How To Value Houses (CFFL 540)

How To Value Houses (CFFL 540)

Transcript:

Jack Butala:                         Jack Butala with Jill DeWit.

Jill DeWit:                            Hi, there.

Jack Butala:                         Welcome to the show today. In this episode Jill and I talk about how to value houses.

Jill DeWit:                            This is interesting.

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

Jill DeWit:                            Okay. Matt asked, “Hey guys, I did a few searches on the forums. I couldn’t find anything specific about the topic of how to build a buyers list. I’ve heard it mentioned of manually pulling emails of paid Land Watch users in your areas and asking if they’d be interested in being buyers. I’ve also heard mention of people systemizing the process of scraping those emails. This is all good stuff. It looks like it may be a good idea to keep one property up on Ebay at all times and adding those people to a buyers list. It looks like managing your buyers list through A-Webber is currently the best option.” He’s doing a lot of work here. I’m really impressed. “I wasn’t able to find a definitely ‘This is the best way to do it,’ or ‘Do these three things every week,’ and I’m sure I’m not the only who would benefit from this thread. Hopefully the group can get some good actionable items from this thread. My question to everyone is if you were to build a buyers list from scratch today, how would you do and how would you structure emails to your buyers list. Thanks!”

Jack Butala:                         Outstanding question, Matt. Plus you’re thinking out of the box. I think you’ve asked a few other questions that haven’t made it as far as this show on the landinvestors.com community and this is top notch so I’m going to do my best to answer your question. Drop everything and go to landwatch.com and go to the signature area. In fact I do a YouTube video on how to do this so if you go to our YouTube channel, landacademy.com, I actually show you how to do it on the computer. It’s incredibly simple and fast. Literally takes about 30 minutes and you’re going to have 50 to 100 of the best land buyers in the country. Go to the signature area, right click on any given email … You’re going to see each … State-by-state it lists the land owner or the signature. It costs a lot of money to be a signature level member at Land Watch.

Jill DeWit:                            It’s like 500 a month, from what I remember.

Jack Butala:                         Yeah. Click on … First try to do it with one. Click on the person’s email and that the notice of all their contact information and then save as and copy it to Word or anywhere else on your desktop and you’re going to get their email address. Do that for all 50 to 100. I’m not sure how many. Every time I look the list gets bigger. These are the people who are real serious land buyers and sellers. That’s the beginning of your A list. Since you’re interested in doing this on an ongoing basis, which is incredibly positive, continue to do that, I don’t know, once a month maybe. Then post your Craigslist ad in the area that you’re working. Let’s say it’s Montana for example. I’m just throwing any location out there.

Post your Craigslist ad saying you’ve got a bunch of property that you want to buy or you want to sell and you’ll get some people that way, but the absolute best way, without a doubt, to get great buyers and probably will result in immediate sales, is to go to Real Quest, which you already have a subscription to, and take a look at who owns property in the immediate area of the properties that you want to sell. If it is Montana or one county in Montana, like Sweet Water, I guess Wyoming, or I’m drawing a blank on counties in Montana. You’ll see exact, you’ll see and just drop them a little note. We’re anti-post card here at Land Investors, but this is a time, an appropriate time to send out a post card. You will get a ton of buyers that way. I hope that answers the question, Jill. I mean, what do you think, Jill?

Jill DeWit:                            I could … I would honestly say to be, if you wanted to build up your email list and make sure they’re interested, I would have no trouble because you can manually enter people into A-Webber, that’s what we use the most for our email list, and create a group and then you can send them an email asking them to reply … You know, I mean or at least say I’ve added you to my group, here’s the kind of stuff that I have available and what’s coming up and if you’re not interested you know they can easily opt out and, you know, no harm no foul, and if they are interested, you know if they don’t do anything, you know you got a good list, too, by the way. I think that would be really good because there’s several that hit me up like just exactly like we’re talking about, and I’m like, “Yeah, I’ll be on your list because I want to see what you got going on. I want to see your prices.” When people do that to me, I don’t opt out.

Jack Butala:                         Me too.

Jill DeWit:                            I sit right there on their list because I, like I said, for me it’s research even sometimes. For a lot of them, they want to be on your list because, you know, you never know what comes along. I might be interested in something that comes my way.

Jack Butala:                         Yeah, put us on your list. I’m on a million lists, too, Jill. I’m sure Jill’s … I’m on house lists, apartment building lists. I have no intention of ever, for the rest of my life, buying an apartment building, but I’m on the list because I just want to see.

Jill DeWit:                            What would you say … I’m going to say to Matt, to summarize, once a month, say once a month do the Land Watch scrape once a month and whoever’s not already in your thing, add them. Once a month do a Craigslist or something like that or Ebay, maybe rotate.

Jack Butala:                         Yeah. Ebay thing’s always good, but the thing about Ebay is the quality. You’re going to get a consumer, end user buyer.

Jill DeWit:                            That’s true.

Jack Butala:                         While I’m not discouraging it, I think that …

Jill DeWit:                            It’s not the best.

Jack Butala:                         Yeah. Ebay’s not what it used to be.

Jill DeWit:                            Right.

Jack Butala:                         But, again, I, by leap … Who can resist this sentence, “Hey, I saw in the county records that you own a piece of property in XYZ county. Well I just bought 13 pieces of property,” or “I’m negotiating 13 deals in this immediate area and I’m extremely confident that they’re a lot less than what you paid. Let me know if you’d like to see what I have.” That goes for houses and everything else. House, which we’re about to talk about, with houses. This is a, you know, who can resist that?

Jill DeWit:                            Right.

Jack Butala:                         In fact what might end up happening is they might say, “Hey.” They’re going to do one of two things. They’re going to say, “I would love to buy some more property there,” or they’re going to say, “Man I have never used the property that I bought there anyway. How about you buy mine too?”

Jill DeWit:                            Right, exactly.

Jack Butala:                         So it’s very, very healthy.

Jill DeWit:                            You know I thought of one more thing, too, that’s really, really good is to, on your website, have a place where people can opt in so when they find you and they find your site and they’re looking at your property, have a box on the side where they can opt in like, “Hey, don’t see the property that you’re looking for but want to be on my buyers list? Sign up here and you’ll get a monthly/weekly/bi-monthly,” whatever it is. Let them know what kind of email you’re going to send out, you know, of available property, let them opt in. Then you could even put that on social media, on your Facebook page and stuff like that too and you’ll get people that will just find you.

Jack Butala:                         Yeah. I mean, I keep … The answer to this question’s clearly going to go on forever because I keep thinking of good things.

Jill DeWit:                            I know.

Jack Butala:                         Social media, man, I’ll tell you, our top sellers in our group, buyers and sellers, buy … They buy property and they post it all over social media and then you can track the analytics in tremendous amount of detail, who clicked on it, who responded to it, who looked at it, Facebook groups, specifically. Groups, there’s tons of property groups, like rural land property groups where people are really interested in buying this stuff so you can track that. Here’s what … In the end, here’s where Jill and I are at. Jill and I, after 20 years of doing this, what ends up happening is you find probably 10, I don’t know, five to 10 buyers who essentially just buy anything because you’ve established trust with them.

That’s how … I mean, we don’t post property to the public anymore because it’s too much work. What we do is we just say, before we pull the trigger on any acquisition, I don’t care what it is, a ranch, a house, or a piece of land, a rural piece of land, we call our guys and say, you know, “Hello, you’ll opt us in to this month’s acquisition for you,” and they say, “Okay,” or they say, “Oh my gosh, no,” which they almost never say. You’ll eventually find five or 10 people that just they want to buy everything from you, but it takes some work and it takes some time. But, man, you’re asking the right questions and you’re … Actually, you know what I love about this question, Jill, is he provides like four solutions right in his question.

Jill DeWit:                            Right. I know, Matt, you’re already answering yours so it’s perfect, Matt, “Yes, yes, and yes.”

Jack Butala:                         That’s right. Do it all and what makes sense for you will make sense. You know, we, same old, we were the largest land seller on Ebay for years and we consequently have a, I don’t know, 25,000 buyer list, 25,000 unit buyer list. It’s no surprise we found, you know, five to 10 people who really want to buy everything out of that kind of group. The wider you cast the net, the better buyers you’re going to get and get down to the, you know, the end, so to speak.

Jill DeWit:                            That sounds like dating. [crosstalk 00:09:14] I was waiting for you to do it. I’m like, “Here it comes.” You know, it’s like the more you date, the more you’re going to find that special one so Matt, up your numbers.

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, how to value houses. I love valuing property. This is a blast for me so the rest of you can just turn your MP3 player, just turn it off.

Jill DeWit:                            Right.

Jack Butala:                         This show is really just for me, I guess.

Jill DeWit:                            No.

Jack Butala:                         It’s not for Jill, I’ll tell you that.

Jill DeWit:                            I made some notes. Are you serious?

Jack Butala:                         You have some notes?

Jill DeWit:                            I totally have some notes.

Jack Butala:                         Awesome.

Jill DeWit:                            I show up, babe.

Jack Butala:                         How to value houses. You know appraisers who are, if you get a loan on a house to buy it, you need, you know the mortgage, the company wants to have an appraiser. That’s not what this show is about. It’s not … This isn’t about Appraisal 101. This is about how I value houses before we send out a mailer, an acquisition mailer so that we can get some results and actually buy some property. That’s really what this show is about so I wonder if your notes are apply to that.

Jill DeWit:                            No, they really don’t. No, I’m just kidding. Yeah, they kind of do. You know what they do. Do you want to hear my notes?

Jack Butala:                         I would love to. Yeah, go ahead.

Jill DeWit:                            Here’s my notes that I made about this, about how to value houses, because I know where you’re going with this. What I look at is … or what I think that I would look … What you look at is, you know, what’s for sale, what’s available. You know you want to find a good mix of like what’s for sale because comps from a year ago are really not accurate, everyone. If that’s the best that you can find, by the way. What’s really out there right now for sale is a good indication of where I want to come in way under, number one, you know, and what is actually selling. All right what are these people paying for these properties like right now or in the last 30 days? I know you’re going to talk a lot more about this. My other note was not the assessed value. Do you want me to share my [crosstalk 00:11:26].

Jack Butala:                         Sure, yeah, absolutely.

Jill DeWit:                            Where … This is I know I’m kind of jumping around here and you’re going to bring it all back together, Jack. I was just going to say, if you’re looking in an area, like I was just doing a little looking before the show and I know this certain area here at the beach where homes are selling, easy, four million. But guess what the assessed value is? I just went looked up a particular home I know for sale for four million, the total assessed value is 2.1. Look at the difference. I just want to throw that out there. Now please, Jack, bring it home, please.

Jack Butala:                         Well, I mean, Jill’s 100% right. Never look at assessed value. Just forget it. I mean and I mean that. I mean forget assessed value. It has nothing to do with value in real estate. All the assessed value is, for the record, is a way for the assessor in that specific county, in whatever cockamamie scheme they’ve concocted to, from that, to come up with that number to assess your tax rate and how much your property taxes are. The same house in Michigan versus California that has the exact same tax rate, the amount of money of taxes that you pay, might have a, one might have a $300,000 assessed value and one might have a $2.2 million assessed value, but the taxes are the same.

Jill DeWit:                            Why do you think, Jack, that people get hung up on that? I hear so many people saying that, “Well, it’s assessed at this so it’s worth that.” Why do people think that?

Jack Butala:                         For two reasons. Number one, they got some really bad information, maybe they’re married to an appraiser. Right, I’m not knocking appraisers, but I’m just saying that it’s not a way to value real estate. But when you look at a line of … The second reason is when you look at a bunch of data, let’s say you look at a whole list of data of houses in one little town somewhere and you’re staring at the addresses in one column, and the next column is there’s this thing called value. It’s hard not to … It’s hard to just throw it away, you know especially if you’re brand new. That’s why.

Jill DeWit:                            Okay.

Jack Butala:                         But, I mean the takeaway from what Jill said is just forget it. Forget assessed value. It’s meaningless. Just pretend we’re in school for a second and this is Appraisal 101 and you’re just, you know you sit down at a desk and you’re ready to be an appraiser and the first thing the instructor says is there are three ways to value real estate. Some of them pertain to us and some of them aren’t. I’m going to take all the malarky out of it for you. There’s the cost approach, right? How much it costs to replace a property. With land we don’t care about that so throw it away. Check. We don’t need to worry about that. Number two … There’s three ways. Number two is the sales comparison approach, recent comparison values. Well, if you’ve ever tried to get recent sales comparison values on a rural piece of acreage, good luck because it’s all over the map and here’s why. Recorded sales, maybe Jill deeded a property to me and we sold it for a dollar. Maybe the most recent sales comparison value that had nothing to do with the internet, or a real estate agent, or the MLS was to their brother-in-law so it’s a related third party transaction. You know where I’m going with this. It’s tough to get sales comparison that are real.

The third way is an income capitalization approach which is a long way to say cap rate which is how commercial real estate investor assess cash flow in real estate, apartment buildings, office buildings, strip malls, all that. Well that doesn’t apply to us either. Now we got that out of the way, the technical classroom stuff. What the heck. What’s the answer then, Jack? The answer is existing for sale property. That is how you value a house or a piece of land, in my opinion. You go to a very reliable place where there is for sale property, the multiple listing service, anywhere, like Zillow, Trulia, anywhere that you can … where there’s a lot of properties for sale. I love RedFin personally and they haven’t been around for too long, but man they have a great computer interface and you can really sort by map, which I think is important, sort with a map. You take a look at what, I don’t know, the average price per square foot of the average home in a two or three block radius.

There’s one or two take aways from this whole episode, this is one of them. Don’t go too far out of one or two or three blocks so if you know anything about real estate at all, in fact if you’ve ever lived in a piece of real estate, which I think is all of us, you know how different one block from the next block can be. There might be huge houses one block over from where you live or you might live in a huge house and then two blocks over there’s tiny little ones so you want to make sure … The first thing is you want to make sure you’re looking at like kind real estate. Then try to get an average, an average price per square foot. Let’s say it’s 100 bucks a foot, 100, 125, 130 dollars per square foot of average for sale listed property.

Then you want to value that, value your mailer, which is really what this is about, at about 70% of that, maybe 60% in some cases. What you’re looking for is somebody who just, who’s going through some type of life event and they’re done, they’d like to sell you the property just to kind of get out of it, knowing full well that it’s a reduced value from retail, from retail for sale property. Then the whole goal is to take that, buy the property, you mark it up a little bit, within reason, and make sure the person that you’re selling it to, who you’re wholesaling it to is going to make more money after they clean it up. That’s the whole way to value houses in my opinion. What do you think, Jill?

Jill DeWit:                            I love it. I mean, I’m like over here going, “I have nothing.” You just pulled it all together and … Yes.

Jack Butala:                         I just … The reason that I wanted to do this show today is to … because I just pulled a data set from a small town in California that actually is going to hit the mail next week and we’ll see what happens but I spent … The other thing, my last point here, my final point on how to value houses and pricing is that, to this day, I mean I’ve sent millions and millions and millions of offers out over the years to property owners who we’ve done, we haven’t talked about it recently, but we’ve done almost 16,000 transactions since we started doing this. What I’ve learned is that, even to this day, it takes me maybe two full days, not to do a mailer, but just to price it properly.

I don’t go line by line, but to find that perfect equation per square foot … I always use per square foot fee in houses. Find that perfect equation of for sale property time what? Times .72 if it’s 72% or .65 if it’s 65% because it’s a balance between how fast do I want to buy it and resell it or do I want to, you know, hit a home run if it’s like ranches, movie star ranches. If you’ve listened to previous episodes, we talk about that. It’s very, very, it’s imperative to price mailers correctly. You know it takes a lot of practice. You’re not going to do it the first time out perfectly.

Jill DeWit:                            Thank you for sharing that, Jack, because I talk to people and I hear a lot of people trying to rush through this and this is one of those things that you don’t want to rush through. You really want to spend some time on it. I find myself, often, telling our people, “Please go back and spend some more time. The data’s all right there. You have everything you need, please get to know this stuff,” so thank you, Jack.

Jack Butala:                         There’s a lot of resources on … You’re welcome … a lot of resources on YouTube about how to do this and Jill and I have done full-blown education programs. Then when you’re ready to get it in the mail, we just released a company last week called Offers2Owners.com where you simply call an 800 number and we get the stuff in the mail for you.

Join us in another episode where we discuss choosing real estate, choosing a real estate specialization. That’s actually a topic.

Jill DeWit:                            Exactly and we answer Joshua’s question about picking a county and agricultural land use. Ought to be good.

Jack Butala:                         You are not alone in your real estate ambition.

Jill DeWit:                            Hey, you like our show? Please subscribe and rate us on iTunes or wherever you are listening.

Jack Butala:                         Information and inspiration to buy undervalued property.

 

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