How Much Capital Do I Need to be an Equity Partner? (CCFL 486)

How Much Capital Do I Need to be an Equity Partner?


Jill DeWit:                            Jill DeWit with Jack Butala! That’s where you say hello.

Jack Butala:                         Hello.

Jill DeWit:                            Welcome to our show. We flipped it and Jack’s like, “I don’t know what to do.” In this episode, Jack and I talk about how much capital you need to be an equity partner. I’m curious what you’re going to say here.

Jack Butala:                         I love talking about equity.

Jill DeWit:                            I know. First, let’s take a question, posted by one of our members on the online community. Right now, aka Success Plant, and it’s free.

Jack Butala:                         So Kathleen asks, and this is a really good question, I picked this question out of Success Plant, “In a recent RealQuest search, in which improvement percentage was set to zero”, when you set your improvement value to zero, what you’re looking at is land, it isn’t real estate with no improvements on it, it’s land, “I found parcels with definite improvements, McMansion type built improvements. Before downloading the records, I checked a few of the APNs on the counties GIS satellite images.” God, Kathleen’s come a long way.

Jill DeWit:                            She’s so good.

Jack Butala:                         Excellent work. I would do exact same thing. “Satellite images found that many of these parcels had real improvements, not mobile homes, but real brick and mortar, with existing permits in place. You might remove the quote unquote ‘SFR’, single family residential, under the land-use criteria, I still get records showing some serious improvements: large houses with very large houses, et cetera. It seems that the 0% improvement criteria is not yielding land, only parcels. I checked eight different APNs, and they all had very nice improvements. It may just be this county, but has anyone else run across this same issue? I’m not sure why I’m getting these results.” Okay. There’s a reason I picked this lengthy, potentially boring …

Jill DeWit:                            Tell us, Jack.

Jack Butala:                         … question. Data, and I’m sure, by now, Kathleen has not even spent a dime on this data, she’s just doing research to do a download for a potential mailer. The deal is this: RealQuest has an agreement with 3200 counties, and they all have messy data, and they all use different ways. People at RealQuest download the data each month, or more often than that, from the assessor, and they have to work within a very definite structure, a data structure. Picture Excel, with a bunch of columns, and they have to jam data in there, so the problem may be that the data is jammed in the wrong column, which is very, very unusual, or number two, that county really does do things differently. 0% doesn’t mean 0%, or they have some cockamamie scheme about how it all works.

Here’s my advice: move on to the next county, or try to find the consistency where the land is indicated somehow in their data set, and then use it that way.

Jill DeWit:                            And then you can be the only one that’s figured out that county, and that’s not a bad thing.

Jack Butala:                         And that’s the last thing I was going to say, and Jill’s exactly right, so now, you’re at a massive competitive advantage, because no one’s going to take that extra step. Well, Kathleen always takes 19 extra steps in everything she does, and I mean that as a compliment. No one is going to hit those properties, they’re not going to look that hard into it.

Jill DeWit:                            They won’t figure it out.

Jack Butala:                         Exactly. My hat’s off to you.

Jill DeWit:                            You know, and that’s …

Jack Butala:                         I love these challenges, and it’s going to pay off in spades.

Jill DeWit:                            Well you know, this is one of the things that you should do, when I talk to people about picking a county, you should be spending some time on this county, before you dive in and just download a bunch of stuff, and start sending out mailers. This is one of the steps you should go through, can I access the data I need after I send out these offers?

Jack Butala:                         Yeah, because bear in mind …

Jill DeWit:                            How good is this county in answering the phone if I need something?

Jack Butala:                         Bear in mind that, if you do everything right, like most of our members do, you’re going to get a bunch of purchase agreements sent back in the mail, and if you can’t get the answers you need to buy the property, or you can’t get anybody on the phone to record it, or on and on and on, then …

Jill DeWit:                            Now you’ve wasted it.

Jack Butala:                         … you’ve wasted time and money. So you really want to make sure that you can take this all the way to the end with the county. Before you spend any money or time.

Jill DeWit:                            Not just making sure it meets your pricing criteria, make sure the county works and all that good stuff.

Jack Butala:                         This is why Kathleen makes money. This is why she’s a vocal … generating a bunch of money in our group.

Jill DeWit:                            She’s doing awesome, I’m so happy.

Jack Butala:                         And she knew nothing. I remember when she started. It was right when we moved to California, Jill.

Jill DeWit:                            Yeah, I know. It’s awesome. If you have a question you want to be on the show, reach out to either one of us on Today’s topic: how much capital do I need to be an equity partner. I think it’s kind of cool, I mean honestly, yeah, I’m an equity partner. People go, “Oh, look who’s so …”, enlighten us, Jack.

Jack Butala:                         Here’s where this question came from, I had a deal review slash data review call last week with a guy, and he said he had a light bulb moment because of one of our podcasts, like a year ago, about being a lender, being a private lender. He was flipping houses, everybody knows how hard that is for a certain personality type apparently, my personality type too, and this guy’s. And he said, “I’m making 10% on these houses, come on! What if I just be a lender, what if I lend somebody 100 grand, charge them 10%, and they pay me when they sell me, $110,000?” So he became a lender. He became a hard money lender, and now he’s in our group doing the same kind of thing. He’s partnering deals, land deals, with other people who don’t have as much money as he does.

That led me to this. Now you’re sitting there, thinking to yourself, “Well, that’s what I want to do. I don’t want to do all these silly mailers and all this crap that you guys say, and it’s complicated, and Kathleen has to question it. I don’t want to go through that. I just want to make money!”

Jill DeWit:                            Yep. I have money, I want more.

Jack Butala:                         Yeah! I want to put my money to work, like the guys on Shark Tank always say. I want to send my dollars out to summer camp, and I want to come back bigger and stronger, and more of them.

Jill DeWit:                            Are you going to be Mr. Wonderful here?

Jack Butala:                         No I’m not.

Jill DeWit:                            Oh, okay.

Jack Butala:                         I wouldn’t mind being called Mark Cuban, though. But anyway, how much money does it take? And the answer is: very, very little! We buy property for $500 dollars regularly, on a weekly basis, and people in our group do, so if you’ve got 500 bucks, and you want to be a money partner, then join Success Plant, it’s free, and say, “Hey, I’ve got 500 bucks.” And I’m telling you someone’s going to say, “you know what, you’ve got 500 bucks, I’ve got 500 bucks. Let’s do some stuff together.”

Jill and I are putting together a website called Land Crowd Fund, as well as Land Tank, in fact, that’s what I think tomorrow’s show is about, Land Tank, where we match people with money, lazy people with money and really ambitious people, young, ambitious, intelligent, data seekers who send mail out, and [inaudible 00:07:21] deals. It’s a site that puts those people together. How much capital do I need to be an equitive party? Very, very, very little. The true answer is: the same amount of money that you have. That’s how much money you need.

Jill DeWit:                            Exactly. You don’t have to come in with $100,000 or $1,000,000, or something like that.

Jack Butala:                         The guy I talked to, he has several million dollars he’s applicated to this, to doing land deals with our group. And he’s like, “Well how do I review these?” I said, “Well, the best money people on the planet are people that used to buy and sell land, like us.” I can look at a deal in three seconds and say this is going to work or it’s not. If you’re looking for a capital partner, a money person, make sure they know what they’re doing. If you’ve never dealt with a money person, they can be really, really dumb.

Jill DeWit:                            That’s a good point. If they don’t understand it …

Jack Butala:                         Yeah, they don’t understand real estate.

Jill DeWit:                            … then it’s going to be very difficult, and you don’t want to educate them, it’s going to be too hard.

Jack Butala:                         Most of them say, “Oh yeah, we would look at every deal. We want to do this … “, and they don’t specialize, which I don’t understand. We specialize. Like they’ll look at a manufacturing company, and they’ll look at a 40 acre property in Mohave County. If your money person is talking like that, run away.

Jill DeWit:                            It’s got to be a good fit for everyone. Just because they’ve got a lot of money, but they don’t understand the process or maybe they need a lot of hand holding or something. For me, that doesn’t work. That’s not a good fit for me. I need someone who understands me, who understands this product or asset, and the big picture. Then we’ll talk. Even then, just because they understand it, doesn’t mean I’m going to take their money. That’s a whole nother thing, too. Be picky, you know?

Jack Butala:                         I can’t. The money partner that we have, we’ve got a few, but my favorite money partner is like, “Yeah, whatever you think, Jack. I’ll do it.” That’s what you want.

Jill DeWit:                            “I trust you. Well we’ve done ten before, so I know how you work now.” That’s a nice thing, too. I understand the getting to each other part of it too, but I still got to pass a few tests to get to that point.

Jack Butala:                         Now, if you listen to this show at all, you know that I can’t stand talking on the phone, there’s some people that really love to get all in business, and be a business person. Come on, I want to get in and out of the deal as fast as possible, with no talking.

Jill DeWit:                            Right. Could you imagine if your equity partner’s calling every day, going, “Did it sell yet? Did it sell yet?”

Jack Butala:                         “How did it go? Do you have anything else? How are you?” I’m working with a salesperson.

Jill DeWit:                            Exactly. “Hey, my brother wants to get involved, could he get on this call too?” No, no, no.

Jack Butala:                         “How do I look in this blouse?” Shut up, jeez. If I want to have a talk, I’ll call my sister. My sister, the real estate agent in Michigan, she can talk a blue streak, man. She’ll sit and talk on the phone for four hours, about nothing at all.

Jill DeWit:                            That’s so funny, I love it. “How do I look in this blouse?”

Jack Butala:                         Well, you look fantastic, Jill [inaudible 00:10:26].

Jill DeWit:                            All right, thank you. Join us in another episode, where Jack and Jill discuss how to use information, that’s Jack …

Jack Butala:                         And inspiration, that’s Jill …

Jill DeWit:                            … to get just about anything you want.

Jack Butala:                         … we use it every day to buy property for half of what it’s worth, and sell it immediately.

Jill DeWit:                            You are not alone in your real estate ambition.

Jack Butala:                         I like this reverse thing.

Jill DeWit:                            Me too, it’s kind of fun. It’s like being in charge. There’s a whole other thing I could say that I’m not going to say right now, because there might be kids listening. About role reversal.

Jack Butala:                         These shows turn sometimes. What do you have on your mind today?

Jill DeWit:                            I don’t know. I like being the boss now and then.

Jack Butala:                         I don’t hate it either.

Jill DeWit:                            Everybody wins.

Jack Butala:                         Information and inspiration, to buy undervalued property.


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