No Real Way to Automate House Renovations (CFFL 521)
Jack Butala: Jack Butala with Jill DeWitt
Jill DeWitt: Hi!
Jack Butala: Welcome to the show today. In this episode, Jill and I talk about how there’s really no way to automate a house renovation. And I feel qualified that Jill understands, and has a lot to say about this.
Jill DeWitt: Oh my goodness.
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 DeWitt: Okay, Sean asked, “I have a seller with a deed in his name from 1958.” Which is very normal for us, this is cool. “In it the previous owner wrote a very long, wordy exception to retain mineral rights. Can anyone tell me if I need to include the mineral rights in the verbiage, in the new vesting deed I’m creating? I can send a picture of the deed, if it would be helpful to anyone. Thanks for your time.”
Jack Butala: Do you wanna answer?
No matter what you do, that person … Well the person before, the person that you’re buying it from, will retain the mineral rights to that property forever. Regardless if they’re deceased or not. And to undo that, I mean it takes a team of lawyers. As you can imagine, petroleum companies and mining companies are experts at this. So they have whole teams that specialize in that.
But here’s the real deal, from a big picture concept. Along the chain of title, after the homestead, from the government. Somebody retained the mineral rights usually. Sometimes it could be you! If you do a lot of research, you might end up with the mineral rights. If nobody said right in the deed document, “I’m getting you the property, but with the exception of the mineral rights.” You could very well own mineral rights. Like I said, it’s a whole different career, however; you should exclude that when you convey the property.
The mineral rights portion of this, and to do that, it’s real simple. If you look at any of the deeds that we do all over the internet. You’ll find a deed from us, and it quite simply says, “We’re getting you the property with the exception of the mineral rights.” It doesn’t say, “We don’t ’em,” or, “We’re keeping ’em for ourselves,” or anything, we’re just saying … The verbiage just says, “We don’t really know who owns mineral rights, but we’re pretty confident it’s not you.”
Jill DeWitt: Well you know what, here’s another … I personally … Jack, you can tell me if you disagree, but … If you goof up, and you do what we’ve said in the past, which is verbatim, copy the legal description and don’t change a word, you will be fine.
Jack Butala: Right, so-
Jill DeWitt: So-
Jack Butala: I beg to differ.
Jill DeWitt: Well-
Jack Butala: In the end Jill, you’re right. But go ahead.
Jill DeWitt: Well I guess let me explain this, please. So, if you copy it, verbatim, all you’re doing is reiterating to the next person what’s already happened. Are you going to get in trouble for that? Heck no. Do you have to do that? No, you don’t. But, I mean I think it’s a personal preference if you will. And if you’re worried about taking it out, and doing it the right way, then I might leave it in.
Jack Butala: Yeah I mean, if you’re brand new, Jill’s right, you’re not going to get into any trouble for doing it this way. But I’ll tell you, at our level, I would just leave it out entirely, and say, “We’re not conveying mineral rights.” And it’s as simple as that.
So, mineral rights is a big issue. It can make property really more valuable, or less valuable. Especially some of these rural areas, where the whole attribute to buying a property is oil, and gas, or some mineral situation. But I have specifically and intentionally chosen to stay away from that, and really just make the money on the actual real estate. But, we have people in our group, Luke Smith is one of them, who really knows a lot about this.
Jill DeWitt: Yeah, and if you look Sean … When you’re looking, it’s usually a separate line, or separate paragraph. So it’s easy to pick out the legal description separate from this little “addendum” if you will. Like I said, personal preference is fine. If you’re not comfortable with it Sean, leave it in. You’re not doing any harm … I kinda like leaving it in. Especially if you’re new, because that’s your proof that the next guy knows on the deed that, “Hey, it doesn’t come with this.” Kind of thing so.
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, there’s no real way to automate house renovations.
Jill DeWitt: Why?
Jack Butala: This is the [inaudible 00:04:32] of the show.
Jill DeWitt: Wouldn’t it be cool if it was? Hi, I’m going to clone myself. This is the only way you could do it, is clone yourself, and since technology doesn’t have that yet, there is no real way.
Jack Butala: So, this topic came up … I came up with it, because I was speaking with a guy, casually just met this guy. And he buys like 20, 30 acres properties on the outskirts of Los Angeles. Gets entitlements, puts them in. Puts the roads in and stuff, or has other people do it, and then he builds like 20, 30, 40, 50 houses.
And he said, “Boy, I tell ya, the only reason I do it this way now is ’cause I failed at renovating houses like everybody else. I would have one in North Los Angeles. One down in South Los Angeles, and I would spend most of my day driving back and forth yelling at contractors. Instead I have one property. I go there one time, or my general contractor does. I build 50 homes, exact same houses, you take the floor plan, flip it or something. Get a little creative, and that’s automating house development, or house renovations.” The other way … He’s just, honestly-
Jill DeWitt: Less development I would think. Renovation, I always think of renovation as changing it.
Jack Butala: Well I gave that example … That’s exactly right. So I gave that example, because renovations are impossible. You have no idea what you’re getting into.
Jill DeWitt: Everyone’s different.
Jack Butala: Do we like risk, or not like risk, in investing?
Jill DeWitt: Right. This one’s roof’s good. That one’s roof is not good …
Jack Butala: You don’t know. Until you get in there, you have no idea. It’s like dating. On the outside it looks okay, but no, the guy’s crazy. He’s crazy. For the first three weeks everything’s fine, then the real guy came out. He’s nuts. It’s just like renovating house.
Jill DeWitt: You always come back to the same analogy. How ’bout buying a used car?
Jack Butala: Same thing! It was fine for two weeks then it just blew up, so …
Jill DeWitt: Exactly.
Jack Butala: Oh used car? What fun is that?
Jill DeWitt: Right.
Jack Butala: Everybody can relate to dating, or being married to somebody that you found out they were nuts after it was too late.
Jill DeWitt: Yes.
Jack Butala: Every single person.
Jill DeWitt: Yes, I think you’re right, totally.
Jack Butala: Have you ever had a lemon car? A car that just blew up on you? After a month of owning it?
Jill DeWitt: No, but my kids have. Well you know what, then I disagree with that. I think they did it but, anyway.
Jack Butala: That’s what I think.
Jill DeWitt: When I was young no, I never had a lemon, but anyway, got rid of those cars one way or another.
Jack Butala: How many people have you gone out with where its just turned out to be just a disaster?
Jill DeWitt: Oh, that’s a lot-
Jack Butala: Excluding the relationship you’re in right now.
Jill DeWitt: Well, I’ll let you know. I’ll let you know. I still think there’s some hidden things I haven’t uncovered!
Jack Butala: There’s all corners of crazy goin’ on over here.
Jill DeWitt: No, no, no, I’m just kidding. Totally kidding. So anyway … But back to this house renovations, could you imagine I mean, there’s just really no way.
Jack Butala: There’s no way.
Jill DeWitt: And that’s why … Well you know-
Jack Butala: It’s so inefficient.
Jill DeWitt: Well let’s talk about these. Everybody’s into these HGTV shows, and when you look, I mean have you noticed they’re spending all their time on one project? And they’re spending a lot more time than you think that they’re spending on that one project. I mean, if they’re speedy, it’s a month. I mean a month, 45 days, is hauling. Especially if you’re moving walls, and plumbing, and you know-
Jack Butala: And have a great contractor-
Jill DeWitt: Putting in-
Jack Butala: And if you’re pulling permits that, that stuff’s on time, and the material’s are on time-
Jill DeWitt: Exactly-
Jack Butala: There’s a lot of moving parts.
Jill DeWitt: Yeah, you really have to be ready and go, man. I remember you order the carpet, and the flooring, and all that stuff. While the deal’s closing, you should be ordering your materials, and have your stuff. So the day it closes, you’re in there demoing, and then the next day they’re starting.
So, it’s gotta be that fast. But the whole point of this is, it takes your time. If you really don’t babysit these projects, and anybody who’s done renovations knows that … If you’re not really there, and involved. Too much can go wrong.
Jack Butala: I agree. There’s too many unknowns and it’s too risky.
Jill DeWitt: And too much money can be spent, and wasted because you’re not there.
Jack Butala: Because of those unknowns. It’s just by definition, it’s incredibly inefficient.
Jill DeWitt: Yeah, imagine the wrong flooring shows up, and matches nothing. They don’t know. They start installing it, ’cause you’re gone for a week. You show up and go, “Oh no.”
Jack Butala: Right.
Jill DeWitt: Now you’ve got a mess.
Jack Butala: So let’s compare, here’s the good news. Let’s compare to land investings. So here’s what happens, and this is what we do. And if you’re already involved in this, maybe you can pick up a few efficiency pointers out of this.
You identify a market. Let’s say, I don’t know, it’s a rule in Massachusetts. You identify country rule Massachusetts, and you price it at x per acre, or x per lot. Y per lot, or z per square foot, or whatever you’re buying.
And you send out the offers, and the come back. Some of them come back signed, some of them come back in the form of a negotiation on the phone, with the seller. Or what not. So now you’re lining all your ducks up.
You’ve got six deals to review, you review them. You send out your army of notaries, or you call your title agent. However you do it, and you start buying these properties. You review them, and buy them. And then you post them saying …
What you’re doing is automating the whole thing. You’re doing the exact same thing for every single property. The only variable is the actual property itself. And that doesn’t matter. Because you’re still doing three maps, or five maps. Whatever you set out to do. You’re still doing a legal description, and you’re still doing a description.
When you sell it, same thing. There’s a process. Continually go through the same process. So, once you’re good at it, you can ramp it up. Now you’re sending 2,000-
Jill DeWitt: And sub out [crosstalk 00:10:16] some of the stuff that you don’t like to do.
Jack Butala: You never leave your desk, never. So think about that. Are you gonna drive all over town, babysitting contractors? ‘Cause that’s really what ends up happening … And choosing color patterns, and stuff-
Jill DeWitt: Exactly.
Jack Butala: Or you’re gonna sit at your desk, and churn through the deals that come in.
Jill DeWitt: Right, this was-
Jack Butala: You want to talk about capital outlay-
Jill DeWitt: Right, oh gosh yes.
Jack Butala: I mean if you don’t have a partner land business, and you don’t have a apples to apples. You don’t have a partner in the home renovation business. You buy a house, for whatever. If you’re lucky, a couple hundred thousand bucks. Spend another 70, or 80. Now you’re into it for 300. Can you imagine if you started-
Jill DeWitt: Having that much tied up-
Jack Butala: You land business for 300,000$-
Jill DeWitt: Right what we could do with that, oh my goodness, exactly-
Jack Butala: Not we, but people-
Jill DeWitt: But anybody.
Jack Butala: So yeah exactly. So I mean it takes five to 10,000$ just to start a land business, and you can double, triple, your money constantly.
Jill DeWitt: Mm-hmm (affirmative)
Jack Butala: You’re gonna end up with 300,000$ instead of spending it. So, there’s no real way to automate a house renovation. In fact, if somebody’s figured it out, I would love to know. All it really does is make for good TV.
Jill DeWitt: I was gonna say too that, we personally, and most of our members know people that have made 40, and 50,000$ off one transaction. That they have oh maybe, four hours in total. That they’ve spent. Could you imagine four … You can’t spend four hours on a house flip to make 40,000$.
Jack Butala: No that’s not the normal-
Jill DeWitt: But-
Jack Butala: But the norm is, I mean you can expect to buy … Cash in, cash out 30 to 40 days for land. If you’re doing stuff right.
Jill DeWitt: So yeah, but you know what I’m saying-
Jack Butala: But you don’t do anything.
Jill DeWitt: Right.
Jack Butala: The whole time, all you’re doing is directing other people, and you’re looking for other deals.
Jill DeWitt: And you’re doing a transaction, and transaction, and that’s it. So imagine this, and it’s … I’m trying to think of what the right term is, but it’s … So you start the ball rolling, and maybe you buy a property weak. You buy a property weak, you get a system going. Like Jack’s talking about.
So, as your system goes, and builds, as you buy property weak, you happen to be four weeks ago. You bought one, and it’s posted, and it just sold. Buy, sell. So you can see you had a nice little merry go round … I don’t know if that’s the right term going, but anyway-
Jack Butala: Well i would say snowball affect-
Jill DeWitt: There you go. ‘Cause you buy more, and more, and more as you get better, and better, and better. And then before you know it, it’s game over.
Jack Butala: So yeah, I mean it never ends. It’s clear that to me that our’s is not-
Jill DeWitt: Then you’re telling your wife to quit her job, and now you’re staring at your job. And you’re making different decisions-
Jack Butala: So let me be super clear on this. It’s not the end all for everybody, but if you want to hear some … I was just reading through Laneinvestors.com looking for questions for future episodes. There is every … I mean there are a ton now. Hundreds, and hundreds. There’s thousands actually, of stories, of people succeeding.
And every once in a while you hear one where somebody says, “I bout a bunch of property. I just can’t sell it.” And then somebody three months later says, “Hey, what’s the update on this?” “Oh yeah, it’s fine. I sold it all.”
Jill DeWitt: Exactly. Isn’t that funny?
Jack Butala: So my point is all kidding aside, there’s varying levels of success. But if the light bulb goes off over your head, like it has with many, many, many of our members, you can take this thing to the moon. I have never say around with anyone, and said, “Oh yeah, I successfully renovate houses consistently, and there’s no real surprises, and it’s my job entirely.”
Jill DeWitt: I know.
Jack Butala: Never.
Jill DeWitt: Isn’t that interesting?
Jack Butala: Not with one person ever.
Jill DeWitt: Exactly. I know I’m thinking of our closest friend at this gig. He always looks tired-
Jack Butala: He’s tired, and angry.
Jill DeWitt: I know.
Jack Butala: And he’s like, “Oh. I got killed on this one.”
Jill DeWitt: And he can’t get a way [crosstalk 00:13:58]
Jack Butala: It’s a good thing I’m doing four of ’em, ’cause I’m only gonna make money on two. That kind of thing.
Jill DeWitt: Right, I’m like, “Come visit.” He’s like, “I can’t, I’m in the middle of this, the middle of that.” “Well shucks, we can. Okay see yeah.”
Jack Butala: You know what he says?
Jill DeWitt: What?
Jack Butala: The only way I can win at this, is if I buy it really cheap.
Jill DeWitt: Right?
Jack Butala: That’s the only way.
Jill DeWitt: Who knew? That’s very interesting. I love it.
Jack Butala: Doing this in another episode, where Jack and Jill make fun of their personal relationships, and discuss information, that’s me.
Jill DeWitt: And I salvage him with inspiration, that’s me. To get just about anything you want. We use it everyday to buy property for half of what it’s worth, and then sell it immediately.
Jack Butala: You are not alone, in your real estate ambition. We should have done this on the show.
Jill DeWitt: I know I was thinking about that. I mean really, seriously it bums … I’m happy he was able to come for our party. That was really, really cool. But I mean the reality is, it’s hard to get away. With his life, with us.
Jack Butala: Exactly, he’s a pretty low key guy. He’s not too jammed up-
Jill DeWitt: Stressed out.
Jack Butala: Like we are.
Jill DeWitt: Yeah. Jam- what’d you say?
Jack Butala: Jammed up, amped up like I am.
Jill DeWitt: Oh, am I amped up?
Jack Butala: No, you’re not.
Jill DeWitt: Oh.
Jack Butala: I can’t handle that profession. There’s just too much risk. I really, I can’t stand it.
Jill DeWitt: Yeah. Even the-
Jack Butala: I want to know what’s gonna happen when I wake up tomorrow.
Jill DeWitt: Even the good ones that we did, where I would come to you, and I could easily say, “On time, under budget.” It still wasn’t a fun experience for you.
Jack Butala: No, because you’re sitting there in the back of your head saying, “Oh well at least this one worked.”
Jill DeWitt: Right.
Jack Butala: “I wonder what’s gonna happen in the next one?”
Jill DeWitt: But then also too, how much tied up right now. That kind of thing. That’s a little nerve wracking.
Jack Butala: Millions of dollars.
Jill DeWitt: Even pay cash, it’s still tied up. It’s so … I get it.
Jack Butala: Information, and inspiration to buy undervalued property.
If you have any questions or comments, please feel free to email me directly at jack@LandAcademy.com.
I would like to think it’s entertaining and informative and in the end profitable.
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