3 Reasons Not to Complete a Deal (CFFL 520)

3 Reasons Not to Complete a Deal (CFFL 520)

Transcript:

Jack Butala :                        Jack Butala with Jill Dewit.

Jill Dewit:                             Hi!

Jack Butala :                        Welcome to the show today. In this episode, Jill and I talk about three reasons why you really shouldn’t complete a deal no matter how good it is. And with some stories, I hope, too, Jill.

Jill Dewit:                             Mm-hmm (affirmative).

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

Jill Dewit:                             Okay. Brandon asks, “I wanted to set up LetterStream, so that it sends out letters automatically through an API using Podio.” “Has anyone done this?” “I know it can be done using Podio, and Click2Mail, or Lob,” I don’t know, Lob, “But, can it be done with LetterStream?”

Jack Butala :                        Thank you so much for asking this question, Brandon.

Jill Dewit:                             Super cool.

Jack Butala :                        The answer is, heck, yes.  We are about to launch offers2owners.com. It’s offers, the number two, owners.com.  And, we … It essentially puts a tremendous amount of old school service back into doing a/an offer campaign.

Jill Dewit:                             Mailer.

Jack Butala :                        Yeah.

Jill Dewit:                             Yeah.

Jack Butala :                        So, it turns out this is a bottleneck for a lot of people, and we want to solve it.

So, we have hired a full-time person to … With an 800 number. You call him, and you ask questions, just like this, and then, we help you through it. Right on the phone, we help you with your [LetMail 00:01:14] merge.

(cough) Excuse me.

We help you with whatever it is that’s stopping you from an IT, or text standpoint, or any reason, really, from sending out a mailer.

And, this is a … LetterStream … One of the reasons that we chose LetterStream is they are 21st century capable of doing exactly what you’re trying to do.

And, we’ve been testing it, and it’s working great. So, we can and will help you, Brandon. Thank you for asking.

Launch date? Soon.

Jill Dewit:                             Haha. Exactly.

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, three reasons why you wouldn’t complete a deal, no matter how good it is. This is the meat of the show.

Jill Dewit:                             There’s actually 30,-

Jack Butala :                        Haha

Jill Dewit:                             But we’ve … Trying to narrow it down to three, today.

Jack Butala :                        I have to be honest-

Jill Dewit:                             There’s a lot.

Jack Butala :                        Jill and I were having kind of a reminiscent, you know, walk down memory lane, laughing scenario, before the show ’cause we were talking about all the deals that we haven’t completed.

Jill Dewit:                             Yeah.

Jack Butala :                        For reasons where something, you know, it set us off.

Jill Dewit:                             Right.

Jack Butala :                        Either one of us or both of us. Sometimes, the seller’s attitude. Sometimes, it’s the escrow officer’s attitude.

Jill Dewit:                             Sometimes, it’s Jack’s attitude.

Jack Butala :                        Haha

Jill Dewit:                             Haha. Let’s be honest. There’s people that rub … Well, you know, it just happens, probably, the wrong way. And, you know, no, I’m just, not just you, I mean, theoretical you. You know?

Jack Butala :                        I am extremely good at-

Jill Dewit:                             Mm-hmm (affirmative)

Jack Butala :                        Over-reacting to certain situations.

Jill Dewit:                             You think?

Jack Butala :                        Haha

Jill Dewit:                             No, no, no, no, no. Jack, you’re the most calm, even-tempered-

Jack Butala :                        Haha

Jill Dewit:                             Mellow person-

Jack Butala :                        Haha

Jill Dewit:                             I know. And, I know-

Jack Butala :                        Haha

Jill Dewit:                             If you asked any one of our staff, they will say-

Jack Butala :                        Haha

Jill Dewit:                             Jack, ah, he’s a pussy cat. Haha

Jack Butala :                        Haha. Oh, Jill.

Jill Dewit:                             No, I don’t know what you’re talking about.

Jack Butala :                        You know, you’re a barrel of laughs too, all of the time.

Jill Dewit:                             Oh.

Jack Butala :                        You’re perfectly behaved at work, by the way.

Jill Dewit:                             You are being silly.

Jack Butala :                        Haha

Jill Dewit:                             By the way, where you going with that one? So, at least I … Haha

Jack Butala :                        Back to the topic.

Jill Dewit:                             Thank you.

Jack Butala :                        What, in recent history, have you killed any deals because, you know, even though they’re really good deals-

Jill Dewit:                             Yep.

Jack Butala :                        Go ahead.

Jill Dewit:                             Yeah. Well, well, one in particular, just two months ago … I was all excited about this multi-unit transaction, but it was taking too long. And it was … I was gettin’, you know, what’s the hold up, what’s the hold up? I’m standing around, you know, I was ready to …

It was funny because it was, me, buyer, seller … We negotiated the deal. We’re happy with it. Escrow agent dragging her feet, dragging her feet, dragging her feet. I’m like, all right, this is taking too long and then, at the very bitter end, I find out that he changed the deal. Took out some properties.

Jack Butala :                        Took some properties out.

Jill Dewit:                             That I wanted.

Jack Butala :                        Okay, so that’s deal number one, and that sends me to the moon.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        If you agree, in writing, you sign a purchase agreement, it says we’re going to close a deal in 30 days, as a seller … You know, our staff runs around to make sure that we make good on these deman, on these-

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        On what we say. So, sellers and escrow agents materially change the deal.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        So. I got personally involved in this and I will … I’m not-

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        I’m not ashamed to say, I blew my top.

Jill Dewit:                             I thought about it, too. I looked at the lists, I’m like, so, yeah, so, he, obviously decided, no, I’m going to keep these. He was go … I was selling that he was selling his whole portfolio, I’m like, you know what, and here’s the deal.

I was agreeing to buy some things, that I didn’t necessarily want. But, it was part of the whole portfolio. I’m good with it. I’ll make it work.

Jack Butala :                        When you have a multi-unit deal, invariably, some properties are better than the others.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        Some are not as good, and some, you know, really, you just put up with.

Jill Dewit:                             Right.

Jack Butala :                        And so, you don’t just cherry-pick the five best that are off the top.

Jill Dewit:                             Right. This is part of the deal.

Jack Butala :                        And, then still close the deal for the same amount.

Jill Dewit:                             Right. And then he pulls-

Jack Butala :                        No way.

Jill Dewit:                             Them out. I’m like, yep, nope, not happenin’. And, it was taking too long, at that point. I’m like, that’s all I needed. See ya.

Jack Butala :                        I look back on that now, Jill, and I wonder if he instructed the escrow agent to, intentionally drag her feet.

Jill Dewit:                             Maybe, maybe, that could have been too.

Jack Butala :                        Because we got assigned that escrow agent. That was one of the contingencies in the deal.

Jill Dewit:                             True. He liked that person.

Jack Butala :                        Yeah.

Jill Dewit:                             So, you know what, now, he has no deal.

Jack Butala :                        So-

Jill Dewit:                             That’s what can happen.

Jack Butala :                        [I wonder 00:05:20]

Jill Dewit:                             So, that’s the thing too, you need to know … It’s not just [inaudible 00:05:24] buyers, seller. You know, you don’t want to do this stuff because you’ll … The deal will fall apart on you, too.

Jack Butala :                        So, one of the reasons is-

Jill Dewit:                             Yeah.

Jack Butala :                        A deal materially changes, you know. Once you sign the purchase agreement, that’s kind of it, in my mind. We’ve all agreed.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        And then, if it materially changes along the way,-

Jill Dewit:                             This is not cool.

Jack Butala :                        There’s a one institutional buyer, who’s no longer in this market anymore, any longer for, probably, for this reason. He was famous for, on the day of closing, changing the price.

So, if we … One deal I did was very large deal. More than seven digits. And, it came down to a price per unit of like, $1,200 a lot, or some number like that.

And, he said, “No, I’m not going to sign the deal.” “The price is now as a seller.” I mean, he was, actually, the buyer. “I’m now going to buy the properties for 800.” And, this is like, two hours before the wire transfer.

Jill Dewit:                             Um-hmm (affirmative)-

Jack Butala :                        So, I ended up doing the deal because it still was a fantastic deal. But, turns out, Jill and I have a podcast with several … Haha

Jill Dewit:                             Haha

Jack Butala :                        Tens of thousands, probably, a hundred thousand listeners. And, it’s fun to talk about stuff, like that,-

Jill Dewit:                             Yeah.

Jack Butala :                        When it happens.

Jill Dewit:                             Okay, so, we did number one. Did you get number two?

Jack Butala :                        Yeah, I will-

Jill Dewit:                             [inaudible 00:06:30]

Jack Butala :                        If you miss something in due diligence, as a buyer … And, this happens all the time, don’t knock yourself around over it. Happened in healthcare deals all the time, when we did ’em.

If you missed something during your due diligence, namely, access, or lack of access, sometimes, you have to close a deal. There’s a contingency in every one of our transactions, that … Did I say close a deal, or kill a deal?

Jill Dewit:                             Kill a deal. You said, “Close.” You mean kill.

Jack Butala :                        I mean kill.

Jill Dewit:                             Yeah.

Jack Butala :                        So, if you find something out midway, halfway through the transaction, that it’s like, they’re-

Jill Dewit:                             Whoops.

Jack Butala :                        Now, it just killed the value of this deal.

Jill Dewit:                             Right.

Jack Butala :                        Really, if you find something out where it no longer is economically feasible for you to buy this thing, then get the heck out of it.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        You know, with commercial properties, if you find out there’s an issue with environmental … Long-term care facilities, for example, which is where I cut my teeth a lot of years ago. Sometimes, they’re in rural locations, and they have like, heating oil tanks under them, that are, even the current owner doesn’t know about.

But, if we found out about it, that was a reason to kill the deal, immediately.

Jill Dewit:                             Mm-hmm (affirmative)-

So, that’s number two. You find out something, that you missed before, and it’s a deal killing issue, then, it’s okay. Get out.

Jack Butala :                        Exactly. And then, the third reason … And, Jill knows all about this. And, this the most disappointing for me, is that, at some point during the deal, you find out, probably, ’cause the seller didn’t tell you the truth. That the darn thing’s not conveyable.

Jill Dewit:                             Right.

Jack Butala :                        And, maybe, it’s a lot of times, they don’t even know. The seller, themselves, it might be the kids, or the grandchildren.

Jill Dewit:                             Right.

Jack Butala :                        And, they write a will, and it says, “Well, what do you mean, Grandma left me everything.” Well, it’s still in Grandma’s name, man, she can’t sign it.

So, are there ways around this? Absolutely. We talk about ’em in our Thursday-

Jill Dewit:                             Um-hmm (affirmative)-

Jack Butala :                        Weekly call all the time. There’s … You can get lawyers involved. You can learn how to acquire a title property yourself, or, depending on where you are in the country, it’s called a lot of different things … Adverse possession.

So, but, then the question is … And, Jill brought this up and, rightfully so … There’s a point where you could make a lot of money, it’s just taking too much time.

Jill Dewit:                             Right. So, that’s what I look at. When I … When these things happen, I go all right, this is going to take me a week. All right, it’s going to take me a week for this one deal. How much money am I talkin’?

All right, if I ditch it, I do 10 deals. Will I make more money on these easy ones? Heck, yeah. Then, I have to let the other one go.

Jack Butala :                        So, what do you mean, Jill? How do you know there’s 10 more deals to do?

Jill Dewit:                             ‘Cause, I’m staring at them.

Jack Butala :                        Haha

Jill Dewit:                             Haha

Jack Butala :                        ‘Cause we send a lot-

Jill Dewit:                             ‘Cause we send out a lot of mail, and I’m staring-

Jack Butala :                        Send a lot of mail.

Jill Dewit:                             I mean, that’s the reality, you know, if you don’t have enough deals, just send more offers. That’s easy.

Jack Butala :                        That’s right.

Jill Dewit:                             You know? We were talking about that the other day. One of our members had … I don’t know if I read it in landinvestors.com, or if I got an email. I don’t remember, but it was kind of a funny joke, like, it was like, “Huh, it works.” You know, who knew they were being sarcastic and funny. It was really cute. And, it’s great like, it does. If you need more deals, you just send out more offers. And, you can review those deals, and pick the ones you want there.

So, that’s what happens. And, that’s what’s really funny, too. I’m like, I might be halfway down the path working on a transaction, and some deal comes in that’s even better.

Jack Butala :                        Right.

Jill Dewit:                             I’m like, all right, okay, I need to finish this one ’cause I want to get to that one, ’cause I really want to get that one. So, there you go.

Jack Butala :                        Well said.

Jill Dewit:                             Thank you. Haha

Jack Butala :                        There’s always another deal.

Jill Dewit:                             There really is.

Jack Butala :                        I don’t care how … It took me years to learn that … Right, just so disappointed, sometimes,-

Jill Dewit:                             Yeah.

Jack Butala :                        Because there’s just nothing you can do, or you, or it’s … You brought up, earlier too, before the show … You know, we [can cut 00:10:02] deals in here all the time from people because of this silly podcast. People contact us and say, “Hey, do you want to buy a marina?” “Do you want to buy an apartment building?”

We get the apartment building one a lot.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        And, it’s, sometimes they’re smokin’ great deals.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        And, it … I have trained myself, now, as hard as it is, to just say no. It’s not that I necessarily want to do the deal, ’cause it’s really … I, personally, don’t like apartment buildings, as an investment. But, boy, if I spent, I don’t know, 12 hours-

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        Because we have … Because of this show, I know who’s going to buy it, so-

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        But, we’re not licensed agents. And so, it is, I just have to say, “No,” and kind of walk away.

Jill Dewit:                             Well, there’s a reason not to complete a deal.

Jack Butala :                        It’s like-

Jill Dewit:                             Haha

Jack Butala :                        Somebody hands you a 30 year old glass of Scotch, and it’s all at the right time, and everything, and you have to say, “No.” It’s that same feeling. Haha

Jill Dewit:                             I can’t imagine you turning that down, ever.

Jack Butala :                        Haha

Jill Dewit:                             Why would you ever say, “No.”

Jack Butala :                        [inaudible 00:10:57]. Actually, I would stop what I’m doing, even if it is a real estate deal, and, probably, do that.

Jill Dewit:                             Yeah.

Jack Butala :                        With whoever it is.

Jill Dewit:                             Exactly. Haha

Jack Butala :                        Haha. Well said.

Jill Dewit:                             Yeah. That’s a good one.

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

Jill Dewit:                             And, inspiration, that’s me.

Jack Butala :                        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.

If you hear noises in the background, it’s because the windows in our studio on the beach, are open, and they’re beach noises.

Jill Dewit:                             Hm-hmm (affirmative)-

Jack Butala :                        You should be happy.

Jill Dewit:                             It’s warm today.

Jack Butala :                        Haha.

Jill Dewit:                             It’s nice today.

Jack Butala :                        Did we cover all three?

Jill Dewit:                             I think so.

Jack Butala :                        I think so, too.

Jill Dewit:                             Yeah, that was good. There’s probably, like I said, there’s 30. There’s a lot of reasons not … It’s not your criteria, you know. I mean, there’s all kinds of things that you could think of, but we wanted to hit some different ones, and big ones, and just make sure everybody knows … For me, I want to make sure everybody knows it’s okay.

Jack Butala :                        So, just-

Jill Dewit:                             You can pass on a deal. You don’t … Just ’cause you sent an offer, and they signed it, and sent it back … You don’t have to buy it. If it sucks, don’t buy it.

Jack Butala :                        If you’re more than three … As an investor, if you’re more than three months into this, after sending consistent mailers, you already know what we’re talking about.

Jill Dewit:                             Um-hmm (affirmative)-

Jack Butala :                        You know, it’s those first months, those very first … Let’s say the very first 10 deals where you sit there and you stare in the mirror, and you say, “I gotta make this work, I gotta make this work, I have to prove this concept to myself, that it actually works.”

Jill Dewit:                             Right.

Jack Butala :                        And … But, after you get, [after/if 00:12:19] you get piles of mail on top, piles of mail, back,-

Jill Dewit:                             Right.

Jack Butala :                        And, phone calls, and you realize, no, I don’t-

Jill Dewit:                             Yeah, they’re going to get real picky, and it’s a good thing.

Jack Butala :                        Exactly.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        So, ballpark, just without even thinking about it, Jill … How many times … I mean, of all the deals that we get in from mailers, only,-

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        Do … How many close, as a percentage?

Jill Dewit:                             Oh, my gosh.

Jack Butala :                        80%, 50%, 1%?

Jill Dewit:                             Okay-

Jack Butala :                        These are [inaudible 00:12:41]

Jill Dewit:                             Offers coming back.

Jack Butala :                        Mm-hmm (affirmative)-

Let me put it this way … Ones that make it into-

Jill Dewit:                             Well, it’s a tough … Well, let me-

Jack Butala :                        Properties that make it into our database.

Jill Dewit:                             Oh, why, they all-

Jack Butala :                        Not just fishing calls.

Jill Dewit:                             They all get in the … Okay, how do I say this? Our criteria has changed. So, my percentage has changed.

Jack Butala :                        Haha

Jill Dewit:                             So, this is the reality, right now.

Jack Butala :                        I think this is good for [listeners 00:13:02].

Jill Dewit:                             Yeah, ’cause the … Some of the properties, that are coming back now, I mean, I have a list from when the calls come in, like of noes ’cause it’s just too small. I don’t … Nothing … If it’s a property, you know, below a couple thousand dollars, and there’s certain areas, I don’t want ’em. I mean, I moved on. I doing much bigger deals.

So, of those that come back, a pretty high number-

Jack Butala :                        Mm-hmm (affirmative)-

Jill Dewit:                             Of the/our new transactions. If I, if we’re hitting the right people, which we usually are, we’re pretty much going to close those.

Jack Butala :                        Right.

Jill Dewit:                             So, does that answer the question?

Jack Butala :                        No.

Jill Dewit:                             Oh.

Jack Butala :                        Haha

Jill Dewit:                             Haha

Jack Butala :                        And, it was a trick question ’cause I actually ran the numbers before [inaudible 00:13:43].

Jill Dewit:                             I don’t know, then. I don’t know.

Jack Butala :                        Haha

Jill Dewit:                             Haha

Jack Butala :                        I agree with you. The too small deals, there’s a lot but,-

Jill Dewit:                             Yeah. I just-

Jack Butala :                        The deals that fit our criteria, and we know we can double our money, and it’s real fast, and it’s not a lot of work … About 75 to 80% close.

Jill Dewit:                             Right.

Jack Butala :                        And, the ones that don’t close are really for the reasons, that we outlined in the show.

Jill Dewit:                             Mm-hmm (affirmative)-

Jack Butala :                        And, it’s mostly because we find out, of all, of those reasons, really, in the end, it comes down to, we find out somebody’s passed away. They just,-

Jill Dewit:                             Right.

Jack Butala :                        We can’t get the deal done easily enough, and-

Jill Dewit:                             Right.

Jack Butala :                        We’re actually working-

Jill Dewit:                             That’s usually … That’s more likely the problem. You’re right. Less than access and things like that, I can work around stuff. We can make access.

Jack Butala :                        Those are the first deals that’ll go into a [land crowdfund.com 00:14:24], by the way. The ones that are just too small, but they’re too small for us, but it’s somebody else’s really fantastic first-time deal. [inaudible 00:14:30] first-time deals.

Jill Dewit:                             Yep.

Jack Butala :                       Information and inspiration to buy under-valued property.

 

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