How to Buy Your Next House for Half Price (CFFL 542)

How to Buy Your Next House for Half Price (CFFL 542)

Transcript:

Jack Butala:                         Jack Butala with Jill DeWit.

Jill DeWit:                            Hey there!

Jack Butala:                         Welcome to the show today! In this episode Jill and I are going to talk about how to buy your next house for half price. Here’s a hint: it’s the same way we buy all the other stuff.

Jill DeWit:                            Yup.

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

Jill DeWit:                            OK. I love that he uses this name. It’s not his real name, I looked, I know. But shammgod asks, if you go on landinvestors you’ll find him here. He asks, “A couple of properties I’ve researched I’ve noticed have extremely low assessed values. Sometimes $20, in an area where that’s not normal at all. Is this a red flag when that happens, and what would you be looking for? I realize analyzing assessed value is unnecessary, but when it’s significantly different from the other properties in the area, I feel like something might be up. Overthinking? Or a good flag to follow?”

Jack Butala:                         At this level there’s no such thing as overthinking how to analyze data. There’s overthinking, like, lots of stuff. But analyzing data, you can’t overthink it. And I think that this is a fantastic question. Assessed value, like you said, has nothing to do with the actual value of the property. What you’re experiencing when you see, if you have a dataset of like kind properties, in a perfect world, and the assessed values are all over the map, it’s purely for this reason: the assessor, or the assessor before him, or 13 assessors ago when the county actually incorporated, made a mistake. They just overlooked that APR and so it got assessed at $20.

It might be a property that’s designated as a non-profit, so there’s no taxes at all. 13 assessors ago a guy may have decided that the two-zero dollar value in that column in the database really meant that it was a non-profit thing. So, they get offers from me, shammgod. When I see that, I disregard it. The only reason that, in order for a property wouldn’t get an offer from me when I scrub out data is, number one, it’s like a government property, so the owner is not somebody who is going to respond. Like, the City of X, that’s the owner. They don’t get a letter from me. And the other reason is property use. I’m famous for not sending offers to industrial property. There are people in our group that that’s all that they do is send offers to industrial property, and they do great. So those are the two reasons, assessed value is not one of the reasons. I hope that answers the question.

Jill DeWit:                            I think it’s great. Thank you, Jack. If you have a question or you want to be on the show, reach out to either of us on landinvestors.com

Jack Butala:                         Today’s topic: How to buy your next house for half price. This is the meat of the show. So think of going to a garage sale or to a jewelry store, even better …

Jill DeWit:                            Better. Now you have my attention. Thank you.

Jack Butala:                         And you go to a jewelry store, and you see a diamond ring, and the exact same ring, two of them, side by side, or as close as can be, and one’s 10 grand and one’s five grand. But they’re the same ring. Which one are you going to buy?

Jill DeWit:                            Two of the five grands.

Jack Butala:                         Two of the five grands?

Jill DeWit:                            Ha ha ha ha.

Jack Butala:                         So you buy two of the five thousand dollar rings …

Jill DeWit:                            That’s right.

Jack Butala:                         And sell one of them for ten grand.

Jill DeWit:                            That’s right.

Jack Butala:                         And now the one that you’re going to keep is free.

Jill DeWit:                            Bingo.

Jack Butala:                         Wow.

Jill DeWit:                            That’s how I roll.

Jack Butala:                         That’s what people in our group do all the time with houses.

Jill DeWit:                            Did you know I was going to say that?

Jack Butala:                         No.

Jill DeWit:                            OK.

Jack Butala:                         No, I think it’s fantastic. Why not get two diamond rings?

Jill DeWit:                            Thank you, yep.

Jack Butala:                         So what do you do, how do you buy a house for half price? Is this a joke? Are you people nuts? You could never go into a jewelry store and do that, right? No, of course not. So how can you do it with houses, which in my opinion is way more important than jewelry anyway? How the hell can you do that? Here’s what you do. You get a dataset, like our members all have access to the best data on the planet, and it’s the same data that we use. You pick a neighborhood that you and your spouse love. In my case, the neighborhood will not get picked by me. It will get picked by my spouse. And then I go to work.

I get a finite dataset of all the pieces of property in this neighborhood. We live in a town in southwestern California that’s got about 1,500 APNs in it, total. And that’s your dataset. Every single one. Put them in there. And then go to work on the data. Figure out the properties that you might want to take out, some that are too expensive, some that are too, maybe too cheap or on a block that for some reason, you know, the purple house block or something like that, where you just don’t want to live next to somebody who’s got a purple house.

Whatever your reason is, throw out the data and send them a letter. And you send them a letter for essentially half of what you think the property is actually worth. Half price might be pushing it, maybe 60, 70 percent, some number like that. And if your dataset is more than 2,000 units or 1,500 to 2,000 units, or you send an offer more than once, maybe you send it one week and you don’t get any hits, you send it another, two, three weeks later, soften them up a little, you’re going to buy a house.

Jill DeWit:                            Can I jump in here now?

Jack Butala:                         Yeah.

Jill DeWit:                            OK, so here’s my …

Jack Butala:                         Is your spouse going to like it? We’re going to find out.

Jill DeWit:                            Well, here’s my, this is really how it goes. I was waiting for, the front end of this has to be the data. You’ve got to get that out of the way. Because you’re either going to win emotionally, or you’re going to win financially. And in this case, if this is your next home, like, your permanent residence, you want to have both.

So you got to have Jack’s way first. You’ve got to start out, first, yes, you pick the neighborhood, because it’s got the, you know the subdivision, you know the school district, that’s where the friends are, that’s the high school they want to go into. We got all that figured out, where the shopping is and everything, great. You’ve done that work together as a couple, if you will. Now, whoever is the data person, for us it’s Jack, now he goes to work like he just described. So Jack digs in there, I’m not paying any attention at all, I’m letting Jack do his thing. Jack’s out there getting all the homes and the prices and the offers and everything that meet his criteria first out of the way. Now what’s risen to the top? There’s like three. There’s three now that meet Jack’s criteria based on his numbers. He did the data, and they all financially check his boxes.

Now it’s time for me, I get to emotionally come in and then pick the three. And that’s how we do it. So then I get to go in and go, “Alright, these are the three that you like, now I get to go pick the one of the three that I like. This one, I like the street, I like the yard. This one I like the floor plan. This one I love the pool.” Whatever it is. And that’s how you win.

Jack Butala:                         That’s right. Is it that easy? Here’s a story. About a year and a half ago we changed our commercial printer because we found a better one. We found one that was in the 21st century. And recently in a meeting, this has been an incredible, successful relationship with a company called LetterStream. They’re a non-consumer company, so essentially they took us on as a customer, as B2B customer, and now we dole it out, we spread the love among all of our members and get that commercial rate, about 50 cents, we charge about 50 cents to get a letter in the mail, an offer in the mail, and we don’t charge for all the help you might need in the beginning. So recently he said, “Look, I’ve just got to tell you,” we were in a meeting, “I’ve just moved. My wife and I just moved with our kids.” And I said, “Wow, that’s great, man.” He said, “But I, before I met you, I didn’t know you could send that letter.” I said, “Dave, you own a printing company.”

Jill DeWit:                            Printing company.

Jack Butala:                         He said, “I know, but I didn’t put it all together until I met you.” And he told us what was useful. “My wife has been in love with this one block in our neighborhood. She’s like ‘God, I just love the way the trees are.'”

Jill DeWit:                            I love it.

Jack Butala:                         They bought a house.

Jill DeWit:                            I love it.

Jack Butala:                         He said, “We didn’t necessarily get a smoking smoking smoking deal on it, but we bought it for less than it’s worth, and my wife’s happy, you know. She got the house of her dreams.” Quote unquote. So he’s like, “Man, I wish I could give you some kind of endorsement.” I said, “I’ll talk about you on the show.”

Jill DeWit:                            Ha.

Jack Butala:                         Plus, you know, we run almost 100,000, with our group, we run almost 100,000 offers nationwide, every month through …

Jill DeWit:                            Through his company.

Jack Butala:                         Yeah, with an incredible amount of success. Have you ever heard anyone complain about …

Jill DeWit:                            Oh gosh, no.

Jack Butala:                         I haven’t either, Jill.

Jill DeWit:                            Oh my gosh, no.

Jack Butala:                         Before this there were some issues but …

Jill DeWit:                            It took a little while. These guys are like same day or next day.

Jack Butala:                         Yeah.

Jill DeWit:                            And the speed of the commercial processing and all that, I mean, these people, you’re getting phone calls back the next week. Not two weeks, not three weeks, not a month. Like, the next week, be ready, here it comes.

Jack Butala:                         Exactly.

Jill DeWit:                            You’re going to get people calling you back, so … So what else about, I’m trying to think here, um, I love Dave’s story, and I can’t believe that he did it.

Jack Butala:                         Yeah.

Jill DeWit:                            So he obviously has our mailer and everything too, so he kind of had an idea how to do this. So, I love it.

Jack Butala:                         I mean, it’s the same principles, what I’ve done is sort of applied the exact same old school commercial real estate acquisition principles to residential real estate. Why no one else has done this, I mean, it’s 2000 whatever, 17, it just baffles me.

Jill DeWit:                            Well, you know what, I just remembered what I wanted to say. What I wanted to add was, remember we are sending out offers to homes that are not yet listed. They’re not on the market, what you are trying to do, as Jack has said before, many times, you’re looking for a situation. And it works with homes the same it works with property, the same as it works with all kinds of things. You know, you’re just trying to smoke out the person that, they just happened to get your letter as they just finished talking about it, because they just, let’s talk about this. It’s September. They just put their last kid in college, and now they’re looking at each other and going, “What are we going to do with this big house. All three of our kids are gone, and I don’t know what to do.” And next thing you know, your letter arrives. That’s what you’re looking for.

Jack Butala:                         Or they pull the letter out of a file that you sent them three years ago.

Jill DeWit:                            True.

Jack Butala:                         That they forgot about, and they’re just paying the taxes and they pull the file out one day, and they say, “You know what, I wonder if this guy would still want to buy our house for $320,000. Yeah, I know it’s worth 400, but Geez, it needs to be cleaned up, this needs to happen. I wonder if they would just buy for 300 right now and we can just go do what we want to do.”

Jill DeWit:                            Right. Exactly.

Jack Butala:                         There are way more people out there, in my opinion, than investors think. There are so many people out there that just really would be interested. I mean, how many times have you sold something like that, listener?

Jill DeWit:                            Oh my gosh.

Jack Butala:                         How many times have you sold a couch that’s worth half, just to get it out of the house?

Jill DeWit:                            Bingo.

Jack Butala:                         Or a car. Or how many times have you had a garage sale.

Jill DeWit:                            And just said forget it.

Jack Butala:                         How many times have thrown something away or sent it to Goodwill. It’s perfectly good stuff …

Jill DeWit:                            Right.

Jack Butala:                         You just don’t need it anymore. You don’t want to deal with it.

Jill DeWit:                            Exactly.

Jack Butala:                         Same thing applies to real estate.

Jill DeWit:                            People don’t believe that. And the other thing I find that people don’t believe is, how many homeowners have 100% paid for assets. People don’t believe that, and it makes me nuts.

Jack Butala:                         51%. I can answer that.

Jill DeWit:                            Thank you.

Jack Butala:                         51% of the people in the country have no mortgage.

Jill DeWit:                            Right.  [inaudible 00:12:06] well, tell me about your parents. Oh yeah, their house is paid off. I’m like, hello, that’s who I’m talking about. They’re like, “Oh.”

Jack Butala:                         I have yet to get the stats on how much equity people have in their houses yet, with any reliability. Like, I’d like to know, alright, great, so 51%, that’s a HUD statistic, by the way, so I somewhat agree with it, from the census. I’ve yet to see a statistic out there that says, alright, so there’s 50% of the people who have a mortgage on their house, how many, what’s the equity piece, you know? Like, of that half, do half of those, is it like 80% paid off, or 50% paid off, or what’s the equity piece? I know it’s asking a lot. Oh, wait,

Jill DeWit:                            We have that data.

Jack Butala:                         We have that data. It’s very difficult to deconstruct, but that’s the kind of stuff that we’re constantly working on here.

Jill DeWit:                            Yeah, yeah. By the way, that’s available. We have access to that data. If you want to pull, you have to get specific in a certain area, but man, if you want to sit down and within this zip code, I want to know, alright, not only who has everything paid off, but I want to know everyone who has a mortgage with less than 30%, and this type of loan, and these details, I mean, we have that.

Jack Butala:                         What you want to try to smoke out, and you have to dig into the documents, unfortunately, it’s not already all calculated for you, which is good and bad. The good is that no one has ever done it, I can guarantee you. Not even me. If I haven’t done it, no one has done it. Dig into the document for each, let’s say you’ve got a dataset for 1,000 homeowners, and you have their mortgage documents, which is real easy to get. Or what’s called a lien report. You can figure it out, you can back into when they did their mortgage and for how much. And then back into how much equity they have. So, if their loan originated, I don’t want to get too detailed here, but if their loan originated 15 years ago and they never refi-ed the mortgage, or never refi-ed the equity piece, you can pretty accurately guarantee, pretty accurately calculate what they can afford and make a decision. Why is this important? Because people who have mortgages on their house, they can’t make the decision about selling it regardless of the situation they are in. The bank has to.

Jill DeWit:                            Exactly.

Jack Butala:                         So if it’s leveraged, or it’s a real new loan, or if it’s over leveraged, like we’ve seen over the last ten years, they don’t have a choice. So why spend 50 cents to send them a letter, anyway? That’s just the point.

Jill DeWit:                            Right.

Jack Butala:                         Send it to the people who don’t have a mortgage on the house at all.

Jill DeWit:                            Exactly.

Jack Butala:                         Pretty simple stuff.

Jill DeWit:                            Exactly.

Jack Butala:                         Join us in another episode where we discuss every million dollars of acquisition cost, costs you $5,000 a month in payment.

Jill DeWit:                            Hm

Jack Butala:                         Yikes.

Jill DeWit:                            And the next episode, where we answer Alan B.’s question about managing terms deals.

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

Jill DeWit:                            I hope that got some people thinking, because I really hope people start to understand our whole purpose of helping everyone buy property, and do it on their own. And make more money, and cut out the middlemen, you know, and …

Jack Butala:                         You know, Jill, you nailed it earlier in the show. We don’t say this enough. You know, this isn’t a sexy business that we’re in. It’s not. There’s a lot of data manipulation, there’s a lot of engineering slash accounting slash STEM-type nerd weirdo stuff that goes on to generate a ton of money for you and your family, so, and the people in commercial real estate know this, they’ve known it since the beginning. That’s why they got into it. Or it found them, however that works. So, HDTV I really think gives an incorrect picture about what flipping real estate is all about.

Jill DeWit:                            Yeah, I’m sure of it.

Jack Butala:                         I think they picture like, if you’re a good decorator, then you’re going to be good at this.

Jill DeWit:                            Exactly.

Jack Butala:                         And that’s so inaccurate. It’s upsetting, actually.

Jill DeWit:                            No, I think HDTV is a wonderful tool if you’re going to repaint, or redecorate, not remodel, redecorate your kitchen, and you want some color ideas, or some things like that to spruce it up. I think it’s great for that. But because when you really get into doing remodeling and moving walls, and all that good stuff, it’s a lot of work, and it’s a lot of money, and the figures, well, they don’t even give you any figures.

Jack Butala:                         Not anymore. Did you notice that?

Jill DeWit:                            I was going to say, that, yeah, the figures that they portray may or may not be accurate, but they stopped even doing that, you’re right. It seems like a couple years ago, you’re right, Jack. They used to tell us, bought for this, sold for that. And now they have just removed them. And some of them, too, they would follow it all the way through. Like they would say, it was listed for this, and they accepted an offer for X, and so this is what they really made. Now they only would say, “Well, at the end of the day, they got three offers.” OK, well, what happened? They don’t even say.

Jack Butala:                         I bet some lawyer got a hold of that and said, “You guys have got to stop lying about this.”

Jill DeWit:                            Oh.

Jack Butala:                         I really think that’s what happened.

Jill DeWit:                            That makes sense.

Jack Butala:                         Or some version of that.

Jill DeWit:                            I was wondering why. I’m like, why are we not sharing numbers anymore? OK, because someone said, “Those are fluff numbers, and you legally can’t do that.” OK.

Jack Butala:                         It’s misleading.

Jill DeWit:                            True. Very true.

Jack Butala:                         I’m not busting on HDTV at all. It’s entertaining, and Jill and I watch it.

Jill DeWit:                            I like it.

Jack Butala:                         We watch it all the time.

Jill DeWit:                            Well, we were having a discussion the other day, too. I was just going to, I’ll end with this. I think there’s people on HDTV that are more recognized, like in society, than some of the top musicians or something, because so many people watch this stuff. It’s really funny. I haven’t figured out, I haven’t figured it out. I don’t know. It’s hilarious.

Jack Butala:                         I don’t think anyone’s figured it out.

Jill DeWit:                            Alright.

Jack Butala:                         There’s a saying in Hollywood, it goes like this.

Jill DeWit:                            Ready.

Jack Butala:                         Nobody knows nothin’.

Jill DeWit:                            Wha?

Jack Butala:                         It’s been around for years.

Jill DeWit:                            I love it. Well on that note, if you know nothin’, and you still listen to us anyway, hey, please subscribe or rate us on iTunes or wherever you are listening.

Jack Butala:         You are not alone in your information or inspiration to buy undervalued property.

 

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