How to Create Equity from Real Estate Acquisition (CFFL 430)

How to Create Equity from Real Estate Acquisition (CFFL 430)

Jack Butala:                       Jack Butala, Jill DeWitt.

Jill DeWitt:                         Hi.

Jack Butala:                       Welcome to our show today. In this episode Jill coughs on the air [laughter 00:00:06]. In this episode, Jill and I talk about how to create equity from a real estate acquisition. This is near and dear to my heart, and it’s Friday and I cannot, honestly, cannot wait to talk about this.

Jill DeWitt:                         Oh good. I’m so sorry, I didn’t mean to cough in everybody’s ears.

Jack Butala:                       Before we get into it, lets take a question posted by one of our members on the Landinvestors.com online community, it’s free.

Jill DeWitt:                         Okay, Kevin ask, “I’m looking for a title company that will issue me just the title policy without having to pay escrow. I called First American Title, Chicago Title and a few others, but they all say the same thing. They tell me that in California they will only do title if escrow is involved. The property is in San Bernardino, California. Thanks in advance for the help.”

Well, one of our members has already chimed in, it’s kind of a comment. Nat said, “Good luck, let me know if you find one. I’ve never heard of one that doesn’t include escrow.”

I hear that.

Jack Butala:                       So it turn out, and I agree with that too. So, we’re gonna solve it, like we solve everything. We put together a website called, Titlemind.com. And it you go to that website, you will see when the launch date is. It hasn’t been launched yet. But there’s a count down to the website launch and, long story short, you type in the address of the state/county and APN.

You put it in, just like you’d put something into Google, and somebody closes your deal and it way, way cheaper than going to First American or anything else. We have cut a deal with the National Title Company, this is the future.

Jill DeWitt:                         Just going to get Title Policies.

Jack Butala:                       Well you can choose …

Jill DeWitt:                         You can do both.

Jack Butala:                       You can choose just to get a Title Policy, just to satisfy your own mind. You can choose to full-blown escrow with it or you can choose just escrow and no title. It’s pretty cool. I wish I had this when I started.

Jill DeWitt:                         Oh, I know.

Jack Butala:                       Now, I’m tellin ya. How much money have we probably wasted on retail value Title Policies.

Jill DeWitt:                         Exactly.

Jack Butala:                       How many trees died?

Jill DeWitt:                         Right. Oh my gosh.

Jack Butala:                       Do you have a question or do you want to be on the show, reach out to either one of us on landinvestors.com. Today’s topic, How to create equity from real estate acquisitions. Okay, I’ll just have to say how much I love this.

Jill DeWitt:                         Good.

Jack Butala:                       So it use be that you would create equity by developing real estate. So, you’d take a piece of land, you’d put a shopping mall on top of it, and you’d lease the thing out to a bunch of retail outlets, and bang. Now you’ve created equity because the raw value of the land itself and the building cost, let’s say just for fun, 10 million bucks.

Now you have a revenue stream and the capitalization rate yields 20 million, lets say.

Jill DeWitt:                         Right.

Jack Butala:                       And you sell it.

Jill DeWitt:                         Right.

Jack Butala:                       That’s the whole game. That’s what real estate developers do. They develop it, lease it up and sell it on a cap rate. They’ve created , in that example, 10 million dollars worth of equity. I give you this for thought. You and I, and any listener here, can do the exact same thing with all they had eggs.

All you gotta do is buy it for less than it’s worth. You buy a 40-acre property for 4 grand or 8 grand or 10 grand and you sell it for 20. You did the exact same thing it took that real estate developer to do in years. You buy a ranch in Santa Barbra for 800,000 bucks, you sell it for 1.2, you’ve created $400000 worth of equity by signing you name, twice.

This is a short show.

Jill DeWitt:                         It is.

Jack Butala:                       Your nails look great.

Jill DeWitt:                         Thanks. I’m like, well I’m truly tryin to think. I’m sitting here thinking, “What,” without choking. I have this silly cough and this tickle in my throat. But what can I really add.

Jack Butala:                       I’m gonna to kiss is out of you.

Jill DeWitt:                         To this space.  Wow.

Jack Butala:                       Is that yucky or good.

Jill DeWitt:                         I don’t know, that might be yucky.

Jack Butala:                       You never know with women, you know.

Jill DeWitt:                         It’s a little yucky.

Jack Butala:                       Sometimes they think it’s yucky, sometimes they think its romantic. It’s really just a dice roll, for a guy.

Jill DeWitt:                         It is not a moving target.

Jack Butala:                       It isn’t?

Jill DeWitt:                         No, no, if you’re talking nice, it’s usually going to be received well, seriously. If it involves kissing, it’s good.

Jack Butala:                       Okay.

Jill DeWitt:                         We’ll leave it at that.

Jack Butala:                       I don’t know, you just said it was yucky.

Jill DeWitt:                         Well, there’s a cough involved.

Jack Butala:                       I’m gonna kiss that anger right out of you.

Jill DeWitt:                         You should try that.

Jack Butala:                       That’s not gonna go well.

Jill DeWitt:                         Wow.

Jack Butala:                       No, when you’re real upset, I don’t think there’s kissing.

Jill DeWitt:                         Can you imagine, sweetheart I’m just gonna kiss this drama right outta you.

Jack Butala:                       I can tell ya, from experience, that’s not gonna work.

Jill DeWitt:                         I really want somebody to come home from work and try that with their wives.

Jack Butala:                       It took me 50 years to understand this about women. The best thing you can do, it sit there with your hands folded in you lap and listen, and not talk at all.

Jill DeWitt:                         Right, don’t give advise.

Jack Butala:                       Yep, don’t give advise, don’t solve the problem. Just sit there and listen. 50 years it took me understand that. Turns out that women, they don’t want you to solve any problems. Men want to solve everything.

Jill DeWitt:                         Right.

Jack Butala:                       No, they just want you to listen.

Jill DeWitt:                         That’s fair, it’s right.

Jack Butala:                       I went to dinner a year ago, one time with a guy, and we were sittin there being in the bar area. And there was a table of six women and they were all talking to each other and no one was listening. They were all facing each other and talking. But women can talk and listen at the same time.

Jill DeWitt:                         That’s true.

Jack Butala:                       Guys can’t do that.

Jill DeWitt:                         No, yeah, is that confusing to you?

Jack Butala:                       Yeah, you either talk or listen.

Jill DeWitt:                         Got it.

Jack Butala:                       That’s why I have a podcast cause I don’t have to listen to anyone today.

Jill DeWitt:                         That true, cause you could sit there and watch a group of women and one could be talking to the person to her left, and she’s hearing the conversation of the person to her right at the same time. And she’ll pause and comment and go right back to what she was saying to the other person. It’s really funny.

Jack Butala:                       Let’s parlay at this into acquisitions somehow. Do you think because of this talent, you’re better a acquisitions than, let’s say, any given guy?

Jill DeWitt:                         Yeah.

Jack Butala:                       I think so too. I really do.

Jill DeWitt:                         Yeah, cause you know what? I can read between the line sometimes too. I really can. When I’m talking to sellers, I can hear, well maybe I don’t know if it’s me too, but I can hear little things. Like, oh they really do want to sell and when they’re telling you they don’t want to sell, they do want to sell. They’re jus waiting for you to say the right thing at the right price or something.

Jack Butala:                       Okay, so I’m going to ask you about this, cause we buying 180 properties in Southern Arizona that are RV/Mobile Home Lots. Which is my favorite. And so, you’ve been talking to the sell a few times, right? What’s in his voice, is he a seller, is he not a seller? I mean, cause you negotiated the greatest deal we’ve ever done.

Jill DeWitt:                         He did want to sell. He just wanted to hear it was going to be real easy. That was a lot of his concern.

Jack Butala:                       Easy?

Jill DeWitt:                         Yes, you have to uncover whatever it is. So for him, it was the ease of the transaction and how fast he can have a check.

Jack Butala:                       Well heck.

Jill DeWitt:                         Right?

Jack Butala:                       That’s what … We built a business on that.

Jill DeWitt:                         I know.

Jack Butala:                       I want to buy them faster than he can sell them.

Jill DeWitt:                         So and sometimes that’s all it takes. It’s not necessarily about the price. It’s just, how fast can I cash out, and be done, and how easy, and your gonna do all the work.

Jack Butala:                       Here’s the terms of this deal

Jill DeWitt:                         Yeah.

Jack Butala:                       This is the take away from this show. It’s about 180, 179 properties we’re buying them for $300 each, and we’re just selling them for about 1500 buck eachish. Let just say, well let’s just use round numbers. 180 properties, they want to sell them for 1500 to 2000 dollars each. Probably for cash. That’s $300000. Talk about creating equity, that’s the topic today. We’re gonna create, over $300000 for a purchase price, I think it’s, 30 thousand, well no, it’s like 300 times … No, it’s $60000. It’s less than 60, it’s like 50 grand. And it’s amazing.

Jill DeWitt:                         It is.

Jack Butala:                       And that’s how you create equity from a real estate acquisition. So, it’s such a simple concept and it needs to get discussed. Somebody left a message on our website. It said, “Thank you Captain Obvious.” Did you just do that?

Jill DeWitt:                         Seriously?

Jack Butala:                       Yeah, because it was under … We did a show a long time ago, you and I, called The Two Reasons that Property Doesn’t Sell. And the two reasons are, it’s either priced incorrectly or it’s for sale but it’s not reaching the right buyers.

Jill DeWitt:                         Exactly.

Jack Butala:                       And he said, “Thank you Captain Obvious.”

Jill DeWitt:                         I think that’s fantastic.

Jack Butala:                       So do I. You know what, I would love …

Jill DeWitt:                         That’s a compliment.

Jack Butala:                       That’s what I think. Every show we do, if we can just point out super, super simple, sixth grade stuff.

Jill DeWitt:                         Dude, I want to get a shirt that says, “Captain Obvious.” That’s awesome.

Jack Butala:                       This whole concept today, on this show, Creating Equity from Acquisitions, it needs to be pointed out.

Jill DeWitt:                         It’s being truthful too. You know, I love that. This is so interesting. Why do people try to make things difficult?

Jack Butala:                       I don’t know, Jill.

Jill DeWitt:                         That’s the funny part. It is obvious, it is true. You buy it right, mark it up, sell it have a nice day. Why do we have to make it so difficult?

Jack Butala:                       Make a ton of money. Like in the show yesterday, we were talking about net price and value, and all right, so maybe that’s complicated to some people. Here, I’ll un-complicate it for you. Buy the property for $10000 and try to sell it for 20, you’ve created equity.

Jill DeWitt:                         Exactly.

Jack Butala:                       If you want to be complicated about it, put a shopping mall on it and spend two years of your life yellin at contractors.

Jill DeWitt:                         Right.

Jack Butala:                       Or you can just buy a ranch for half and sell it the next week.

Jill DeWitt:                         Right, exactly.

Jack Butala:                       By sending mail out. That’s what this whole thing is all about. That what landinvestors.com is all about. Creating equity form inexpensive real estate acquisitions.

Jill DeWitt:                         And how do we do that?

Jack Butala:                       There’s nothing else to say.

Jill DeWitt:                         Using data and our tools, you buy, right?

Jack Butala:                       That’s it.

Jill DeWitt:                         Next, Captain Obvious. That’s so good.

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

Jill DeWitt:                         And inspiration, that’s me.

Jack Butala:                       To get just about anything you want.

Jill DeWitt:                         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 ambition.

Jill DeWitt:                         I have something funny to say.

Jack Butala:                       You’re Mrs. Obvious then if I’m Captain Obvious.

Jill DeWitt:                         You want to hear something really funny? My brother …

Jack Butala:                       You’re Kernel.

Jill DeWitt:                         My brother, you will totally get this, and you’ll love this. My brother gave my mom a nickname.

Jack Butala:                       Oh, no.

Jill DeWitt:                         A long these same lines, a long time ago. He was calling her, Captain Random.

Jack Butala:                       I remember this, I loved Captain Random.

Jill DeWitt:                         That’s what he was calling our mom.

Jack Butala:                       What, did she just do random stuff?

Jill DeWitt:                         Yes.

Jack Butala:                       Like what? Give me an example

Jill DeWitt:                         She would just …

Jack Butala:                       It’s so much fun to make fun of our parents.

Jill DeWitt:                         She would just walk around and, I know she doesn’t listen to this show so it’s all good. But, you know what, and I’ve heard of this. I am sure that I do the same thing now but just things just pop into your head.

Jack Butala:                       And she just says stuff?

Jill DeWitt:                         Yeah.

Jack Butala:                       No you don’t, Jill.

Jill DeWitt:                         Okay, thank you.

Jack Butala:                       If you did I would tell you.

Jill DeWitt:                         But he did come up with Captain Random and I just thought that was just so funny. That was a long time ago.

Jack Butala:                       She’d just walk around and say stuff like, I like purple. Is that what happens?

Jill DeWitt:                         I don’t know, it just be like different weird things and yeah.

Jack Butala:                       The spaghetti’s undercooked, just random stuff.

Jill DeWitt:                         Well, she …

Jack Butala:                       Like tourettes but rated G.

Jill DeWitt:                         Because her mind was thinking quickly, and it would just come up. She would be in, I’m sure a lot of women do this and I’m sure I’m not alone here.

Jack Butala:                       You’re gonna get emails because of that.

Jill DeWitt:                         Oh, I’m gonna get it. But I’m sure[inaudible 00:12:31]. Cause we’ll be thinking about something and something else will pop in our head, and then you’ll go, “Oh, speaking of spaghetti, when we take this trip next year …” You know, things like that.

Jack Butala:                       I got a funny real estate story. So, real early in my career. I was a Commercial Real estate Broker, and I’d bought and sold nursing homes and long-term care facilities. Which is how all this mess started. I was in Detroit and I drove to Milwaukee, cause we sold a property, the property was owned by a non-profit religious organization called, The Jewish Home for the Aged. We were selling it too. I was broking the deal, we sold it to a Christian organization, for-profit Christian organization, literally for-profit. And so, I mean, you want to talk about a comedy affairs.

The closing took place, first of all that was the last in-person closing I ever did. If there’s a reason the real estate agents don’t let buyers and sellers talk to each other.

Jill DeWitt:                         Oh, got it.

Jack Butala:                       So, the closing took two weeks, I’m not exaggerating, in the basement of this facility and it all came down to listing every single resident, and their paraphernalia, and how there gonna remove this religion from the wall. I mean it was not about the real estate deal at all. It was about their non-profits mission to make sure that …

Jill DeWitt:                         So it was emotional, not a financial?

Jack Butala:                       So, Captain Random here, the woman that was running the thing, the biggest scatter brain there ever was. We would be talkin about something and she would just say, “Oh, and Mrs. Clarice crucifix has to be removed.” And so it was just two week of that.

Jill DeWitt:                         That’s hilarious.

Jack Butala:                       But even her lawyer was like, I can’t take this anymore, she’s nuts. But never do an in-person closing, that’s the take-away from that.

Jill DeWitt:                         I love it.

Jack Butala:                       Just do a, we use to call them then, they were FedEx closings then.

Jill DeWitt:                         Oh, that’s good, okay.  All right, well Captain Obvious. Let’s go have a good weekend.

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

 

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