Your Acquisition Criteria and Ours (CFFL 440)

Your Acquisition Criteria and Ours (CFFL 440)

Jack Butala:                       Jack Butala with Jill DeWit.

Jill DeWit:                           Hi!

Jack Butala:                       Welcome to our show today. In this episode, Jill and I talk about your acquisition criteria, and our acquisition criteria. The concepts are the same, but they should be a little bit different. Before I get into it, let’s take a question, posted by one of our members on the landinvestors.com online community. It’s free.

Jill DeWit:                           Okay. Luke asked, “I don’t usually check the zoning on these properties. Recently, it seems like that’s all I have been doing. Learning a lot, too. It’s totally different county by county. Some of the zoning info is in corelogic and some isn’t. Knowing what is allowed and not allowed in the property makes ’em easier to market, just takes a lot of time. I wonder if you guys ever check or get into that or have any pointers? Thanks.”

Jack Butala:                       I do. Oh, Trevor answers.

Jill DeWit:                           Yeah, I got one right here, too. So I put in here one of the comments from one of our folks. And then I thought we’d weigh in, too. All right, so Trevor already commented. “Luke, I spent an hour with the county today getting sent to the assessor, treasurer, assessor …” Coast Guard!

Jack Butala:                       Coast Guard helicopter.

Jill DeWit:                           Super cool. All right. So he said, “Lucas,”-

Jack Butala:                       That is so cool.

Jill DeWit:                           I love it. I know. “Luke, I spent an hour at the county today getting sent to the assessor, treasurer, assessor, and zoning. Found out it will cost me basically nothing to split four of my 40 acre properties I have accepted offers on into 20 acre parcels. Was then reluctantly told that with a specific zoning, I can basically do whatever you want …”

Jack Butala:                       Yeah, must be in Texas.

Jill DeWit:                           Awesome. “Do whatever you want.” This is in quotes. “Down to one acre parcels if you want to even though it makes my life hell.” I love it. “She told me it was still the wild, wild west.”

Jack Butala:                       This is Texas.

Jill DeWit:                           “And then went on to rant about folks selling land, landlocked land, to folks on the internet and how they’re all crooks, hahaha. We laughed and laughed about those dirty, nasty, probably inbred internet land sellers.” That’s so funny. “So I tried to do a zoning search of that county and no dice. Must find another way now. I have found a few sections with that zoning via GIS so I may have to see what I can do to buy it cheap enough. Maybe team up with a heavy equipment guy …”

Jack Butala:                       Yep.

Jill DeWit:                           “… and start turning sections into 10 acre [crosstalk 00:02:25]”

Jack Butala:                       That’s what you do.

Jill DeWit:                           “If I can find a good county road to the section, game over.”

Jack Butala:                       Yep. You need a county road. Then a section is a square mile, it equals 640 acres. Do the math on this with me real quick. This started as a zoning conversation and ended in a subdivision conversation. Which is why you check, hey, Luke! That’s why you always, we check the zoning on everything.

Jill DeWit:                           I do.

Jack Butala:                       And it’s not just enough to go and see what it’s zoned. Like, let’s say it’s zoned …

Jill DeWit:                           Commercial.

Jack Butala:                       … residential.

Jill DeWit:                           All right.

Jack Butala:                       There’s a, or are you third gate, which is single residence per 38. It’s a Arizona specific. It’s always different for county. And you always want to call. Because of the reason that Trevor outlined. And you want to see a pattern in way stop zones because if you want to split it, you’re gonna triple your money.

Follow me on this. Trevor bought, I know the terms on one of his deals because he called me and told me, a section, 640 acres, for $100 an acre in Texas. That’s $64,000, now he owns a square mile. Let’s say he blades in roads and has, gets 64 … it’s not possible, but I’m just going to do it, ’cause this, it’s not possible to get 640 one-acre lots out of 640 if you blade roads in. But, I’m gonna just, let’s say you get 600, for the sake of argument.

And he blades the roads in effectively, ’cause it’s, say it’s flat, and puts some nice flowers in or whatever you do to make it look nice, and manage the roads. After rain, you’ve gotta go out there and check it and the whole thing. It’s not as expensive as you’d think. There’s a lot of local guys in rural areas that have, you know, yellow iron. Large caterpillars that’ll blade the roads there real fast.

So now you have 600 one-acre properties and you sell them for $1,000 each, all right. And who’s not gonna buy an acre in Texas that’s all bladed in for $1,000? You’re gonna sell ’em faster than you can imagine. For $600,000 and a $64,000 investment and let’s say you spend $10,000 or $20,000 on the roads. This is an intentionally silent time on this podcast right now.

Jill DeWit:                           Why?

Jack Butala:                       Because I, it’s staggering, the amount of money …

Jill DeWit:                           Oh, right.

Jack Butala:                       … that you can make.

Jill DeWit:                           I agree.

Jack Butala:                       You spend $70,000 and in about three months, you collect $600,000. And the people that are buying these properties, at a $1,000 a unit, are calling you and thanking you. And their kids are thanking you.

Jill DeWit:                           Exactly.

Jack Butala:                       Now, let’s say you spend, charge $1,500 or $2,000.

Jill DeWit:                           Right.

Jack Butala:                       That’s $1.2 million.

Jill DeWit:                           Mm-hmm (affirmative). Yep.

Jack Butala:                       On a $70,000 … show me, tell me, and we don’t have any employees. You don’t have any [inaudible 00:05:11] costs. It’s staggering.

Jill DeWit:                           Mm-hmm (affirmative).

Jack Butala:                       Those the kinds of deals that Jill and I do.

Jill DeWit:                           Yep.

Jack Butala:                       Frequently.

Jill DeWit:                           Well, back to the zoning, too, it’s interesting how, like, this county found in, depending on zone, do whatever you want. You know. [crosstalk 00:05:29]

Jack Butala:                       Texas just changed the rules. In our favor.

Jill DeWit:                           Love finding those higher zone. You think you want residential. This is an interesting little tip that, it’s harder to zone up than it is to zone down. So, meaning, commercial and all that stuff is easy to go down to residential, down to less important … I don’t know what the word is. Less, ah, business-related uses.

Jack Butala:                       Well, it’s less harsh on the, the lesser the harsh use of the land, the easier it is.

Jill DeWit:                           Right.

Jack Butala:                       So …

Jill DeWit:                           Well, it’s great-

Jack Butala:                       … heavy industrial. Good luck getting a residential area zoned to heavy industrial. It’s not … city planners almost never do that. But they’ll take heavy industrial area and zone it down to residential, if that makes sense.

Jill DeWit:                           Exactly.

Jack Butala:                       If it’s in the best interest of the community, that’s theoretically what they’re supposed to do.

Jill DeWit:                           Right. Exactly. And I love those ones that, the one … what’s interesting to me is, one of the reasons that we always look, it’s a little thing, but one of the reasons we look at zoning is I want to make sure, can people put a mobile on there?

Jack Butala:                       Yeah.

Jill DeWit:                           I mean, that’s a huge thing. And for the end user, in our world, as do I have to have a site built home or can I put, roll something up on there?

Jack Butala:                       That’s a big deal.

Jill DeWit:                           Mm-hmm (affirmative). And, how big does it need to be? Because then you get into [inaudible 00:06:46] zoning, with utilities and things like that. It’s important to, just to know and how to properly market ’em. Because you know what, too? By knowing that, I market them differently and I’ll get more money for them.

Jack Butala:                       Ding, ding!

Jill DeWit:                           Thank you.

Jack Butala:                       It’s exactly right, Jill. Isn’t it great set of questions by two senior level members of … how cool is it to be able, if you’re new in this, to be able to just go on a success plan and listen to two seasoned pros.

Jill DeWit:                           That’s true.

Jack Butala:                       Like, have a discussion like that.

Jill DeWit:                           Yeah, so landedsuccessplant.com is what it’s called today. And it’s going to be flip, this, any day now the switch is going to flip and it’ll be, you’ll find it off landinvestors.com is where you’ll have it. But it’s great to go in.

Jack Butala:                       Hey, this parley is right into our, our show topic. And if you have a question or you want to be in the show, reach out to either one of us on landinvestors.com. Today’s topic is our acquisition criteria versus your acquisition criteria. So, generally, Jill and I, for houses, we, we make $10,000 period. Whether it’s a $300,000 house or $120,000 house, we mark it up $10,000 and then we have the buyer before we even flip the thing. We sell houses to flippers. So that’s simple. Then that should be your, if you’re into that kind of this, that should be your goal, also. Try to do one or two a month.

Jill DeWit:                           We have several people that are, that came to us from that background. That’s what they were doing. And they just got tired of [inaudible 00:08:16] they’re like, oh my gosh, the sweat and energy and money and cost and stress [crosstalk 00:08:21] …

Jack Butala:                       Well, you never want-

Jill DeWit:                           … that I poured into this property that I got stuck with for six extra months, and I made $2,000 in the end. No, seriously. Or, I lost $40,000, I was just happy to get rid of it. I mean, that kind of thing. So it’s kind of funny. So we have a lot of ’em in our world that are here because they’re done. They’re acquisition criteria does not include that. But, they also know people who still do that. ‘Cause you know how it is. If you’re in that world, you’re gonna meet those people. So we have a lot of people that are doing like we do. And hey, I’m feeding these deals to all my buddies. I don’t want to do it anymore, but at least I’m helping them out.

Jack Butala:                       Right.

Jill DeWit:                           And I’m making something, too. Everybody wins.

Jack Butala:                       So, here’s the take away from the whole show. Have an acquisition criteria. I see some people make this mistake early on. And I never made it, because I came from an acquisition background all the way through. So, when I was in, when I was VP of acquisition for a, a large publicly traded health care organization, we had, you know, written on a white board on the wall. We only buy X, Y, and Z. And so then it was my job to find that and make it happen. And I did, pretty well. What I see happen with a lot of people that are new in this business is that they’re what I call opportunist. They’ll look at every type of deal. And they’ll price it, and man, you waste a lot of time. Or, you can sit there and say, I only pay $100 an acre for properties between five acres and 40 acres in Arizona. Or in Wisconsin. Or whatever. And you stick to that and it’s a little tough to get used to in the beginning, but once you do …

like look at Trevor in this example. I only buy property that’s zoned this way, where I can do this, this, and this and my margins whatever.

Jill DeWit:                           Mm-hmm (affirmative).

Jack Butala:                       And now, you’re not wasting any more time. Looking at, you know, funeral homes.

Jill DeWit:                           Exactly.

Jack Butala:                       I literally, somebody called me and said, “Would you like to buy a marina?” This is like three weeks ago.

Jill DeWit:                           I’m in the golf course. I’ve had numerous golf courses, what would I do with a golf course?

Jack Butala:                       Yeah, I mean, I don’t care if it’s the most profitable thing on the planet, it’s a deal of a lifetime, I’m not gonna review it.

Jill DeWit:                           Exactly. No, thank you.

Jack Butala:                       It’s a discipline.

Jill DeWit:                           I don’t care if you’re gonna give it to me, I still don’t want it. Thank you.

Jack Butala:                       Yeah. So, our criteria is $10,000 for the houses. We have to double our money on any small acreage deal. So, yesterday we talked about, well we want way more than double our money on this RV park. We’re buying for, what? $200-ish each? And we’ll sell them for $1,000 each, maybe $1,500 each.

Jill DeWit:                           Mm-hmm (affirmative).

Jack Butala:                       So that passes that. And then, my favorite is the high-end ranches in the L.A. area. We have to clear $100,000. We usually end up clearing way more. Sometimes, it’s seven digits. But I would rather do 10 deals at $100,000 than one deal at a million and take eight months. I’d rather just turn ’em, turn ’em, turn ’em.

Jill DeWit:                           Exactly.

Jack Butala:                       Your acquisition criteria should be doubling your money, period. Because you want to get the experience if you’re new. If you did this mobile deal like we’re doing, that two, let’s just call it 200 even, you would want to sell those properties, and I mean overnight, for $400-$500 a unit cash, if you’re doing cash. On terms, it’s a whole different deal.

Jill DeWit:                           Right.

Jack Butala:                       ‘Cause you want to get the experience and you want to learn and I see a lot of people make that mistake. They get real greedy. They’ll say I’m going to wait, I want $10,000 each. It’s too easy to put it in the spreadsheet and say, oh, I’m a millionaire. Plug in the number that I can sell this for. And you really can’t sell it for that.

Jill DeWit:                           Right.

Jack Butala:                       So, that’s the whole point to this show.

Jill DeWit:                           Yep.

Jack Butala:                       We have a different acquisition criteria because we’re at a different place in our career. But, when I started this, it was double my money and get out. And that’s what we teach in the program.

How’s your nail color today?

Jill DeWit:                           It’s good! No, I just love you. I’m just listening, it’s all good.

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

Jill DeWit:                           And inspiration, that’s me.

Jack Butala:                       To get just about anything you want.

Jill DeWit:                           We use it every day 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.

You know what I just realized? And this is what happened at that party last weekend. We make this look easy.

Jill DeWit:                           We do.

Jack Butala:                       We talk about clearing $100,000 on a real estate deal like we talk about what do you want for dinner.

Jill DeWit:                           We do.

Jack Butala:                       Is that good or bad? I can’t decide.

Jill DeWit:                           I think it is what it is. Well, it’s also parleys into why we don’t talk about sales ever. I don’t really think about sales, it’s only the acquisition. People go, what about the selling part? I’m like, what about it? You know, I mean it’s really how it goes!

Jack Butala:                       Pick a button and put your credit card in.

Jill DeWit:                           You know, it’s like, when you say, they don’t get it. Well, let’s just say I’m selling this, I’m selling a Porsche for half of what it’s worth. Do you think I’m gonna have trouble? Well, no. All right, next.

Jack Butala:                       I use diamonds.

Jill DeWit:                           There ya go.

Jack Butala:                       I love diamonds better than cars because you hold it in your hand. So-

Jill DeWit:                           Whatever it is.

Jack Butala:                       Would you buy a diamond that you know it’s half price?

Jill DeWit:                           Yeah.

Jack Butala:                       Yeah, you would a diamond! Well, why wouldn’t you buy a house? Oh, ’cause I don’t know how to do that. Okay. What else can I do for ya?

Jill DeWit:                           Or a car or, dream it up. So, yeah. It’s just … are we jaded? Are we, because we’re at this point?

Jack Butala:                       I don’t know if it’s, I don’t know. I don’t ever want it to sound like we’re bragging. And I don’t think that it comes off that way.

Jill DeWit:                           No!

Jack Butala:                       I just, you know what the problem is, Jill? We have to start making up what we do for a living again.

Jill DeWit:                           Yeah. It’s getting a little, it’s [crosstalk 00:13:44]-

Jack Butala:                       I used to park cars or something.

Jill DeWit:                           Well, here’s what happens. Here’s the reality what happens, this is what happened in that party. So, the people that do go, ‘Holy cow.’ Next thing you know, they’re like, they’re trying to give us money and I don’t want their money.

Jack Butala:                       Yeah, always.

Jill DeWit:                           That’s the thing. I mean, I have to share this. So we sat at lunch the other day, and we emptied our pockets of all the business cards. No, I had them in my purse, you had them in your phone case, and I’m like, who is, I don’t even remember who this is.

Jack Butala:                       And I threw them away.

Jill DeWit:                           We brought home a stack of business cards that was just given to us. It was all, oh, thank you, that’s nice, thank you. No, I’m not interested in …

Jack Butala:                       Jill and I, for the record, we don’t even have business cards. I threw mine away years ago.

Jill DeWit:                           And that, it got so funny, it’s like do you have a card? I’m like yeah, no. No, I don’t.

Jack Butala:                       It’s not bragging, we just, you know, honestly we should just say we have a real estate data company. And it still, it still questions.

Jill DeWit:                           It does. Like, what is that? It’s funny. Cool.

Jack Butala:                       Information and inspiration to buy undervalue property.

 

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