s a house or land or anything else, or an apartment building.

Jill DeWit:                               Right.

Jack Butala:                            I see-

Jill DeWit:                               People doing it backwards. They do, it’s like driving for dollar. You see-

Jack Butala:                            Yeah, driving for dollars is ridiculous.

Jill DeWit:                               I wrote down 10 addresses, now I’m going to research 10 addresses. Well, you may come up with 0 out of that 10 versus blast the whole neighborhood-

Jack Butala:                            Blast the whole neighborhood.

Jill DeWit:                               Then get some offers, some people back, and then go, “All right. Now I’m going to check out the asset.”

Jack Butala:                            I’ve always wondered what, when you drive for dollars and you look at an asset, what makes it, “Oh, that wasn’t worth it.”

Jill DeWit:                               Isn’t that funny?

Jack Butala:                            What is it? Is it falling down?

Jill DeWit:                               That’s what I think.

Jack Butala:                            Why would you want to buy a falling down house?

Jill DeWit:                               It’s boarded up or something, those are the worst ones.

Jack Butala:                            Why wouldn’t you want to buy a perfect house that’s half price?

Jill DeWit:                               Exactly because the guy wants to cash out.

Jack Butala:                            I see that happening. That’s my number 4. What’s your number, 4 or 5?

Jill DeWit:                               5. Okay, here’s my number 5. What’s the title of this here? The top 5-

Jack Butala:                            5 mistakes new land investors make.

Jill DeWit:                               Okay, so my number 5 is they’re paralyzed, not diving in.

Jack Butala:                            I’m glad that we did this separate.

Jill DeWit:                               We had a few new investors that have gone over and over and over and over and over everything and there’s a little bit of deep down nervousness. They just need a little kick. Then they can do it. It’s okay. You don’t have to … They don’t dive in and it’s okay. That’s why we’re here, but that’s the thing. I guess that’s part of why-

Jack Butala:                            A lot of these mistakes are okay to make, by the way.

Jill DeWit:                               Right.

Jack Butala:                            That’s why we’re here.

Jill DeWit:                               That’s the whole thing, I think, is why our people are so successful and [inaudible 00:19:02] so well. It’s not like, “Here you go. Here’s a book. Have a nice day. See you later. Don’t call me.” That’s not it. That’s not our group and that’s not how we roll. That’s why it’s true, when I say, “Dive in,” it’s okay. We all help each other too. There’s somebody where you were a month ago, and it’s great.

Jack Butala:                            Or a year ago.

Jill DeWit:                               That’s what I love about our online community is everybody’s so good about helping each other. Someone is a month ahead and because somebody helped them, they’re happy to help the next guy and so on and so on. Next thing you know, they’re doing deals together and it’s great.

Jack Butala:                            Yeah. Everybody wins.

Jill DeWit:                               It’s perfect, so yeah. “Hey, remember Mike, when you helped me with that, well here’s what I’ve got on my plate. You want to do this?” Yeah, what’s your number 5?

Jack Butala:                            My number 5 and I know this is my number 5 because I was absolutely guilty of this until I met Jill. You need a source of inspiration. It might sound hokey to some of you [Southie 00:20:04] older guys who have a lot of experience, you need a source of inspiration. Stuff goes wrong. I don’t care who you are or what happens or who you have in place, stuff goes sideways or you have a dry spell, or you send out a mailer and you get less response, or you want to change. You need to go back to some source of inspiration or just back to some support group, let’s call it, and get re-energized or re-inspired, or reassured.

Jill DeWit:                               I’m touched.

Jack Butala:                            Yeah, I never had anything like that at all, personally or professionally until I met you.

Jill DeWit:                               I am really impressed that that … is that not funny that that made your list and it’s not on mine?

Jack Butala:                            Yeah.

Jill DeWit:                               I guess not diving in is having the support or inspiration, but yours is better. I like that Jack.

Jack Butala:                            What’s your number 5?

Jill DeWit:                               I already did mine.

Jack Butala:                            Okay.

Jill DeWit:                               Yeah, so I love it. That’s so good. We all get hung up, whatever it is, we get hung up. There’s days you just don’t want to get out of bed, whatever it is and you do need to have some inspiration to remind you why you’re doing it. It might be your bank account. Seriously, I’m not kidding.

Jack Butala:                            Yeah, you know what? You’re right about that. That can be a super inspirational scenario.

Jill DeWit:                               For some people, that’s their inspiration.

Jack Butala:                            When there’s no money or a ton of money, they can both be inspired.

Jill DeWit:                               Yeah. Yeah, that’s true. No money can be like, “All right I’m not messing around now. I’m going to kill it. Watch this,” and a ton of money can be like, “Oh, yeah. You know what?”

Jack Butala:                            This is why I do this.

Jill DeWit:                               “I forgot we just took that great trip to Hawaii with the whole family. How did I afford that? Because of these properties.”

Jack Butala:                            Exactly. Join us in another episode where Jack and Jill discuss how to use information, that’s me.

Jill DeWit:                               And inspiration, Jack reminded me, that’s me.

Jack Butala:                            To get just about anything you want.

Jill DeWit:                               We use it every day to buy property for half what it’s worth and sell it immediately.

Jack Butala:                            You are not alone in the mistakes you make in real estate. Good show.

Jill DeWit:                               Yes. That was really good. Thank you for the [inaudible 00:22:10]. Boy, that was a good number, that was a good list.

Jack Butala:                            What do you want to ask Google?

Jill DeWit:                               Oh my goodness. Okay, ready? Okay, Google. What inspires you to get up everyday?

Google:                                     Hm, I’m not quite sure.

Jack Butala:                            Wow. Okay, Google. How do you buy cheap land?

Google:                                     Sorry. I’m not sure how to help with that.

Jack Butala:                            Wow. Strike 2.

Jill DeWit:                               Boy, we can. Geez.

Jack Butala:                            I’m going to save her.

Jill DeWit:                               All right.

Jack Butala:                            Okay, Google. What’s the capital of California?

Google:                                     Sacramento is the capital of California.

Jill DeWit:                               That’s so funny.

Jack Butala:                            I saved her.

Jill DeWit:                               I’m glad you’re having fun with your toy. I was waiting for a property-related ad, so yeah.

Jack Butala:                            Information and inspiration to buy undervalued property.

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