Scale Your Real Estate Investment Business (CFFL 516)
Scale Your Real Estate Investment Business (CFFL 516)
Transcript:
Jack Butala: Jack Butala with Jill DeWit.
Jill Dewitt: Hello!
Jack Butala: Welcome to our show today! In this episode, Jill and I talk about scaling your real estate investment business. Sounds like an episode of Shark Tank. 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 Dewitt: Okay! Chuck asks, I am selling a large parcel on terms of which I signed a purchase option agreement with my seller. The parcel is 40 acres that I auctioned for $9,000 and I’m closing through a title company. Before I sign a terms agreement with my buyer, I thought I would seek advice from our forum to see if I should first fully close on the property with my seller to make sure there are no hitches due to something I may have missed in my due diligence. I don’t want to get stuck not being able to close due to some surprise with the property, via title company findings and I’ve already signed a purchase and sale agreement with my buyer.
Jack Butala: All good points.
Jill Dewitt: So, should I simply fully disclose to my buyer that I’m in the closing process and there may be a chance I cannot sell and will refund all of their money and have written in the-
Jack Butala: Purchase and sale.
Jill Dewitt: Purchase and sale with my buyer. Any other advice? Thanks in advance!
Jack Butala: Excellent, excellent questions Chuck. And this group is so intelligent. Not only did you ask the question but you gave three or four options on how I should answer it.
Jill Dewitt: Right.
Jack Butala: I’m serious. It’s just very well thought out and intelligent question.
There’s two ways to sell property on terms. A deed of trust, which is kind of what you do, depending on the state you’re in, this is how you do it. But, a deed of trust is what you do when you buy a house with a mortgage. There’s a trustee and it gets recorded.
When you buy a house, you don’t own it. The bank really owns it with the mortgage. And it gets recorded with a title agent. And then you actually get the deed recorded in your name with a lien on it all throughout the payment periods. For 30 years sometimes. When you’re done, the bank says “Okay, thanks. I’m releasing this lien and you own it, what’s called, free and clear.”
Another way to do it is called a land contract, or just a contract for sale. Depending on which part of the country you’re in. Land contract is Rust Belt, contract for sale is out here West. That way, the property is in your name throughout the duration of the payment period as the seller. And when they’re done paying you physically deed the property over to the … And that’s how Jill and I that’s how I do all of our deals. And I’ll tell you, the reason we do them that way is because I got burned doing it the other way, because if and when they default, they cost a tremendous amount of money to undo that deed of trust.
Jill Dewitt: Right. Exactly.
Jack Butala: So, to answer your question directly Chuck, if that’s not boring enough today. To answer your question directly, close the deal, if you love the property. You obviously got this far, so you love it. Buy the property for 9,000 bucks, now you’re done, you own it, it’s in your name. And then do a contract for sale. And let the person make payments and … What Jill does all on the way payment cycle, is she communicates with the buyer. And says, “Hey, if you’re enjoying it that much, and you love the property that much I’ll give you a cash discount.” This is like 6, 8, 10 months in.
Jill Dewitt: Mmhhmm
Jack Butala: If you can get together the money with your whoever, put it on your credit or whatever, we can just cash out of the thing and I’ll give you a real substantial discount. And that works out really well too.
Jill Dewitt: Totally.
Jack Butala: You’re in control. With the way that I described it. With a deed of trust, you’re really … There’s other people involved. And we all know, in this group, how much we love to have lenders and real estate agents and all banks and all credit …
Jill Dewitt: I want them all involved.
Jack Butala: Yeah, sure.
Jill Dewitt: I want the more people I can get involved.
Jack Butala: Let’s get some cocktails together.
Jill Dewitt: Yeah! That’s a great idea.
Jack Butala: Let’s become friends. No, no, no. What you want …
Jill Dewitt: Yeah, just kidding.
Jack Butala: You want to be the seller and want to be the buyer and you want to have a relationship.
Jill Dewitt: Yeah.
Jack Butala: You get deals done that way and that’s kind of what the show is about.
Jill Dewitt: Mmhhmm.
Jack Butala: Scalability.
Jill Dewitt: That’s how we roll!
If you have a question and you want to be on the show, reach out to either one of us in landinvestors.com.
Jack Butala: Did you ever have a relationship with somebody where they’re pushing you along cause you’re just not doing it fast enough?
Jill Dewitt: What the heck?
Jack Butala: That’s my life.
Jill Dewitt: Did you just say that? Are you actually-
Jack Butala: That’s my whole life.
Jill Dewitt: Hold on.
Jack Butala: My whole life, I have been the one who’s done things too fast.
Jill Dewitt: Yes!
Jack Butala: Everybody tells me, slow down.
Jill Dewitt: Yes.
Jack Butala: Then I meet this girl-
Jill Dewitt: No.
Jack Butala: And she’s even faster than me.
Jill Dewitt: Not necessarily. Hold on a moment. If anyone’s going to say, let’s play hooky on a day, isn’t it usually me?
Jack Butala: Yeah, that’s true.
Jill Dewitt: Okay, thank you.
Jack Butala: I’ll tell you, when you turn the off switch off though it’s off. It’s a compliment.
Jill Dewitt: Oh it’s off. Thank you.
Jack Butala: But when it’s on man, it’s on.
Jill Dewitt: That’s what’s so funny …
Jack Butala: I just couldn’t make that transition fast enough for you.
Jill Dewitt: You have a hard time sometimes cause we’ll be out somewhere and you’ll think of something, and I’ll have to honestly say, “You know what, I do not remember the details”. I’m not … On my desk … I really do shut it off.
Jack Butala: It’s good. I respect that. I admire it.
Jill Dewitt: Thank you. Yes. Thank you very much.
Jack Butala: Today’s topic, scale your real estate investment business. This is the meat of the show. How do you really … What’s the difference between repeat … Repeat it. Do I repeat it, repeat it, repeat it or do I scale it? What’s the difference between those two things? Cause they are not interchangeable and I hear them used incorrectly frequently.
So here’s the deal, scalability. When you scale your business up, if you have a coffee shop and then you open another coffee shop, that’s repeating your business, it’s not scaling it.
If you write a book, you write it one time and you close it and it’s over and you sell it 10,000 times and then 20,000 and then 20,000,000 times, that’s scalability. Well how the hell can you do that when you’re tied to transaction, you can only do so many transactions a day. Here’s what you do, you become a private lender. So now you have … you do your own deals and you’re going along, chugging along and doing fantastically well like a lot of people in our group. And then you start to notice that in our group there’s this guy named John over here and he’s doing great. And he’s burning it. He’s burning through his acquisition money as fast as he can and selling properties and the guy knows what he’s doing and you get along. When you guys talk on the phone, you laugh a little bit. Hhmm.
So you lend him money. Then you lend Jimmy money. And then Sally. And then whomever else. And now you’re scaling your real estate business and you’re just like Jill just said before this show. You wake up in the morning and you look in the database, and you say, “Yes. Yes. No. No. Yes. No. Yes. No. Yes. No. No. No. Yes. No.” Then you become a great surfer.
Jill Dewitt: What the heck? Well, it’s more-
Jack Butala: Cause you have so much time.
Jill Dewitt: Oh, I see what you’re saying. So it’s really what Jack’s saying is not just about, you’re not just saying, “Hey, here’s $10,000 let me know how it goes”. No, you’re completing deals with that person cause you’ve watched them, and you’ve seen their track record, and you’re comfortable with them.
Jack Butala: And you know the business.
Jill Dewitt: You have a little bit of a partnership. You may have a partnership over here, partnership over there, even a partnership with 10 people. You know what deals are going down, they’ve already passed your test. That’s what Jack’s saying. You look in the computer and you’re like, I’ll do that one with that guy. I’m not going to do this deal with that guy, I don’t like the deal.
Jack Butala: That’s right Jill. That’s right.
Jill Dewitt: I’m going to this one with her. And that kind of thing. So, that’s how you lend them money. And we do this. Well our group especially, I see all kinds of great deals going on on our deal board with our members. And I was just looking at it today.
Jack Butala: That’s what this group is for.
Jill Dewitt: I know. I have a few that says I just have this, I don’t want to let it go to waste. It’s a 160 acres over here. Here’s a map, here’s the details. I’m like, this is so good stuff. So we are really not letting deals go to waste.
There you go. And then that way, you could have 10 deals going on at the same time.
Jack Butala: You see how fast she’s talking right now?
Jill Dewitt: Jack, I’ll talk like Dory.
Jack Butala: God no. Everybody just turn your radio off just now.
Jill Dewitt: Alright.
Jack Butala: Oh geeze.
Jill Dewitt: Sorry.
Jack Butala: Is that like Dory whale?
Jill Dewitt: Yes. Nemo. So anyway, that was such a good movie by the way. The second movie was adorable. I have to say even though our kids aren’t little but I still, those are funny.
Jack Butala: Jill and I still go to those animated movies. The kids are all grown up.
Jill Dewitt: No, wait. I’ve got to tell you something funny though. Do you remember when we went and Jack said, “Let’s go see Baby Driver.” I’m like, is that a kid’s movie? Then I realize, Baby Driver is not a kid’s movie. And by the way, if you’ve not seen Baby Driver, you have to see Baby Driver. That movie rocked.
So anyway. Back. What were we talking about? We have enough time cause we have deals going on, and we don’t have to do much. We can go see stupid movies.
Jack Butala: And do this show.
Jill Dewitt: And have fun. And go fast or go slow. So, alright. Sorry. Totally just changed your subject.
Jack Butala: No, I actually interrupted you.
Jill Dewitt: It’s all good. But-
Jack Butala: So it’s real easy to scale this business once you know what you’re doing. But here’s some mistakes I’ve made personally and I see some people in our group make once in a while so let’s try to avoid those.
Here’s an example. Hey Jack. I know you love 40 acre properties and I know you love to buy them for I don’t know, $80,000 then sell them for 180 and they’re worth 250. And that’s kind of your niche right now. I know you love that.
Here’s a marina in Tennessee. Would you like to buy it with me?
Jill Dewitt: Oh, and I have a golf course.
Jack Butala: I’m exaggerating. But I do see people that say, “Here’s a Los Angeles apartment building and man, all it needs is $300,000 of work. And the rents could be this and that.” The fastest way for me, for my personality, to go bankrupt, is to buy an apartment building. We’re not renters. We’re not landlords.
Jill Dewitt: I don’t want to do that.
Jack Butala: Yeah.
Jill Dewitt: You know, I think the golf course thing. I brought that up cause I really had someone that was trying to give me the golf course. But I don’t want a golf course.
Jack Butala: People get up and make fortunes in the apartments business, in a bunch of other real estate businesses where I would dismally fail. And people fail at selling land, where I do really well. So, where you can fail at scalability is in being a private lender partner. Not lender, but a private partner. Like an angel investor. Not really an angel investor either but a partner on a deal.
Jill Dewitt: He’ll get there. Keep going Jack.
Jack Butala: Jill’s pushing me along.
Jill Dewitt: Keep trying. Third time, you got this.
Jack Butala: If I didn’t love you …
Jill Dewitt: I’m sorry, I just sit here and go, where is he going? Alright.
Jack Butala: You want to make sure, my whole point is, you want to make sure that whatever you’re getting into with a partner they understand. Your brains are connected. They understand you incredibly well. And you understand them incredibly well. Even personally. And then the deal that you’re doing, you would actually do that deal. If you found it first, you would do that deal yourself. That’s the kind of partnership you want to get involved in. And then do it over and over and over again.
If you have a question, join us in another episode where Jack and Jill discuss how to use information. That’s me.
Jill Dewitt: And inspiration riding away on a scooter, that’s me.
Jack Butala: Just about anything you want.
Jill Dewitt: 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 Dewitt: That’s funny.
Jack Butala: I love when people bring us deals and nine times out of 10 I have to explain that’s just not … One time somebody brought me a wrecker company. They wanted me to invest in their we tow your car away if you’re parked [inaudible 00:11:25]
Jill Dewitt: Oh, okay.
Jack Butala: I’m like, what? First of all, that’s how you go to hell. By towing people’s cars away.
Jill Dewitt: Oh I know. It is not nice.
Jack Butala: It’s just a nasty business.
Jill Dewitt: I couldn’t do that.
Jack Butala: So there’s that. But if I had a nickel for every time somebody brought me some kind of deal like that … Think of any given episode of Shark Tank. One person is sitting on the panel saying, “This is the greatest idea I’ve ever had and you and I are going to make $25,000,000 in the next three years.”
Jill Dewitt: Right.
Jack Butala: And all the other people are going, I wouldn’t touch that.
Jill Dewitt: What is that? I know nothing about it, I don’t know baby clothes, whatever it is. That would be the kind of thing I know.
Jack Butala: So, you really have to find your niche and love it and be interested in it. Somebody brought me a chain of oil changing shops one time in Phoenix. It was no money down and I really looked at it and I said, “We could turn this thing around and make a couple $100,000 a month.” And I’m so glad I didn’t.
Jill Dewitt: Mmhhmm. Sometimes I find myself, I even surprise myself. I’m like I hang up the phone and I go God, I sounded real excited there. I really love what I do so much I actually really do get excited. And sometimes, I go why is this exciting? I must sound like a crazy person to people. Why is she all excited about buying that stupid piece of dirt? It’s dirt. I don’t know, but I love it.
Jack Butala: Exactly. I love land too, you know. I could have gone the other way, Jill. Like when we met, you could have said-
Jill Dewitt: Yeah, I’m out. I could have said no.
Jack Butala: What are you buying this real estate? What? Real estate? Come on, please.
Jill Dewitt: You’ve got to do something to it. You can’t possibly make money off that.
Jack Butala: Why don’t you just go work at the post office?
Jill Dewitt: Yeah, wear a suit.
Jack Butala: Wear a suit. Please stop wearing the same pair of shorts every date, huh?
Jill Dewitt: Right.
Jack Butala: Information and inspiration to buy under valued property.
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