When to Cut Out of a Great Deal (CFFL 453)

When to Cut Out of a Great Deal (CFFL 453)

Jack Butala:                       Jack Butala with Jill DeWit.

Jill DeWit:                           Hello there.

Jack Butala:                       Welcome to our show today, in this episode Jill and I talk about when to cut out of a great deal. When is it just too much? Just not worth it? The money you’re making on the deal is not worth the stuff you’re going through.

Jill DeWit:                           That just made me think of something funny, I’ll tell you in a minute.

Jack Butala:                       I know what you’re thinking about. Don’t steal my thunder.

Jill DeWit:                           Okay.

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

Jill DeWit:                           All right. Jermane asked “I have just gotten a property under contract,”

Jack Butala:                       Yeah.

Jill DeWit:                           “And I’m looking to close on it next week, I just had a buyer go out and view it and he found two grave sites”.

Jack Butala:                       Yeah.

Jill DeWit:                           Oh that’s hilarious.

Jack Butala:                       I’ve done this.

Jill DeWit:                           This is really funny.

Jack Butala:                       I bought a cemetery on accident like this.

Jill DeWit:                           That’s funny.

“The property is 10.93 acres, and the grave spot is small and only takes up a very tiny portion of the land. Have you ever come across something like this? Does it affect the market ability and sale of the property?”

Jack Butala:                       Oh yeah.

Jill DeWit:                           Well it depends on who you’re selling it to.

Jack Butala:                       I wonder if they’re legal graves first of all.

Jill DeWit:                           Yeah.

Jack Butala:                       This is no laughing matter.

Jill DeWit:                           Is this an Italian mafia?

Jack Butala:                       Yeah

Jill DeWit:                           Thing going on? Is this native american land? I mean you’ve got to be careful about some of this stuff.

Jack Butala:                       Do you think he bought it? Oh its under contract.

Jill DeWit:                           So a buyer went out to look at it.

Jack Butala:                       You know, I honestly hate to call the police for any reason. Truly that’s just a personal thing, but …

Jill DeWit:                           Yeah.

Jack Butala:                       That might be appropriate.

Jill DeWit:                           I think that it’s probably, I would … Well number one, how old are these grave sites? Is it like wild west days and they’re rocks and a stick?

Jack Butala:                       Or is it a joke? Or is it real?

Jill DeWit:                           I know.

Jack Butala:                       There’s no way to really find an answer to these questions in this format.

Jill DeWit:                           That’s very very interesting.

Jack Butala:                       Yeah, that’s something to be very concerned about. The cemetery that I bought on accident, I donated to the city. It was a part of a lot, a huge deal and I didn’t do the due diligence that I should have on that deal.

Jill DeWit:                           I have a question, well here’s one thought too, I don’t know if this is possible. Okay, it’s almost 11 acres, what if these grave sites are in one corner portion of it, could I theoretically rewrite the description and get the county involved and take that piece out of the property, and like you just said and then donate it to the proper authorities or you know a church.

Jack Butala:                       A non-profit group that doesn’t have to pay real estate taxes on it.

Jill DeWit:                           Something like that, and they’ll care for it. Maybe there’s more there too.

Jack Butala:                       If you didn’t know this, listeners. Non-profits, like hospitals and churches and stuff, they don’t pay taxes on real estate at all, they’re exempt. If you have a legitimate 501C3.

So yeah will this Jill, I would sub-divide it and get it out of the deal. If the deal still makes financial sense, it belongs to somebody, get it to the right person.

Jill DeWit:                           Can I say something too? This is one of the things that might tie into our topic today too.

Jack Butala:                       Yeah, this might be when to cut out of a great deal.

Jill DeWit:                           Exactly.

Jack Butala:                       Perfect Jill.

Jill DeWit:                           Thank you, there’s your segway.

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. Today’s topic, what Jill just said, when do you cut out of a great deal?

Jill DeWit:                           Well, when you find two grave sites.

Jack Butala:                       My whole point, this is the take away from this show. My whole point is sit down with yourself or whoever is important in your life and say, “you know, how much is enough?” Right? We all have lines that we won’t cross in our lives with certain stuff. There’s certain stuff that you’re going to accept from your wife and there’s certain stuff that’s just over the line and vise versa.

Jill DeWit:                           Or your employees.

Jack Butala:                       Or your employees, or your kids, or whatever. It’s the same way here. I’ll tell you personally, if I have to talk to somebody whether they’re a buyer or a seller on the phone, if you’re a listener on this show then you already know this, more than three times I’m terminating the deal because now I’m babysitting. Fortunately we have people doing that for us now.

Jill DeWit:                           But you’re right, okay so that’s one of them. Too much talking, I wrote that down too and I love that.

Jack Butala:                       You know, if you’re talking, if too many people are dead and you’re trying to resurrect this deal. That’s the thing for me.

Jill DeWit:                           Yeah.

Jack Butala:                       Then I’ll walk away from that deal.

Jill DeWit:                           Yeah, too much work?

Jack Butala:                       It’s too much work!

Jill DeWit:                           That’s true, I’ve had some of those I’m like all right. You learn after the first one, it might take one or two where you’re like oh shoot every time I come up in this situation I end up spending two days on it because that can really happen. All right, two days, 16 hours, trying to solve some problems that you may or may not solve, versus you could’ve done four deals, four easy ones in that time. For me that’s a cut out of the situation.

Jack Butala:                       You should send out so much mail that you’re opening envelopes everyday, especially if you have a service like Joe Live, which isn’t active yet, where you’re not answering your phone. You’re getting so many signed letters back that you can say, once you run into one of these problems you just say “You know what, I don’t want to do this deal. It’s too hard”. Or it’s too time consuming, I’m just going to open up another letter and I know that another one is going to come around tomorrow anyway.

Jill DeWit:                           That’s exactly what I wrote down, there’s another deal.

Jack Butala:                       There’s always another deal next week, always.

Jill DeWit:                           It is, it is.

Jack Butala:                       There’s always another deal if you do this right.

Jill DeWit:                           Right. Another one to cut out of a great deal is when you find yourself negotiating with yourself, that happens sometimes. You’re so excited about a property that you end up you know upping the deal, you don’t even let the person you know.

Jack Butala:                       Yeah, here’s what you never want to do and we should do a whole show on this.

When you send a letter for $4,000 let’s say for a property, the seller calls back and says “Um $4,000 isn’t going to do it, why don’t you just make me another offer?” Okay stop right there, now you’re negotiating with yourself, they have to come back with another number. That’s just all there is to it.

Jill DeWit:                           You need to know if you’re in the ball park or not, they might say 20 and then just like hang up.

Jack Butala:                       They might say 55.

Jill DeWit:                           Well, have a nice day, and that’s it!

Jack Butala:                       That’s right.

Jill DeWit:                           So that’s it, yeah you’re not going to by the time you back and forth it forever, it’s not.

Jack Butala:                       Let’s use your example, let’s say, you know what let’s play a game Jill.

Jill DeWit:                           Okay.

Jack Butala:                       Tell me if you would do this or not.

Jill DeWit:                           Okay.

Jack Butala:                       Or if it’s too much. You send letter out for $4,000, the guy calls back and says that’s not going to do it but I will take 20. You know, you know the properties worth 50, do you do the deal or not?

Jill DeWit:                           Do I have the budget?

Jack Butala:                       You have the budget, you have unlimited budget.

Jill DeWit:                           I know it’s worth 50?

Jack Butala:                       You know it’s worth 50.

Jill DeWit:                           Okay, but wait wait. So I’m going to double my money at 40? I might do the deal. I might do the deal. Because there have been times, especially when I’m new. I mean I might have mispriced this everybody, so that’s not crazy, let’s just say I’m not that seasoned and everything else I can find online is selling for 50 and 60. I might do it for 20, then I might get out for 30 and run but I’m going to do it really fast. But you know what? That’s a reasonable thing because I’m not going to, you know you’ve got to be smart about this you don’t want to go in over your head and spend all your … Especially when you’re new you don’t want to spend all of your acquisitions funds on one property.

Jack Butala:                       I have a bunch of them right?

Jill DeWit:                           Okay ready.

Jack Butala:                       Send a letter out $4,000, the guys calls back and says … The properties worth ten, right, you know it’s worth ten.

Jill DeWit:                           Four, you know it’s worth ten.

Jack Butala:                       But they say we have to go through escrow.

Jill DeWit:                           Ten wholesale?

Jack Butala:                       Yeah it’s worth ten wholesale. And we have to go through escrow and my Aunt Ninnie is an escrow agent and XYZ main street, do you do the deal or not?

Jill DeWit:                           I kinda like that one.

Jack Butala:                       And you have to pay for all of it, the $1,000 escrow fee, do you do the deal or not?

Jill DeWit:                           Oh. Now it’s not as fun.

Jack Butala:                       So your $5,000 in for a $10,000 property wholesale.

Jill DeWit:                           Yeah, so I’m going to double my money because it’s really worth 20?

Jack Butala:                       Yeah.

Jill DeWit:                           Then I would do it.

Jack Butala:                       You send a mailer out for …

Jill DeWit:                           Am I not replying how you … Are you trying to get me to say no?

Jack Butala:                       I’m not going to judge you, we are different widely on this.

Jill DeWit:                           That’s true.

Jack Butala:                       You know, you send a mailer out on ranches in Santa Barbara for a million bucks cash.

Jill DeWit:                           All right, This is a huge one.

Jack Butala:                       Okay $980,000.

Jill DeWit:                           Okay, $980,000.

Jack Butala:                       You know it’s worth 1.2, it’s really worth two million but you’re going to sell it for 1.25 to a wholesale guy that you know already out there. Do you do the deal? And then they call back and they say, I’ll 1.1 million for sure cash but you have to do it on Thursday, and you know it’s worth 1.25. It’s worth two million but you’re going to sell it for 1.25.

Jill DeWit:                           Because I already have a buyer ready to go?

Jack Butala:                       Yeah.

Jill DeWit:                           Well why would I say no to $125,000?

Jack Butala:                       I’m just asking, I don’t know!

Jill DeWit:                           Okay.

Jack Butala:                       I don’t know, I don’t know why you’d say no either.

Jill DeWit:                           Because I’m going to do a double escrow especially on that one, I got my guy lined up.

Jack Butala:                       I would get involved and we would buy that, because you don’t do escrow.

Jill DeWit:                           You just buy it?

Jack Butala:                       Yeah.

Jill DeWit:                           All right, but you know what I’m talking about.

Jack Butala:                       I would buy it and split it, that would give whoever hard moneyed it, it wouldn’t be hard money it would be an equity partner in the actual deal. Don’t worry.

Jill DeWit:                           Do you want me to ask you one now?

Jack Butala:                       Yeah!

Jill DeWit:                           All right you keep like …

Jack Butala:                       I say no a lot now.

Jill DeWit:                           You do say no, okay heres how Jack rolls.

Jack you sent out an offer for …

Jack Butala:                       Sorry, you’re taking too long.

And this is the first conversation so you can’t talk two more times.

Jill DeWit:                           Oh no no no no. Dude $8,000 it’s worth 20.

Jack Butala:                       Done, I’d do it.

Jill DeWit:                           The guy comes back he wants 12.

Jack Butala:                       I probably wouldn’t do it, I would do it for 10.

Jill DeWit:                           Oh, well now you’re negotiating with yourself. No I’m just kidding.

Jack Butala:                       How? If he comes back at 12 and I say 10 and that’s it and he comes back and says 11, I say no.

Jill DeWit:                           Yeah, and you know what, that’s a good point. I have done that, I have said this is it. Here’s my thing and I want everybody to know this because it really is true and it works, I have told so many times.

Jack Butala:                       This is good advice.

Jill DeWit:                           I had a guy, I was at $1,000 and I think I upped it to $1,500 maybe even $2,000, he was at 10 and I’m like no. I just said I appreciate where you’re coming from I just have to walk, and I haven’t talked about this in a while and you know I really think I maybe, maybe I hold on a moment maybe I kept it at $1,000. It was a ten to one ratio there, like I wanted to pay $1,000 and he wanted $10,000. There was no way we were going to meet in there and I’m like this isn’t going to work. So I said “Look, I understand where you’re coming from and I know you’re going to list it with the realtor, blah blah blah blah,” I said “Hey, I mean if you change your mind in 30 days I mean my offer stills stands, I mean let me know”. And he came back.

Jack Butala:                       And he said yes?

Jill DeWit:                           He called me a month later and said “I’ll take your $1,000”.

Jack Butala:                       I was just going to say you should have a bunch of … I have them all memorized but a bunch of caned responses, I say this to sellers all the time. One of them is “Okay, then call me in six months when it’s not for sale I mean when you haven’t sold it, because you’re not going to sell it to anyone else”.

Jill DeWit:                           You know, I come at it differently and that’s so interesting because I’m really nice about it, I’m like “I wish you all the best, you know the doors open if you change your mind just let me know”.

Jack Butala:                       Right.

Jill DeWit:                           And so, it seems a little less snotty to me.

Jack Butala:                       I don’t mean to be snotty, I just want to get some deals done.

Jill DeWit:                           I know, because you’re looking at it different.

Jack Butala:                       Either one of us do it anyway, that’s the thing.

Jill DeWit:                           You know what, you’re so matter of fact about it and you’re right and I get it so I know that that works for a lot of people and I just talk differently, but we’re saying the same thing.

Jack Butala:                       So back to the topic, it’s a very personal choice and it depends on where you are in your career. You know you have an acquisition criteria right? You’re not going to do … in the beginning you’re pretty much going to buy anything as long as it’s a great deal and you can double it but once you start to have some experience at some point maybe your threshold of profit margin is let’s say $10,000. You know for us its $10,000 on houses and $100,000 on land deals now. Have the same thing about when enoughs enough.

Jill DeWit:                           Right.

Jack Butala:                       Make yourself a set of rules.

Jill DeWit:                           Exactly.

Jack Butala:                       What you don’t want to do is do it on the fly and wait and see and feel it.

Jill DeWit:                           Exactly.

Jack Butala:                       Feeling it’s not good, even if you’re a woman.

Jill DeWit:                           Too much talking. I’m cutting out of this deal.

Jack Butala:                       I don’t know let’s see how it makes you feel, oh that makes me feel good.

Jill DeWit:                           Oh Jack Jack Jack.

Jack Butala:                       I want that cashmere sweater.

Jill DeWit:                           I took that offer because I just like them.

Jack Butala:                       Oh this car feels nice, you know men don’t feel anything.

Jill DeWit:                           Oh no kidding, yeah I’m very aware of that.

Jack Butala:                       Do you want to see another episode where Jill kicks me in the shins again.

Jill DeWit:                           Oh boy, and Jack pushes all Jill’s buttons.

Jack Butala:                       You 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:                       You are not alone in your real estate ambition.

Jill DeWit:                           Dude.

Jack Butala:                       That was a good show, I like those.

Jill DeWit:                           Philosophy?

Jack Butala:                       The game show part of it.

Jill DeWit:                           Oh yeah. Would you do this deal? Let’s make a deal. We should do a show called let’s make a deal, that would perfect.

Jack Butala:                       Landshark? What’s that .com we just got?

Jill DeWit:                           Landshark. Wait, property.

Jack Butala:                       Sharkland. No, no.

Jill DeWit:                           Oh my gosh.

Jack Butala:                       Landtank.

Jill DeWit:                           That’s it.

Jack Butala:                       Reminds me of sharktank.

Jill DeWit:                           So many things coming down the pipeline I couldn’t even remember what they all are.

Jack Butala:                       Information and inspiration to buy undervalue property.

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