Wholesale Houses and Land (CFFL 363)

Wholesale Houses and Land

Jack Butala: Wholesale Houses and 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:                               Hi.

Jack Butala:                            Welcome to our show this Wednesday. In this episode, Jill and I talk about wholesaling houses and land. How do we do it? What’s the meat of it? Let’s get down right to the basic stuff and some of the ways that people do really well and some of the mistakes we see. Before we get into it in tremendous amount of detail, Jill, let’s take a question posted by one of our members on landacademy.com online community. It’s free.

Jill DeWit:                               Okay. Kathleen asked, “What do you do when subdivisions never put in the roads? There are some county roads somewhat close by, but not leading to the parcel I’m looking at. There are also some well worn out dirt or gravel paths that are obviously being used, but not labeled on any county map or GE.” I’m not sure what that is. “Or something leading to the parcel. I have a bunch of possible parcel purchases in this area, but many are in the situation. When does a parcel truly have no access?”

Jack Butala:                            All right, so there’s a few questions in here. I’m going to answer if that’s all right with you?

Jill DeWit:                               Yeah.

Jack Butala:                            There’s a few questions in this whole statement and Kathleen, thank you. This is in true to form. As always, it’s a very intelligent, well thought out question. There are two types of subdivisions. Basically, two types of subdivisions in this country. Number one, picture this situation. There’s a farmer who has a couple thousand acres, or a rancher. He’s got ten kids or three kids. They all get married, he wants to start to parcel out those properties. He splits it all up into forty acre properties and gives some to one kid, another kid and goes down to the county and gets all separate [APNs 00:01:45] and breaks it all out. Perfectly normal, happens all the time quite honestly. Then the kids end up, after years go by, not having any interest. Now the property’s left and it’s kind of cut up. This type of subdivision, in general, is what Kathleen’s talking about.

There’s no real roads or access and it was never meant to be that way. It was only meant to be ranched or farmed. Before subdivision regulations were happening at all in the 50’s and 60’s, people like us were allowed to go do this and break it even down further. Down to quarter acre properties or whatever you thought without any regulations. Without putting roads in or anything. There’s a lot of different names for these types of subdivisions, which I’m not going to go into, but they’re out there and they’re all … People own them and sometimes Jill and I even target those subdivisions quite honestly. West of the Mississippi, I actually know most of them by name.

Jill DeWit:                               It’s true.

Jack Butala:                            There’s that type of subdivision and then the second type is the one where you live. Whether you live in a house or an apartment or wherever. It’s been subdivided through what’s called entitlements and then you make a commitment as a subdivider or the developer to put in roads and utilities and really improve the property and develop it. Those are the types of assets we generally don’t get involved in at land academy. We get involved with the former. Why? Because there’s a chance to buy them so inexpensively. All right, so those are subdivisions.

What really is access? Well, there’s two kinds. Legal access and physical access and they’re pretty self-explanatory. When you look at a plat map and there’s dotted lines and there’s roads and it’s all platted easements, there may or may not be a road there, but legally it’s all platted out and you could get to it if you bladed a road in. Then there’s physical access, which is really what I think everybody’s concerned about from a purchasing and a sales standpoint. Is there a path to my property? Is there a road to my property? Is it paved? Is it a county maintained dirt road? Is it privately maintained? All of that stuff. It’s very difficult to answer this question, and this is her question. “When does a parcel truly have no access?”

I would argue never.

Jill DeWit:                               I would also.

Jack Butala:                            There’s always a way and most states have some type of statement in their statutes that says no one can … If you own a piece of property, no one can reasonably withhold access to it.

Jill DeWit:                               I agree.

Jack Butala:                            That doesn’t address the issue where, okay well, “I went to look at my property seller and there’s a locked gate and a rancher with a shotgun standing there.”

Jill DeWit:                               Right. I agree.

Jack Butala:                            You have to balance price and all this other stuff. Should you seek out property with no way to get to it ever? No. Is it going to come across your desk? Yeah.

Jill DeWit:                               Mm-hmm (affirmative).

Jack Butala:                            You’re going to have to ask yourself these questions right here. “I can see there was a road here a lot of years ago. It’s kind of grown over and I guess if I had on a good day with a four wheel drive, I could get there.” Is that legal access? And on a plat map, there’s dotted lines I can see it.

Jill DeWit:                               Mm-hmm (affirmative).

Jack Butala:                            That’s legal and physical access to me.

Jill DeWit:                               Exactly.

Jack Butala:                            Can you take your Volkswagen Beetle there? Probably not.

Jill DeWit:                               Right.

Jack Butala:                            What you do have to do, if you’re going to look into it. What you’re required to do ethically, in my opinion and usually by law, is disclose what you know about the piece of property that you’re selling.

Jill DeWit:                               Right.

Jack Butala:                            If you’re going to look into whether or not, like Kathleen is here, in great detail, whether or not the property has physical or legal access and then get the answers.

Jill DeWit:                               Right.

Jack Butala:                            You’re required to disclose that. If you never look into it and don’t really care and you say, “Here’s a picture of it on Google Earth and here’s the plat map. This is all the research we’ve done. We don’t know.” You’re required to disclose that too.

Jill DeWit:                               Yeah. No, and I love it. It’s too easy to … Whatever you find out, it’s a) the right thing to do and b) it’s good. I think it helps. Whatever research I have done and I’m posting, it’s in there. If I have a plat map, if I have … I can see the map up to this point. This is where the road is. I can see it’s a dirt road at this point. I put that in the posting, it’s just going to help your buyer too. Because let’s be honest, at the end of the day, you do not want to improperly convey something to a buyer, because if you do, they will come back and probably ask for a refund at some saying, “Hey”-

Jack Butala:                            Yeah, which you’re going to promptly give them.

Jill DeWit:                               And you’re going to give them.

Jack Butala:                            That’s right.

Jill DeWit:                               You’re going to go, “Well that was a waste of time.” Yeah, because you didn’t properly set them up and let them know what this is. “Hey you need a four wheel drive and a GPS,” and the right guy is going to go, “That’s exactly what me and my hunting buddies want.”

Jack Butala:                            Yeah, and I want to get lost.

Jill DeWit:                               “We love it.” It’s an adventure to get out and find our property and no one’s going to be driving by and making noise. Correct.

Jack Butala:                            The person that calls in right after that wants to drive their-

Jill DeWit:                               RV.

Jack Butala:                            Then can’t get there.

Jill DeWit:                               Right.

Jack Butala:                            That needs to be clearly-

Jill DeWit:                               Different property.

Jack Butala:                            That’s right, and that needs to be clear.

Jill DeWit:                               Right.

Jack Butala:                            Because you don’t want to do a bunch of refunds.

Jill DeWit:                               Exactly.

Jack Butala:                            Here’s what we don’t buy and I’ll wrap it up on this. We get a lot of property back in, where there is no roads to be found anywhere. It’s a square in the middle of a mountain range. All right? Somebody went and subdivided that a lot of years ago for whatever reason and it literally takes a helicopter, that’s the only way you’re going to get there. That, or if you’re a mountain climber.

Jill DeWit:                               Right.

Jack Butala:                            At any price, we don’t buy those properties. We don’t get a ton of them coming back. Those are the ones where the seller’s just begging us.

Jill DeWit:                               It’s legal. There’s legal access, it’s just good luck making … Are you going to build a tunnel? You can build a tunnel, but I don’t think you’re going to build a tunnel.

Jack Butala:                            It used to be back in the day, before Google Earth, it was real difficult to identify that, but again, technology has made this so much easier. Jill and I stay way away from property that we just know is going to be a problem and that somebody’s really seeking out impossible property to get to. We just stay away from it.

Jill DeWit:                               Right.

Jack Butala:                            There’s too many other ways to make money on great deals.

Jill DeWit:                               Exactly.

Jack Butala:                            Everybody’s got a different threshold by the way. Jill and I know Kathleen. She’s been with us for awhile. She’s very bright and what you’re describing Kathleen, might be beyond your threshold. You might do better with just drive right up access property. How do you do that? You send more mail out. You have [room 00:08:25] more properties? Then you buy the ones that work for you. If you have a question or you’d like to be on the show, reach out to either one of us on landacademy.com.

Today’s topic, this is the meat of the show by the way, how to wholesale houses and land. Let’s have an open forum discussion Jill. What do you say?

Jill DeWit:                               Okay.

Jack Butala:                            How do you do that? How do you wholesale houses, how do you wholesale land? Are they the same way? Are they the same approach?

Jill DeWit:                               You know, it’s funny. I took this as, “What is wholesaling houses?”

Jack Butala:                            That’s why we do the show. That’s why there’s two of us, I love it.

Jill DeWit:                               Okay.

Jack Butala:                            I love your point of view.

Jill DeWit:                               You want to go first or do you want me to go first?

Jack Butala:                            You go.

Jill DeWit:                               Okay. I was thinking, “What are the three things about wholesaling houses and land versus retail?” I took it as wholesale versus retail.

Jack Butala:                            Okay.

Jill DeWit:                               My number one thing is, boy is it easier.

Jack Butala:                            Oh my gosh, for us.

Jill DeWit:                               The buyers are different. It’s like, imagine you’re a wholesaler selling mattresses. I mean, dream it up, versus a retailer selling mattresses. A wholesale person selling mattresses is going to call Sears, May Company, whoever. They’re going to say, “I’ve got the Sealy’s, I’ve got this, I’ve got that. How many do you want?” Put an order in, nobody’s talking about it. But the retail seller has a store, they got to come in, they got to lay on it and they got to bring their husband by and they got to feel it, and they got to see how heavy it is and they got to see if … is it the thick, thick top? Because are all my sheets going to fit on this or do I have to buy new sheets?

Jack Butala:                            You’re so the girl for me.

Jill DeWit:                               Thank you.

Jack Butala:                            I agree.

Jill DeWit:                               For me, this is why I say it’s easier, and there’s different buyers. I’m not doing wholesale. What we do, land and properties, for us is a dream not dealing with retail. Now, it does mean the prices are different and I’ll get to that.

Jack Butala:                            No, go ahead.

Jill DeWit:                               Okay, so number two is … My number two is wholesale land and houses is I’m not improving it at all. I’m not making up pictures, I’m going to go with my mattress store example. I’m not going to put pretty sheets on it, cool pillows on it, I’m not going to have a spotlight on it. I’m not improving it in any way. I am taking very accurate photos and maps and a description, but again, a lot of my buyers, they don’t need that.

Jack Butala:                            Right.

Jill DeWit:                               Really, in the wholesale world, it’s so great. My buyers, they know what they’re looking at.

Jack Butala:                            They know the business.

Jill DeWit:                               They need a county and an APN and my price.

Jack Butala:                            Right.

Jill DeWit:                               The state county and APN, that’s really what they need and they can go find it. Too easy. Number three about the topic is price. I’m pricing it to double my money and move on. My goal here is volume, not maximizing price. Not getting retail prices. I just want to move. Great, I moved ten mattresses of these, twenty of those and it was exactly what I wanted, I’m out. I hope that guy puts lights on them and does a fantastic President’s Day special and makes a whole lot of money.

Jack Butala:                            Excellent.

Jill DeWit:                               Thank you.

Jack Butala:                            Wholesaling is predictable. It’s much more predictable than retail. You set up a machine. If you’re this type of personality, and I am, you set up an acquisition machine or a manufacturing machine in Jill’s mattress example and you have very predictable sales, very predictable acquisitions and you can predict how much money you’re going to make. Many times it’s a lot less than a retailer, but retail sales go up and down with markets and all kinds of stuff. For me, and I think Jill’s the same way, it’s a lot easier for us to buy a bunch of property and then wholesale it out than it is to kind of just put up our [shangle 00:12:22] and wonder who’s going to walk through the door in a retail environment.

The trade off is you can make … you have to have pricing. You can’t get greedy with that. We’ve all been taught, whether we know it or not, consciously and subconsciously, to get the highest price we possibly can for real estate. That doesn’t fit within the wholesale model and a lot of people never get over it. It keeps them out of this business.

Jill DeWit:                               It’s true.

Jack Butala:                            “That house? Oh, I’m going to ask $450,000 in a $300,000 market.” I see this everyday. “That forty acre property? There’s forty acre properties in that area? Last month they sold for $62,000 and I’m buying it for eight grand? I’m going to try to get sixty-two.” That’s not wholesaling and I understand that, especially if you’re new. Our model is, we bought it for twelve grand in a $62,000 market? We’re going to sell it for about fifteen. We’re going to sell it to the person who’s going to go get sixty grand for it.

Jill DeWit:                               Yeah.

Jack Butala:                            I want them to make more money than us.

Jill DeWit:                               Right. I do want to double, that’s kind of my goal. I want to double it. That’s what we tell our folks with pricing. Your goal is to make double and you’re still going to be way under price than anything, any similar comp you can find out there. You want to blow everybody away.

Jack Butala:                            That’s right. I love being an acquisition expert. That’s what we are.

Jill DeWit:                               Uh-huh.

Jack Butala:                            We’re pretty good at sales now too, but we don’t seek out to be sales experts. We literally find a buyer before we go look for assets. We take their order.

Jill DeWit:                               Do you know what’s so funny about that? That’s the thing. That’s one of the biggest, I think. People come to me and go, “What do you mean sales aren’t a big deal?” I never think about sales. I don’t get excited about sales, yeah. I don’t have an issue with sales because we buy it right. I really don’t. It’s kind of funny because for years Jack, I was a salesperson and I don’t do any selling anymore because there’s really nothing to sell. It speaks for itself.

Jack Butala:                            Yeah, I mean you either get it or you don’t.

Jill DeWit:                               It’s kind of like … I hate to say it-

Jack Butala:                            In a real positive way.

Jill DeWit:                               … our staff’s almost like order takers. “I’ll take number three, number five and number seven on this property list that you just sent me.” “Okay.” I mean, seriously!

Jack Butala:                            That’s what happens.

Jill DeWit:                               That’s really how it goes. That’s what’s so funny. It’s a whole different world and I think it’s hard for people to imagine. “What do you mean? You don’t have to talk them about this?” No, what’s to talk about?

Jack Butala:                            Yeah.

Jill DeWit:                               That’s the beauty of our website. Go look at Land Pie right now.

Jack Butala:                            Pin.

Jill DeWit:                               Pin. Sorry about that. Land Pin.

Jack Butala:                            You guys know who your website … What’s the name of your website?

Jill DeWit:                               It just changed.

Jack Butala:                            I know, [crosstalk 00:15:04] it used to be Land Stay.

Jill DeWit:                               It was Land Stay forever.

Jack Butala:                            To save Jill here. It’s Land Pin now. Like picture a big red pin.

Jill DeWit:                               Right, so anyway. If you go look at Land Pin, there’s a way for people to check out, online, and put their credit card information and have a deed just delivered. Like, no talking and that’s the beauty of it and it really happens. There’s a lot of buyers out there, that that’s how they like it.

Jack Butala:                            I do.

Jill DeWit:                               That’s the way uh-huh-uh-huh.

Jack Butala:                            I love buying stuff online as a consumer so I don’t have to talk to anybody or go shopping or any of that stuff. If you’re not that kind of person, where you want to talk to everybody and really socialize and get to know everyone, this may not be for you.

Jill DeWit:                               You can. Here’s the next step. That’s what a lot of our buyers are doing. They don’t know how to … They’re not the acquisition’s people. They buy from us as wholesalers. They know the value of what they’re getting, they know us and now they’re going to market up and dress it up and have a pretty spotlight shining on it and a banner in the window saying, “Come on in! Free cookies when you lay on the mattress.”

Jack Butala:                            Yeah.

Jill DeWit:                               They’re going to get retail prices and we are very happy for them.

Jack Butala:                            Well said.

Jill DeWit:                               Thank you.

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:                            It could be 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:                            You are not alone in your wholesaling, real estate ambition. Jill, I love wholesaling.

Jill DeWit:                               I know.

Jack Butala:                            We sell retail property inadvertently, but … The tagline in our website is “Land acquisitions for re-sellers.”

Jill DeWit:                               Right.

Jack Butala:                            If you happen to be a retail person with good manners, we happily sell it to you, but if we get an email, and we do every day, that says, “What’s an APN?” That’s not the direction we want to go.

Jill DeWit:                               No, it’s perfect because our customers are all very smart, including the retail ones. That’s the thing, is we’ll have plenty of people that they are … When they say retail, I mean they’re the end user. They’re buying the property for themselves for the cabin site for their family and that kind of thing. They are smart, because when they come to us, we’re not going to hold their hand and say, “Oh the view is spectacular. Isn’t it Mr. Smith? We stood on it for an hour ourselves.” Because we didn’t. This is the point. We tell them that. “Look, here’s the deal. We really are wholesalers, that’s our thing, but we sell to anybody, so you’re getting a great price. For that price, it’s not going to be staked, I’m not going to stand there with you and I’m not going to do this. The right people will go, ‘Oh, I get it. Done. Sign me up.'” Seriously.

There’s plenty of people that go, “Okay, well thank you, I just was checking,” and that’s okay.

Jack Butala:                            What we do now is refer them to a lot of our members who love being retail sellers. They love making … There’s one guy, makes $40,000 a deal or he doesn’t do it.

Jill DeWit:                               Then that’s fine.

Jack Butala:                            He’s very patient about it and really good at it.

Jill DeWit:                               Right and that’s perfect.

Jack Butala:                            Information and inspiration to buy undervalued property.

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