Half as Hard Twice as Profitable vs LandLord (CFFL 395)

Half as Hard Twice as Profitable vs LandLord

Jack Butala: Half as Hard Twice as Profitable vs LandLord. 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 and Jill DeWit.

Jill DeWit:                               Happy Friday.

Jack Butala:                            Welcome to our show again. In this episode, Jill and I talk about it’s half as hard and twice as profitable. You know this land business we’re in is being a landlord. Let’s get into it. I love this kind of stuff. We’ll put some real math to this.

Jill DeWit:                               Okay, cool.

Jack Butala:                            Before we get into, though, let’s take a question posted by one of our members on the landacademy.com online community.

Jill DeWit:                               Okay. Ryan asked, “I’ve been running into a strange problem where I’m getting different sizes for the acreage of property I own during my research. When Google Earth had the APN feature,” that was a long time ago. It was like over a year ago. “I looked it up and measured the lot and the measurement came out to two acres. Then I went to the county site and got a map that shows a parcel and my parcel measurements showed two acres also. I then got a notice of value from the assessor and it says one acre. Am I doing something wrong? What should I do?” Jack?

Jack Butala:                            Ryan, you’re not doing anything wrong. In fact, I know which Ryan this is, too. Like this, you’ve thoroughly though this through, like everything. Congratulations. I know you’re doing really well. Congratulations on that, too. The true, true answer to this is that turns out the county makes mistakes.

Jill DeWit:                               Mm-hmm (affirmative).

Jack Butala:                            They’re human, too. They make a lot of mistakes, quite honestly. Mistakes in recording, mistakes in assessment, very often mistakes in assessed value. Just because the notice of value says one acre, man, that could be just because they were lazy that day and they said, “Eh, it’s about an acre.” I’ve seen that happen. Slews, and slews, and slews of property.

Jill DeWit:                               Exactly.

Jack Butala:                            If you go on the internet and do us a little bit of research, in fact, this question is making me think of my next blog, the topic for my next blog. There’s a way that you can take the circumference of the property and calculate it. An acre is 43560. It’s 43,560 square feet. You can back into it that way.

Jill DeWit:                               It sounds like he did it, too. His map I’m showing, he’s got a parcel map with the actual lot and the measurements where it will show 600 feet by 800 feet by up here, here, here. It said he did the math and he’s right. That, for me, is the real deal.

Jack Butala:                            Yeah, it’s exactly right. By the way, that Google APN scenario. Core Logic purchased that property. That’s why that went away. Purchased that company. That’s why it went away.

Jill DeWit:                               We’re going to bring back a version of that.

Jack Butala:                            We will be releasing a product soon here that does it for you, where you literally just type in … It’ll take you with the corner points to Google Earth for 99.3% of the properties in the country.

Jill DeWit:                               Exactly. It’s insane.

Jack Butala:                            145 million of them. I’m having a blast dealing with that database. I love that.

Jill DeWit:                               Good. Yeah, it’s not you Ryan. Call them.

Jack Butala:                            I would trust you way over.

Jill DeWit:                               Exactly.

Jack Butala:                            I always, even the GIS maps for the county, I always use two sources of data to confirm everything when it comes to, man, am I looking at the right property or not?

Jill DeWit:                               Right. Here’s my other little sneaky thing, by the way, I don’t know if your buyer is going to be so excited about this, but I am excited about this stuff. If the assessor has it wrong and they’re only assessing me with that APN as one acre and they’re accidentally under charging me, part of me does not really want to bring that to their attention.

Jack Butala:                            Yeah, I would not.

Jill DeWit:                               That’s the thing you’ve got to think about. They might go, “Oh, oh gosh. You’re right. Excuse me. Make that times two.” Shoot. I don’t know if I really want to do that.

Jack Butala:                            We say all the time, get to know the recorder. We say if you’re going to do anything with the property at all, get to know the planning and zoning people. Have we ever said, “Get to know the assessor?”

Jill DeWit:                               No, we really haven’t.

Jack Butala:                            No. There’s a reason for that.

Jill DeWit:                               Yeah. We never talk to them.

Jack Butala:                            The first thing the assessor asks, and I’ve made this mistake and I learned the hard way. This is a replication of the first and last call I had with an assessor.

Jill DeWit:                               Oh no.

Jack Butala:                            “Hi, assessor. I’m looking at this property and I’m wondering how large it is. What’s the APN sir?” I give him the APN. He says, “Oh, you know what? This isn’t assessed properly. This slipped through the cracks.” Then I get a tax bill for three times as much.

Jill DeWit:                               Right, you don’t want to do that. Don’t draw attention to it.

Jack Butala:                            It’s kind of like calling the IRS.

Jill DeWit:                               That’s true.

Jack Butala:                            Leave those guys alone.

Jill DeWit:                               You guys put down my income wrong, but everything went through okay. Shoot, looks like you missed a zero.

Jack Butala:                            That’s exactly what it’s like.

Jill DeWit:                               I really owe you this much money. Do we really want to do that?

Jack Butala:                            Here’s a funny side note. I think I said this to Jill before.

Jill DeWit:                               Oh no.

Jack Butala:                            My mother would contest.

Jill DeWit:                               Oh, yes.

Jack Butala:                            My mother, her whole life, with one exception, paid cash for our houses and rightfully so, just like us.

Jill DeWit:                               Your mom is amazing with that. That was so good.

Jack Butala:                            She would contest, because you can contest your tax [inaudible 00:05:08], especially in California. She’s in Michigan.

Jill DeWit:                               We’ve sat there and watched people walk in and do it.

Jack Butala:                            In California if you talk to most of the counties, they encourage you to do it. It’s right on their home web page. To contest your taxes …

Jill DeWit:                               That’s how we get those postcards, too. That’s your time.

Jack Butala:                            You can go in front of a judge literally and say, “My assessed value for this thing is all wrong.” Nine times of out ten, they’ll say yes.

Jill DeWit:                               Right. All my neighbors sold for that, and they sold for that, and this is that, and I bought this. You have to push, but you’re right. They will meet you there, often.

Jack Butala:                            It’s funny, too. I say she paid cash. That’s because people with a mortgage, your monthly payment, there’s an escrow number in there, a dollar value where the bank pays your taxes for you. It’s all automated because they don’t want you to forget to pay your taxes and then …

Jill DeWit:                               PITI.

Jack Butala:                            Yeah, exactly. It’s because the lean positions, I don’t want to get too far into this, but the lean position, the mortgage company has a secondary lean position to the county. They have a huge vested interest in making sure that those taxes get paid, so they do it.

Jill DeWit:                               That way the county can’t take back your property and the bank is left sitting there going, “What just happened?”

Jack Butala:                            We don’t pay attention to our property tax values usually when we have a mortgage because we never see it unless we go to a website and look it up, but we don’t want to. Me included. If you own property outright like we do, we get a million tax bills. You look at the taxes. You look at that bill.

Jill DeWit:                               Yeah, I see it.

Jack Butala:                            You’ve got to write checks.

Jill DeWit:                               Exactly.

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, this is a direct quote from a consulting call that I had two weeks ago. The question that prompted the topic which is it’s half as hard and twice as profitable, this land business we’re in, versus owning a house and renting it out. The question was this, “Have you ever bought a piece of property and then you found out there was a house on it and you didn’t know it and there was somebody living there. Then you decide to charge them rent. This is a problem and then they don’t like the place.” The conversation started to go down that path. I said, “Look, whatever you have experienced in your land business, selling it on terms and collecting payments and stuff, or even if they choose to live there, it’s half as hard and twice as profitable as being a landlord.”

If you go to BiggerPockets, all everyone talks about is, “I want to buy a house, and I want to get a tenant, and I want to rent it, and I want to collect that money every month. I want to live happily ever after.” It just doesn’t go that way.  I’m here to tell you. It does with land.

Jill DeWit:                               I was going to paint a picture about what my personal experience. When this topic came up, I thought for a few minutes and I have a visual here. This is my visual on this topic.

Jack Butala:                            You actually prepped for the show?

Jill DeWit:                               Yes, I did. I do every show. I, Jill, personally prep for every show. Jack? What’s your story?

Jack Butala:                            I write the show.

Jill DeWit:                               Oh. You mentally prep then.

Jack Butala:                            I write the title.

Jill DeWit:                               There we go. Thank you very much. Who carries the show? Let’s see here. Just kidding. I’m just kidding. Here’s my visual. Imagine me, because this is true, I’m sitting in a renovation in a project. I’m literally sitting in the living room. I’m sitting in a folding chair, I’m dusty because we all know what’s going on at that moment. Walls are being moved. There’s no flooring.

Jack Butala:                            Girls don’t like to be dusty.

Jill DeWit:                               It’s a dusty mess. I’m sitting there eating my lunch that I packed that day because let’s be honest, you have to babysit these projects. Sometimes you really have to be there because if you’re not, you don’t know who’s showing up, what’s getting done, what’s not getting done.

Jack Butala:                            Nothing’s getting done if you’re not there.

Jill DeWit:                               If you’re not there and they run into something like they’re looking at the plans and they’re like, “Does the light go here or here?” And you’re not there to answer that immediate question, they’re just going to guess and do what they think looks best.

Jack Butala:                            That’s right.

Jill DeWit:                               You really have to babysit. So, there I am sitting in a dusty, folding chair, eating my lunch, and I’m sitting there with a notepad adding up all the time that I’m wasting and how much money I could be making sitting in our nice air conditioned office after a nice lunch with you, Jack, and just flip some properties which, by the way, was air conditioned, and this renovation at the time was not air conditioned.

Jack Butala:                            Yeah, in Phoenix.

Jill DeWit:                               Yes. That’s my visual.

Jack Butala:                            If you don’t know by now, this is an actual story.

Jill DeWit:                               Yes. That was me. That was the last … Not quite the last. Then the last one we lived in, but almost the last.

Jack Butala:                            That was the last, not house flip that we’ve done. We wholesale all the time.

Jill DeWit:                               But the physical renovation where I’m sitting there, [crosstalk 00:10:15] and I did the plans. I had a blast. The design part of it I loved. Playing architect I loved. Picking out all the …

Jack Butala:                            [crosstalk 00:10:26] You’re talking about.

Jill DeWit:                               That was the biggest one. Really. We made a closet into a bathroom. We created a closet. We changed rooms around.

Jack Butala:                            Jill put a chandelier in the shower.

Jill DeWit:                               It was just right in the middle of the bathroom.

Jack Butala:                            Oh.

Jill DeWit:                               A chandelier in the bathroom.

Jack Butala:                            It was a battle I lost.

Jill DeWit:                               It was just gorgeous.

Jack Butala:                            That’s why we don’t have a TV show.

Jill DeWit:                               I had so much fun.

Jack Butala:                            Those TV shows are not real, by the way.

Jill DeWit:                               That’s kind of true. They show the fun parts.

Jack Butala:                            They used to show the math on some of them. They stopped doing that.

Jill DeWit:                               They did stop doing that.

Jack Butala:                            It’s all lies.

Jill DeWit:                               A lot of them, we know, we’ve had members say, “I’ve never lost- ” Which is true. David said this on one of our member calls a couple months ago, “I’ve never lost $20,000 on a land deal.”

Jack Butala:                            Flipping land.

Jill DeWit:                               He sure has on other deals. We know guys that have lost [crosstalk 00:11:12] a million here in South Bay. A million dollars.

Jack Butala:                            A million dollars on a home flip.

Jill DeWit:                               On a renovation because he made it all bachelored out and couldn’t sell it. That happens. It doesn’t happen in this stuff.

Jack Butala:                            This deal your describing, the last one we did, the last reconstruction. At the end of the deal when I went and picked up the check from the escrow, I did math. I sat in the car and I did the math. You know how much we made per hour on that when I combine our time? 15 cents an hour.

Jill DeWit:                               I believe it. It was ridiculous.

Jack Butala:                            15 cents. We’d be better off working at Mcdonalds.

Jill DeWit:                               We took a trip to Paris in the middle of that. Remember that? We had to time it. Partially because I was pulling my hair out with this. I didn’t see you during that whole period.

Jack Butala:                            Never again.

Jill DeWit:                               You’re like, “Can you take a week off?” I had to juggle some stuff to make it happen. You know what, in our world, I can take off tomorrow. It doesn’t matter.

Jack Butala:                            Yeah, and deals are still getting done.

Jill DeWit:                               They are.

Jack Butala:                            This economies a scale. That’s why I got done with that deal, I learned a lot. There’s a developer friend that I have, we both have, Jill. She builds infill lot houses. Izzy. She only does projects where she can do three or more right on the same block.

Jill DeWit:                               Love it.

Jack Butala:                            There’s a reason for that.

Jill DeWit:                               That’s brilliant.

Jack Butala:                            You get three dishwashers, you put them in at the same time. You pour three foundations at the same time. That really makes a lot of sense.

Jill DeWit:                               Exactly. She Texas area I think still?

Jack Butala:                            She’s in Texas now, on the water.

Jill DeWit:                               That’s what I though. Still, I just can’t … I don’t want to do that. It’s just too much work, like you said. That’s the whole topic here. You’ve really got to sit down and think about what you want to do. I know we have members that came from that and I love that. They are really successful. They’ve been there. They’ve experience that and they know how hard that is. They get into this and they’re like, “Oh my God. It’s so great.”

Jack Butala:                            I hate to see that because they love the itch that, probably if you’re listening to the show, you have this itch, to make money in real estate. That calls you. You don’t seek it out.

Jill DeWit:                               That’s true.

Jack Butala:                            It’s a calling. I hate to see people … Here’s what I see happens. I did a blog on this a long time ago. This is a absolute wrong way to do a real estate deal. This is how I see every new person do it. They look in the MLS, or they call their sister-in-law who’s a real estate agent, and they pick a house out.

Jill DeWit:                               Or they drive around and find one with boards.

Jack Butala:                            Yeah. Then they call the lender. They get a loan. They buy the property. In that loan process, now the real estate agent made some money, the mortgage company made some money, the mortgage broker made some money. Who else made money? Any contractors that were involved. The inspector made money. Everybody makes money except you. You pay money. Then, you go get a tenant. You hope-

Jill DeWit:                               You’re doing all the work, too, by the way.

Jack Butala:                            Or maybe you get a property manager and you pay them, too. You hope that the guy is going to pay rent, the tenant.

Jill DeWit:                               Yeah.

Jack Butala:                            Then what? It’s going to cover it and you’re going to make two or three or four hundred bucks? There are people on the internet that celebrate if they make three or four hundred dollars over their mortgage payment.

Jill DeWit:                               Oh, every month?

Jack Butala:                            Yeah. We flip acreage deals and we make 70 to 150 thousand dollars on an acreage split deal.

Jill DeWit:                               I know.

Jack Butala:                            It takes maybe two hours. Then we never see the property.

Jill DeWit:                               My dad did this for a while. He did it in southern California and then he went to Texas. He had ten to fifteen rental properties at one time in Texas because you could buy them back then for seventy, eighty thousand dollars. Get a three bedroom, two bath. It was in the Dallas area.

Jack Butala:                            It was during the RTC days, too.

Jill DeWit:                               Right.

Jack Butala:                            You didn’t put any money down.

Jill DeWit:                               You can rent them for $1,000.

Jack Butala:                            No mortgage limits. You could have 50 mortgages in your personal name.

Jill DeWit:                               Right. The thing was, he was the handy man. That was just a lot of work.

Jack Butala:                            I bet your mom loved that.

Jill DeWit:                               I’m not kidding. I know. The dishwashers not working. Here goes dad.

Jack Butala:                            That’s not cool.

Jill DeWit:                               He would do that and different things. Then my mom was the cleaning person and she didn’t like that. We still laugh about that.

Jack Butala:                            Oh my god. Your mom? That’s not fair.

Jill DeWit:                               She would go in and get it all ready. She would not be the regular cleaning person, but when he’d buy the home and he’s getting the yard redone and getting it looking … My mom was the person that went in and get it all cleaned up as the new tenant moves in and when the old tenant moves out. My mom would be the cleaning crew.

Jack Butala:                            Somehow I don’t think that would fly in our house.

Jill DeWit:                               The one man cleaning crew. No. It was the funniest thing. I can’t believe she didn’t even say that back then. I am so hiring this out. I’ve got to say, we have a good friend that just moved a week and a half ago. Jack said, “Hey, you need some help moving? I will happily hire you some people. What do you need?”

Jack Butala:                            I did say that.

Jill DeWit:                               That’s what you said.

Jack Butala:                            He caught that, too.

Jill DeWit:                               He did. That’s how it should go now.

Jack Butala:                            They all laughed about that. My moving days are over.

Jill DeWit:                               We’re done with that. My cleaning days are over.

Jack Butala:                            I know.

Jill DeWit:                               Done with that. My cooking days are about to be over, too.

Jack Butala:                            In the title is landlord. It’s not really about flipping houses. Jill and I have never received a call from somebody that says, “My lands not working.”

Jill DeWit:                               That’s right.

Jack Butala:                            The lands not where I thought it was, or any of that stuff.

Jill DeWit:                               Could you imagine?

Jack Butala:                            It just doesn’t happen in this business. In fact, what they do is they say, if we do get a call, it’s like, “Geez. This is more beautiful than the pictures.”

Jill DeWit:                               Do you want to know a funny thing, too, about this stuff. It made me think of a funny story. The one time I had a guy like … Not one time. It’s happened several times. Every now and then you’ll have someone that they think you’re going to meet them there. “Are you going to be there and show me the property?” I’m like, “It’s not like you need a key to get in.” It’s the funniest thing.

Jack Butala:                            Sure, I’ll bring you a sandwich, too.

Jill DeWit:                               The one time I told a British guy, “No, no, but I’ll leave a key under the mat.” He didn’t get it.

Jack Butala:                            I didn’t know that. That’s hilarious, Jill.

Jill DeWit:                               It was so funny. It was like, one second, two seconds. I’m like, “Oh, god. I’ve got to explain this.” He did not get it. I thought that was the funniest thing on the planet. Anyway, it was silly.

Jack Butala:                            I got a call from a guy one time, it was a lot of years ago when I used to answer the phone. He said, “I had no idea how large 40 acres really is.”

Jill DeWit:                               Oh, it’s huge. You’re right.

Jack Butala:                            It’s 1.7 million square feet. There’s right now, to put this into perspective, and I did it for our kids, too. There’s a Ritz Carlton being built right very, very close to our house in Scottsdale. It’s on a 40 acre property. I said, “Kids, that’s 40 acres.” It’s the whole block. It’s one whole residential block.

Jill DeWit:                               When you stand and look at it, that’s a lot of property.

Jack Butala:                            A block. Man, you can’t really even see across it. It’s that far. Then you think about some of these deals we’re doing, 160, 700, 800 acres like in Santa Barbara?

Jill DeWit:                               Exactly. It’s huge.

Jack Butala:                            It’s awesome is what it is. Forget about these houses.

Jill DeWit:                               Unless that’s your thing. You could do this, too.

Jack Butala:                            We will be releasing … Unless you’re a contractor. If you’re a contractor, knock yourself out. You love to do that stuff? You got a truck full of tools, that’s fantastic.

Jill DeWit:                               And you like it.

Jack Butala:                            The way to make money with houses is to do it with the way we do it where you already have a contractor/flipper guy. You just buy houses for him and mark them up 10 grand.

Jill DeWit:                               There you go.

Jack Butala:                            That’s it.

Jill DeWit:                               I agree.

Jack Butala:                            Then escrow pays you.

Jill DeWit:                               Thank you.

Jack Butala:                            Nothing. My whole point is, and it’s in the title, it’s half as hard. What we do here, flipping the land, half as hard, twice as profitable as being a landlord. It’s a lot more profitable, actually.

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:                            I know it’s going on Friday.

Jill DeWit:                               All right. That’s exactly what I was going to say.

Jack Butala:                            You are not alone in your real estate ambition. It is Friday, Jill.

Jill DeWit:                               I was already thinking weekend, is where my head just went.

Jack Butala:                            You were done with the show.

Jill DeWit:                               You know me.

Jack Butala:                            You were done with the show about a half hour ago.

Jill DeWit:                               Oh yeah, I really was. We did an extra show this week.

Jack Butala:                            I know.

Jill DeWit:                               That’s partially why.

Jack Butala:                            That’s what’s going on.

Jill DeWit:                               Yeah. We did a two parter on Tuesday, I think it was. It was two part Tuesday.

Jack Butala:                            I’m not even going to tell you about the numbers on that show, am I?

Jill DeWit:                               No. No, you are. I do want to know.

Jack Butala:                            They’re twice as good.

Jill DeWit:                               I bet they are and they will be.

Jack Butala:                            It gets me thinking.

Jill DeWit:                               Oh no.

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