Better Living Through Equity Accumulation (CFFL 441)
Better Living Through Equity Accumulation (CFFL 441)
Jack Butala: Jack Butala with Jill DeWit!
Jill DeWit: Oh, hi!
Jack Butala: What the- what are you thinking about?
Jill DeWit: I gotta tell you when I get to here. I was thinking about the title of this show sounds like a magazine: Better Living.
Jack Butala: Let’s just-
Jill DeWit: But it is a magazine.
Jack Butala: Did you ever hear the phrase, “Let’s stick to the script.”
Jill DeWit: Okay. It’s … okay. Hi. All right, go ahead. I got a lot to say about this one.
Jack Butala: Welcome to the show today. In this episode, Jack and Jill talk about better living through equity accumulation. It’s a play on better living through chemistry.
Jill DeWit: It’s hilarious.
Jack Butala: Which is really a play on I’m a drug addict.
Jill DeWit: Not to be confused with Good Housekeeping and all those magazines you see on the shelf cause that’s kinda what it sounds like.
Jack Butala: Before we get into it, let’s look at a question posted by one of our members On a land investor’s dot com online community. It’s free.
Jill DeWit: Okay, this question I love. And I’m adding this because this is one of the most asked questions I get when people schedule calls with me. So here it goes. Mark asked, “I am brand new in this world. What is the fastest way to ramp up? I have 5 thousand dollars set aside for acquisitions.”
Thank you, Mark. This is a good question, like I said. So Jack, take it.
Jack Butala: The biggest single mistake that I see with people who are brand new. And when they get into the real estate industry, and this is in any part. Let’s say it’s houses, or whatever. Not just land. Is that they pay attention to the real estate. They’re looking at a deal and they’re assessing the deal and they think it’s about real estate. It’s not. It’s about data. And it’s about learning to manipulate and assessors database so that it rains acquisitions on you every single morning. To the point where you have to turn some down that are smokin’ deals. That is what you’re supposed to be. The first six months of the business you need to be concentrating on learning how to use data.
If you don’t like spreadsheets, or you don’t know what [Ahskeed Unlimited 00:02:16] is, or math has never been your thing. You should, and I say this with respect, you need to find something else to do for a living. And probably a different podcast to listen to.
Jill DeWit: Or maybe a partner though, what if you have a partner with you, or somebody who can do that.
Jack Butala: Yeah, we have a ton of husband and wife teams, whatever the politically correct term is to say.
Jill DeWit: You can learn this stuff.
Jack Butala: Life partner teams that one is real good with data and one is real good with sales. I mean, that’s Jill and I.
Jill DeWit: Exactly.
Jack Butala: Jill selling right there. [crosstalk 00:02:49] What I just said was go find something else to do for a living. And she’s just turned it around, she’s selling it. She’s selling you lister.
Jill DeWit: You know, I actually am quoting one of the members from a long, long time ago that we did on a podcast. Who is in Florida, who actually said, “hey, I’ve watched, and we have too. I have seen ambition trump experience.
Jack Butala: Oh yeah.
Jill DeWit: And you go out and get it, and you learn it. [crosstalk 00:03:12]
Jack Butala: If you’re willing to learn how to use a spreadsheet. Then that’s great. Most successful people in our group stop at nothing.
Jill DeWit: Right, that’s it.
Jack Butala: They just will stop at, they don’t know that they failed at something. They just keep moving forward.
Jill DeWit: They just say, okay, I need to learn excel. Well then I guess I’m gonna take an excel class over this weekend and I’m not gonna stop until I master it.
Jack Butala: Hey, incidentally-
Jill DeWit: Without a mouse.
Jack Butala: Yeah without a mouse. Incidentally Microsoft has some unbelievable courses for free on the internet on all their products.
Jill DeWit: There’s all kinds of places to do it. Well here’s my other thing I want to weigh into. Like what you said, it’s not about real estate, it’s about data. And one of the fastest ways to ramp up is pick a budget, say I’m only gonna buy 10 properties at $500 a pop, here’s my criteria. So now you’re gonna find the county that has the properties. And you know, this person Mark is new in our world. He knows he has all the tools and us behind him to pick a county that is gonna meet that criteria.
So that’s what you do. And you go and set out with your head down. Buy those ten properties, nothing else. Get those out of the way. At least double your money, so your 5 thousand is now 10 thousand. Now decide what you want to do from there. Do you want to keep doing the same thing? Gee, now you have this figured out. That’s the fastest way you ramp up. Because once you get that under your belt, Mark, and you know what you’re doing you might be like some of our other people, “oh boy, this does work.” Now you’re pulling money out of every possible thing you can do to increase your acquisition fund. And do more and more and before you know it 6 months have past, we haven’t spoken to you and you’re going, “well, guess what. I’m looking at a quarter of a million dollars in my bank account right now. Whoops, how’d that happen?”
Jack Butala: That is literally happened to both of us.
Jill DeWit: Yeah, cause you’ve got your head down, and you did it.
Jack Butala: Because it’s not about the money.
Jill DeWit: It’s not about the money. And you’re not looking at the asset like, isn’t it pretty, I want to go stand on it. Uh-uh. It’s a spreadsheet. Like Jack says, it’s a number on a spreadsheet. And just think about doubling your money. Getting this all into a system. And letting it work for you.
Jack Butala: Here’s my direct, laser like answer to this question. Unlike a Politian I’m gonna actually answer this question in detail.
Jill DeWit: Unlike a Politian.
Jack Butala: If I were brand new and I had 5 thousand dollars the very first thing I would do, this is after I become a member of Land Academy, well even before that. I got to that point where I set aside 5 grand, cause I probably really spent maybe a month at least researching on the internet that this is feasible. I would get all the stuff I could get for free from us and from every source. [Bigger Packas 00:05:57] is a fantastic place to get free information. And then if I decided to do it I would join Land Academy and I would get the tools, our lowest level membership is $250 bucks a month. I would get the tools, and I would spend a tremendous amount of time and energy learning how to use data.
And then I would get a calendar out and I would say, cause I probably have a job if I’m brand new. Do not quit your job.
Jill DeWit: Yeah, don’t quit your job.
Jack Butala: Keep your job. Don’t quit your job. When you quit your job you should say, “Man, I should’ve done that a year ago.”
Jill DeWit: Exactly.
Jack Butala: So you want to put a calender together and say these two weeks I’m gonna learn data, this week I’m gonna do this, this Ima do this. And I’m gonna set out to get my first offer campaign in the mail on X date. And be prepared for the next week or two to get the results from it. I would buy exactly, no more, than three properties, probably two. But here, please listen, this is a takeaway from the show. Focus on one deal. Once you get that first deal done you’re gonna know if you want to do this for the rest of your life. For me it was like a heroin addiction, like I would imagine that would be. Because that’s how addicted I became to it. And I think it’s a healthy way.
Get that first deal done, bought and sold, all right? It means you’re gonna have to turn acquisitions down, you’re gonna wake up in the middle of the night worrying. If you’re anything like Jill or me, Jill doesn’t worry about anything. I worry about everything. Get the first deal under your belt. Let’s say you spend 5 grand on a 40 acre property and you sell it for 10. Now you got 10 grand in the bank, take your 5 thousand dollars, put it back wherever it came from. Now you’ve got 5 thousand bucks left, you can literally build an empire on that 5 thousand dollars.
First deal I did I, it’s in the e-book. I netted 10 or 15, and literally went on to generate 25 million dollars and still counting on that. So that’s what I would do. And it’s all because I didn’t care about the real estate. I only care about the data. Everything else you can learn at Success Plant and all that. What you can’t learn without really going though some education and spending hours at a computer is about data. We offer all the solutions for everything else. Everything else is just back off of silly.
Jill DeWit: Exactly, that was good. Thank you, I’m sure that helps a lot of people.
Jack Butala: If you have a question or you want to be on the show reach out to either one of us on landinvestors.com. Good point Jill, because that’s why we do this show, to help you. We don’t do it cause it’s entertaining for us, well.
Jill DeWit: Partially, it is entertaining for us.
Jack Butala: It’s also a chance to talk to my girlfriend.
Jill DeWit: Oh, thank you.
Jack Butala: I’m serious, I learn about what’s going on.
Jill DeWit: You know what, when you like me I’m your girlfriend, when you[crosstalk 00:08:47] No, I’m just kidding.
Jack Butala: What? When do I not like you? The heck?
Jill DeWit: Thank you.
Jack Butala: Today’s topic is better living though equity accumulation. Well what the hell is equity, anyways? Here’s a pure definition of equity. A balance sheet has equal numbers on the bottom. On the left or right side on the bottom. On the left side is all your assets. Think of it as a house. The house that you own is worth 100 thousand dollars, so on the left bottom side. And that right side’s gonna be 100 thousand dollars. Left side, all the assets, so the house you have is a 100 thousand dollar house, well you have a mortgage. You have a 80 thousand dollar mortgage on it. So that’s the liabilities portion. So assets minus liabilities equals equity. So you have 20 thousand dollars of equity in your house. Well you keep paying, liabilities keep going down, assets keep going up, equity keeps going up. And you pay it off, let’s say it’s still worth 100 thousand dollars. So 100 thousand dollars of assets, zero liabilities, 100 thousand dollars worth of equity.
Well how the heck do you accumulate. You can equity quickly, what’s the fastest way to accumulate equity. It’s not by improving the property, all the stuff you’ve learned, forget it. The single fastest way to accumulate equity is to buy a asset for less than it’s worth. Think of that balance sheet again, it’s the house balance sheet for 100 thousand dollars. What if you buy a house for 50 thousand dollars that’s worth a hundred and you pay cash for it? You paid 50 thousand dollars for an asset, you have no liabilities and it’s worth 100 thousand dollars. You have just bought yourself 50 thousand dollars worth of equity and you can accumulate it that way.
Jill DeWit: Listen captain obvious, sorry. You know what, I want to give you a compliment. It really was meant to be a compliment but it just came out-
Jack Butala: Captain obvious.
Jill DeWit: Captain obvious.
Jack Butala: I’m gonna get a shirt made.
Jill DeWit: You are so smart sometimes. This should be obvious but it’s not.
Jack Butala: No, it’s crap that I wish my dad would’ve told me.
Jill DeWit: Right? I’m so happy, a) I really appreciate the accounting 101. But b) what you’re stating, this is one of the funniest things. This is why I love doing the show. You’re stating something that should be obvious. But it’s not for people. They really feel like this. They have to put sweat and pain and tears-
Jack Butala: And build stuff.
Jill DeWit: -whatever into it. No you don’t. You just buy it right. You don’t have to do anything to it. Just buy it right?
Jack Butala: And how do you buy it right? You make a million offers and you buy six.
Jill DeWit: Bingo.
Jack Butala: Those aren’t the exact numbers. It’s more like 100 to 1 for land, and about 2500 to 1 for houses.
Jill DeWit: I totally agree. And I feel like the minute we close on our acquisitions I have equity.
Jack Butala: You can pay, literally I used to say this to my staff, I haven’t said it for a while. You can buy your way out of financial trouble by creating an equity.
Jill DeWit: Bingo.
Jack Butala: So we don’t have them anymore, we used to have slow sales periods cause we were addicted to Ebay back in the day. And so sometimes the bidding or the auctions wouldn’t go as well. And I’m like, we need to buy more property. And everybody’s looking at me cross eyed, like why would you? I’m like, cause we just gotta buy it cheaper. You create equity. The number get staggering. So think of house example that you bought for 50 thousand bucks that’s worth 100. Now think of buying 10 houses like that. Now you’re a millionaire.
Jill DeWit: Bingo. It’s not crazy.
Jack Butala: 100 thousand dollars time 10 is a million dollars. So you couched up half a million bucks, maybe got an equity partner, that loves this stuff more than you do. And you’ve created half a million dollars worth of equity in less than a year and you’re a millionaire. This is so simple, and this is what earlier in the week we talked about. How shocked these people were at this party last weekend. We just talk about it like it’s nothing, cause it really is. It’s that simple. We could end the show right now, actually.
Jill DeWit: We should. I’m just kidding. But it’s just so important.
Jack Butala: Captain Obvious.
Jill DeWit: I, sorry, I love that, Captain Obvious. I think we did get our point across, though.
Jack Butala: Well, what do you say to, Jill, you’re a master salesperson. What do you say to people who say, “what’s the catch? Come on, what’s the catch,” you know? “I’ve been working 40 years at the same job and,” … What do you say to those people? There’s gotta be a catch, it can’t be that easy.
Jill DeWit: You know what? If they can’t get out of their own way and out of their own heads and understand this, I wish them well and I sure hope their pension never goes away. And I hope they have their nice retirement plan and all that good stuff. And I really do wish them well. Because a lot of people just don’t get it. And I feel bad for them but there’s only so much you can do. But the people who do go, “wait a minuet. Now I get it.” The light bulb is going off and they have a lot of questions, oh I’m happy to help and I’m happy to answer the questions. And that’s what we do and I’m happy to show them how. There’s enough to go around. There’s so much. Some of this stuff we teach, Jack, and we talk about and share is basic knowledge that should be applied to every business period. Think about Shark Tank. People come in and what’s the first thing they say? They’ll say, “how much does it cost to make, how much are you selling it for?”
Jack Butala: It’s always the same questions.
Jill DeWit: Right? And then easily they’re gonna go, “okay, how can we get the cost to make it down to X.” Well that’s it.
Jack Butala: So that you can sell it for cheaper. [crosstalk 00:14:56]
Jill DeWit: It’s usually not we need, you know what’s funny, if you really think about it. They’re usually not asking, well you should sell it for more. They usually don’t say that cause you obviously have sales history. The first thing they’re gonna say is how can you make it cheaper?
Jack Butala: Make it cheaper and charge less and sell more.
Jill DeWit: Yeah. Just make it cheaper and have more profit. And that’s what you and I are doing, and that’s what you just said. When the sales are slow, there was a slump, or whatever you feel like you’re something, I don’t know, then we need to buy. But we need to buy more and buy it better.
Jack Butala: Right. Here’s the two other ways- Well there’s really, this is an offshoot. There’s only one other way let’s say, to accumulate equity or create equity and that’s though improvements. So think of a developer who buys a piece of property and puts up a strip mall on it and then rents it out. He’s dramatically created some equity there. If he’s all in to the whole thing for a million bucks and he’s now renting it out and it gets evaluated at 2 million, he’s created a million dollars of equity. That’s not for the weak of heart. Developing anything is really, there’s a lot to do and there’s a lot involved. And the guys who know how to do it live in skyscrapers. I’m not interested in that. I’m interested in buying stuff inexpensively, taking it off of people’s hands that they don’t want it. And I’m not interested in putting in a warehouse.
Jill DeWit: I gotta tell you this, and I feel guilty saying this, I’m a little bit lazy about that.
Jack Butala: I am too, Jill.
Jill DeWit: That’s a lot of it for me. Could I make more money and could I do more of that by putting an office building on it or something … You know what, I worked for, my first personal experience. Not family related, when I worked for these developers here in Orange County years ago. That’s what they did. They’d buy a piece of dirt, build a strip mall, rent it out, hang on to it. I’m not interested in that. Or an office building. They would ground up build it. I dealt with the construction [crosstalk 00:16:48] and all those things.
Jack Butala: Like, farmland leases, love that.
Jill DeWit: It’s a lot of work. I’m just not really want to do that much work. I’d rather not improve it, make a nice chunk of change, and let the next guy go improve it.
Jack Butala: To completely finish the thought, here’s what large private equity groups like KKR do. They do the same thing that we just described but they do it with companies. So they try to buy a company, they’ll go into a company that, say it manufactures stainless steel bolts. And they already own a stainless steel bolt company. You’ll see airline mergers are like this. And the stainless steel bolt company that they manufacture, they’ve already worked the kinks out. They have all the customers, they put it on a new computer system. They’ve really improved it. That’s the key here.
“Oh, I can go and buy this half failing stainless steel company and put a new computer system in there, get a new sales team in there. Split the, they make a different kind of bolt, let’s say, or a different kind of nut, or whatever. And we can sell it to our existing customers cause they’re getting them from somewhere else right now, and so overnight you take a 5 million dollar company and make it a 15 million dollar company because you have made the improvements that are second nature to you to make. And that’s what Bicher Hathaway is. They buy, Warren Buffet’s thing happens to be branded companies like Proctor [crosstalk 00:18:15]. Yeah. Or just brands for some reason. But Jill knows this, I have a great friend from high school. My best friend from high school has a little mini Bicher Hathaway, and he’s very very specific acquisition criteria. And all he does is computerize them. There’s companies all over Detroit, there’s paper everywhere. And he’s a computer geek like I am.
Jill DeWit: It’s perfect.
Jack Butala: It works out fantastic for everybody.
Jill DeWit: He streamlines it, makes it way more efficient. Doesn’t try to change what they do, just makes it way more efficient. And more profitable. Brilliant.
Jack Butala: He takes a lot of the back office stuff out of it.
Jill DeWit: He’s a perfect example, you’re right. A lot of people would go, well duh, that seems easy. Well yeah.
Jack Butala: It is easy.
Jill DeWit: It kinda is once you get in there and know what you’re doing.
Jack Butala: And had the confidence.
Jill DeWit: There you go.
Jack Butala: Join us, another episode? I lost my place in the script because I’m so excited about this episode.
Jill DeWit: You are.
Jack Butala: Join us another episode where Jack and Jill discuss how to us 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 than sell it immediately.
Jack Butala: You have it memorized.
Jill DeWit: I do.
Jack Butala: You’re not alone in your real estate ambition. Captain obvious.
Jill DeWit: Sorry, I had to do that.
Jack Butala: I love it.
Jill DeWit: I know. That just makes me happy.
Jack Butala: I wrote a blog called the two reasons, this is where captain obvious came from. The two reasons why real estate doesn’t sell, it’s priced too high, or the fact that it’s for sale is not reaching the right people. I got called captain obvious which I think is a compliment.
Jill DeWit: Exactly.
Jack Butala: I’ll tell you, 9 people out of 10 people whose hear that say, “oh my gosh, that’s why my house hasn’t sold in 6 years.”
Jill DeWit: Oh my gosh, that’s right.
Jack Butala: Or oh my gosh, you’re right, I need to post this property on the internet. All the places not just craigslist. That’s why it hasn’t sold. Captain obvious.
Jill DeWit: It kinda is obvious when people forget it. They don’t, you have to point it out to them and they go, “oh yeah, you’re right.”
Jack Butala: Information and inspiration to buy undervalued property.
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