Where Not to Buy Property (CFFL 514)

Where Not to Buy Property (CFFL 514)


Jack Butala:                         Jack Butala with Jill DeWit.

Jill DeWit:                            Howdy.

Jack Butala:                         Welcome to the show. In this episode, Jill and I talk about where not to buy property.

Jill DeWit:                            I like this.

Jack Butala:                         We’re going to give names of counties and property types. We’re going to get real detailed here, none of this fluff, and no fluffiness.

Jill DeWit:                            Dude, are you going to share some secrets?

Jack Butala:                         Yeah. All the secret counties. We’re going to give all the secrets away.

Jill DeWit:                            All the secret counties. I love that.

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

Jill DeWit:                            Okay. Jason asks, “I am talking with a man that owns a 3,015 acre ranch in Edwards County, Texas.”

Jack Butala:                         Jeez, how’s that for specific?

Jill DeWit:                            I like this. Wow. “Land in this area is listed for $1,650 per acre. This could be a big deal …” It’s sure sounding like it. “But I’m not sure how to handle it. I’m thinking about proposing an option agreement for each section of the ranch that is divided by five different APN numbers …” Okay, “and market each of the 600 acre ranches separately. I’m not sure what price will sell fast on such big properties. Any advice is appreciated.”

Jack Butala:                         Wow. I mean, I’m totally impressed. This is great.

Jill DeWit:                            I got to do the math.

Jack Butala:                         Yeah. You should market it both ways. You should market it all as one, or you should market it separately. And then the first thing I would do, Jason, and I mean immediately, is try to subdivide it. Go to the county and see if you can split it down in a five … Texas is famous for being a split-friendly state. Hopefully it’s not in an incorporated area, like it’s not in a city, it’s just a county land, because it falls under a different set of rules in Texas, they’re state rules, and it’s pretty easy to get it subdivided. So you could have a retirement deal on your hands here. IF you can get these properties down to five acres, you’re going to sell them for a heck of a lot more than 1,600 bucks an acre.

Jill DeWit:                            Could I just share some numbers with you? So I just did the math. If he came in and was able to negotiate a price, let’s just say, $1,650 an acre, down to a little bit less than half of that. We’re in the $2 million range, okay? So 2 million bucks out, but you double your money on that. You could easily double your money, and now you’re going to make 3 million.

Jack Butala:                         You’re going to make 3 million bucks on this deal. Yeah. Exactly, Jill.

Jill DeWit:                            Holy moly. I just did the numbers, so. And that’s just flat, your numbers, but Jack’s right, Jason. You could get creative with this and sell them as five acres, and 10 acres, and 20 acres, and …

Jack Butala:                         There’s a lot of people in our group that would be really interested in funding this with you, so it’s good that you put that out there.

Jill DeWit:                            … mm-hmm (affirmative), 40s. Yeah.

Jack Butala:                         Make sure you put this on DealBoard, too, because they will, there’s lots of money guys in our group that would love to do this deal.

Here’s the bad news: when you do this deal and you get it all subdivided, it’s be careful what you wish for, because now you’re going to have a bunch of property on your hands that’s all similar, right? You’re going to create your own comparison values. Jill and I have done this in the past, where you end up with 1,000 properties. No matter how cheap it is, it takes a long time to sell property that’s all the exact same. So I’m just making you aware of it. I don’t want to be Debbie Downer about it, but there is-

Jill DeWit:                            I should say, it does, but that’s okay. But you know, great, you have three years of payments coming in, seriously.

Jack Butala:                         I mean, you could spend the rest of your life with this.

Jill DeWit:                            It could be all cash.

Jack Butala:                         You could sell these properties for $20,000 … $500 down and $200 a month, and just basically retire …

Jill DeWit:                            That’s true, too.

Jack Butala:                         … on one deal.

Jill DeWit:                            Exactly.

Jack Butala:                         Congratulations. Nice work.

Jill DeWit:                            That’s awesome.

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: where not to buy property. This is the meat of the show.

Jill DeWit:                            Jack’s saying all the secrets.

Jack Butala:                         Right before the show, I said to Jill, “I’m going to name names. I’m going to name counties, and places, and property types.” And you reeled off a bunch of names.

Jill DeWit:                            I did.

Jack Butala:                         Go ahead.

Jill DeWit:                            Deming Ranchettes.

Jack Butala:                         Come on, Jill.

Jill DeWit:                            Rio Del Oro, I think that’s kind of overdone. Some, you think Cochise?

Jack Butala:                         Those are both in New Mexico.

Jill DeWit:                            You think Cochise? Still good?

Jack Butala:                         I love Cochise, yeah.

Jill DeWit:                            Cochise is still good.

Jack Butala:                         Anything in Arizona’s great.

Jill DeWit:                            What else is? You had some-

Jack Butala:                         Imperial County, in California …

Jill DeWit:                            I love northern California.

Jack Butala:                         … was a bombing range, a bombing test range, post-World War II.

Jill DeWit:                            Not that county.

Jack Butala:                         So for whatever reason, there’s just a ton of property in Imperial County, California that has no access at all. Like, you need a helicopter to get to it. I don’t know what happened or how it got subdivided that way, but it’s just the way it is.

The state of Nevada, entire state of Nevada, you can do well, but you need to buy it super cheap. Same thing with northern Utah. It’s very, very, very … you can buy cheap, but you got to sell it real cheap, too. We stay away from industrial property. Some people love it.

Jill DeWit:                            Commercial, I love.

Jack Butala:                         When I ever talk to the EPA, ever … Commercial properties, we love.

Jill DeWit:                            Commercial property, I love.

Jack Butala:                         Industrial property, zoned property, we take it out of our … We never mail it. I scrub it out of our data, intentionally.

Jill DeWit:                            Can I share my secret on why I love commercial property?

Jack Butala:                         Mm-hmm (affirmative).

Jill DeWit:                            Because most commercial property, you got to check every one obviously, the counties, but most of them, you can put RVs and mobile homes, and things like that on there, so that is why people love it. Those usually sell really fast. When you have a commercial property and you could put an RV on there for six months or whatever it is, you need to advertise that, and you will sell fast because of that.

Jack Butala:                         The fastest selling property for us, by leaps and bounds, involves mobile homes.

Jill DeWit:                            Mm-hmm (affirmative), yep. When you say mobile home lot ready, they’re like, “Woo,” they get all excited, our buyers.

Jack Butala:                         I’m going to reel off a bunch of proper nouns, and you’re going to say yes or no.

Jill DeWit:                            Okay.

Jack Butala:                         Indiana? Yes.

Jill DeWit:                            Okay.

Jack Butala:                         Ohio? Yes.

Jill DeWit:                            I don’t know these areas.

Jack Butala:                         Canada?

Jill DeWit:                            Yeah!

Jack Butala:                         Hell yeah.

Jill DeWit:                            Uh-huh (affirmative).

Jack Butala:                         Maine? Yes.

Jill DeWit:                            Yes.

Jack Butala:                         The title of this show is where not to buy property.

Jill DeWit:                            Well, where wouldn’t I? What about New York?

Jack Butala:                         No.

Jill DeWit:                            Thank you.

Jack Butala:                         Why?

Jill DeWit:                            Well, I was just talking to somebody about this the other day about … She’s a truck driver, actually, and she’s learned … She says a lot of these eastern states, they bring in, some require them, some they say they do but it’s technically not required if you dig deeper-

Jack Butala:                         Lawyers.

Jill DeWit:                            Yes.

Jack Butala:                         To close a deal.

Jill DeWit:                            Exactly. So you know, if that scares you off in the beginning, I understand it. Don’t go there yet until you’re … And then when you’re a pro, don’t be afraid of that, because you know whether or not they need an attorney. Go ahead, Jack, sorry.

Jack Butala:                         Why do we bust on New York so much, you and I? I know why I do.

Jill DeWit:                            Yeah, I don’t.

Jack Butala:                         I spent some time there, and it’s …

Jill DeWit:                            I like New York.

Jack Butala:                         Do you?

Jill DeWit:                            Yes! Hello? I was just, well, let me back up.

Jack Butala:                         You’re positive.

Jill DeWit:                            Let me back up. Here’s why I like New York. Other than changing planes, I’ve been there twice. Once was a family trip, where my brother took care of everything, and it was just a whirlwind Christmastime fun event. Got to see the Rockettes and the whole show, so that was awesome. And go around in a limo and everything, that was great. And then the second time, I was there for New York Fashion Week.

Jack Butala:                         And you stayed at the Waldorf-Astoria?

Jill DeWit:                            Exactly.

Jack Butala:                         That’s why.

Jill DeWit:                            Kind of the same kind of trip, so I don’t really understand why everybody doesn’t like New York.

Jack Butala:                         Have you ever been in a subway in New York?

Jill DeWit:                            I have not. I’m sorry, I have not. Have not, but I walked a lot, and I did take a bus around and did a tour and stuff, so.

Jack Butala:                         I was in a subway in New York one time, and this little girl, all dressed up, she looked at her dad and said, “This doesn’t seem safe.”

Jill DeWit:                            Seriously? That’s funny.

Jack Butala:                         And kids’ intuitions are usually correct, you know. She’s like, “We’re underground and stuff. This isn’t right.”

Jill DeWit:                            I’ve done the Tube in London a thousand times, and I get that. That’s funny.

Jack Butala:                         I had to agree with her. I’m like, “You know what? There’s something really not safe about this.”

Jill DeWit:                            And the ‘L’, in Chicago. I know the ‘L’ really well, but yeah.

Jack Butala:                         New York is, in Upstate New York, you can buy some really inexpensive, really high quality property and then sell it to New Yorkers, because all New Yorkers do, the real ones, just want to get out of the city. So I don’t know, I just … I’ve never nailed New York and never will. I don’t know, there’s something about it.

Jill DeWit:                            Upstate New York is pretty, I’ve heard. And there’s also great places that have lakes and things like that. All right, let’s get back to where not to buy property. Give me some more places.

Jack Butala:                         I don’t buy property, some people make a career out of buying this property, but we don’t buy property that’s just for recreational use only, that you can’t build. In Pennsylvania, for some reason, there’s a bunch of really large subdivisions where they say it’s recreation use only. You can put a tent … I don’t know what they do with it. It’s always around water, for some reason, so it might be wet, wetlands, you know? I don’t buy wet property in Florida. If there’s any, any possibility of it being wet, I don’t do it.

Jill DeWit:                            I don’t buy property that’s really, really, really too small, or the numbers are really too small anymore. And every now and then, there’s places where you got to have two lots to put a well. There’s like-

Jack Butala:                         Stock Deming Ranchettes.

Jill DeWit:                            Yeah. This is a good example. There’s properties out there that you can buy and you can sell. But the silly thing is, even though you can sell them as one piece, no one can build on them. They have to have a little more than that size. Like, the way they got subdivided, somebody’s made a mess.

Jack Butala:                         Or the county went and changed it.

Jill DeWit:                            That could be, too. They changed the requirements.

Jack Butala:                         Because they’re sick and tired of doing the deeds, and that happens.

Jill DeWit:                            Right. That you have to have at least an acre to do a well, and do this kind of stuff, so then it kind of makes a little pickle for people, and I don’t want to do it. I don’t want to deal with any of those. I don’t buy it.

Jack Butala:                         We don’t buy property with any type of deed restriction, ever.

Jill DeWit:                            Yep, that’s not a good place to buy property. That’s true. Where else would you not buy property?

Jack Butala:                         There’s not a lot of physical locations that I would, other than the ones that we said, that I would shy away from.

Jill DeWit:                            It’s really more about the property type and the usage, and-

Jack Butala:                         We haven’t talked about the four A’s in a long time, but you know.

Jill DeWit:                            That’s true.

Jack Butala:                         It has to pass the four A’s test, and for us, I’ll tell you the truth, is now we don’t do deals where we don’t make less than … For land deals, we have to make 10 grand. Most of the harder deals make 100 grand, that’s our threshold. But that’s just a choice. As an investor, you have to decide that for yourself.

Jill DeWit:                            Right. Well, can I share what the four A’s are, too? Because we still use it, and you’re right, we haven’t talked about it. So here’s what we look at when we’re looking to buy a property. Number one, access. If it has access, that’s the best.

Jack Butala:                         Physical and legal access is the best way to go. There are exceptions. You can go back and look at our, on YouTube, we have our weekly calls, and we talk about that a lot. We look at property on ParcelFact and talk about it.

Jill DeWit:                            Mm-hmm (affirmative). Two, acreage. The bigger, the better.

Jack Butala:                         More is better.

Jill DeWit:                            And there’s a sweet spot. I mean, we like, say, five acres, 10 acres, 20 acres, even 40 acres, those are all easy sells. When you get bigger than those, then your buyer market is not as large, and so they’ll sell, but they just take a little time.

Jack Butala:                         It only takes one.

Jill DeWit:                            That’s true.

Jack Butala:                         It only takes one buyer.

Jill DeWit:                            Exactly. Acreage. Three, affordability. That’s a given.

Jack Butala:                         Cheaper is better.

Jill DeWit:                            Exactly.

Jack Butala:                         There’s no exception for that.

Jill DeWit:                            You know what’s funny? I have people at times that go, “That’s almost too cheap.” I’m like, right?

Jack Butala:                         What’s wrong with it?

Jill DeWit:                            I know.

Jack Butala:                         If it’s so cheap, there must be something wrong with it.

Jill DeWit:                            Exactly. It’s a funny saying. I’m like, “Oh, yeah, we’ll do it, that’s fine. That’s just the way it is.”

Jack Butala:                         We remember who went, one day, went into Land Pin … I don’t even think you know this, Jill. And he was sick and tired, he looks mad, he was sick and tired of everybody saying what’s wrong with the property, it’s too cheap. So he raised all the prices. And he sold it. He sold all the property.

Jill DeWit:                            Exactly. Yeah, you know what? There is part of that. Some of it is the psychology. If you price it up a little bit, they’re going to think it’s better and it works out, so yeah. There you go. And the last thing, the last A, so we have access, acreage, affordability, and attribute.

Jack Butala:                         The most important one, I think. Attributes.

Jill DeWit:                            Yeah. What’s special about it? Can I put an RV on there? For a year if I want to? Can I put a mobile home there?

Jack Butala:                         Is it waterfront?

Jill DeWit:                            It is got trees, and on the lake, or is it off a paved road where the utilities are already right there at the lot line? There’s lots of little attributes.

Jack Butala:                         Every property has some attribute. Every single one.

Jill DeWit:                            Is it near Vegas? Or something like that, I don’t know what people will like. There you go.

Jack Butala:                         So, to summarize, really the reason I wrote this topic is because there’s really not specifically a place to not buy property. Really, in the end, and this is a takeaway from the whole show, comes down to price.

Jill DeWit:                            Or in the four, on those other A’s, too. Because even if someone says, “Will you always buy if the price is right?” No. My honest answer is no.

Jack Butala:                         I agree. We reject property every week, and it’s almost always because of access.

Jill DeWit:                            I literally have had people say, “Will you just take it off my hands? I’ll give it to you.” I’m like, “No!” I really have, because I’d say, “You know what, it’s not worth my time, thank you.”

Jack Butala:                         Or the deal’s too small.

Jill DeWit:                            Yeah. That’s really usually it.

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

Jill DeWit:                            And inspiration, that’s me-

Jack Butala:                         To do 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.

Jill DeWit:                            I think that was good.

Jack Butala:                         I do, too.

Jill DeWit:                            People want to know the truth.

Jack Butala:                         That’s right.

Jill DeWit:                            And so, there you go.

Jack Butala:                         I love the Rust Belt, as an investment area. There’s so many fantastic real estate deals there.

Jill DeWit:                            Got it. There’s so many areas that I hear people coming up with that we haven’t even touched on or talked about, especially the north-central part of the country. There’s really pretty areas. I’m anxious to see how some of these folks, how their deals go.

Jack Butala:                         We never talk about farmland. I mean, farmland is a commodity. There’s people in our group who talk about, who just rave about it. For some reason, we haven’t gotten into it.

Jill DeWit:                            Exactly, the agricultural.

Jack Butala:                         Because we make too much money buying property in California.

Jill DeWit:                            We’re kind of happy in our own niche. You know, this is a perfect example of why we never worry about running out of properties. Everybody says, “Are we going to all, is it all going to dry up for us?” No. There’s so much out there that we haven’t even touched on.

Jack Butala:                         There’s 149 million properties in the country. It’s going to be fine.

Jill DeWit:                            Exactly. Divide that by how many buyers, right?

Jack Butala:                         Information and inspiration to buy undervalued property.


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