Wholesaling SFRs in 2018 by the Numbers (CFFL 579)
Wholesaling SFRs in 2018 by the Numbers
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hi!
Jack Butala: Welcome to the show today and this episode. Jill and I talk about … Well, it’s really me who’s gonna talk. Wholesaling SFR’s in 2018 by the numbers. How I like it.
Jill DeWit: I’m going to try to make it somewhat entertaining.
Jack Butala: Before I 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. Jason asks, “When it comes to selling property, would you recommend letting the seller pay with credit card? If so, what is the best credit card service that you recommend to use and get the best use out of it? Wouldn’t it be easier to just completely avoid credit cards?” I think they mean buyer …
Jack Butala: I have so much to say about this.
Jill DeWit: ‘Cause sellers aren’t usually paying. You’re paying a seller. So, I’m assuming he means buyers.
Jack Butala: Let me be incredibly clear, and I’m not joking around.
Jill DeWit: Right.
Jack Butala: You absolutely have to take credit cards.
Jill DeWit: Yup.
Jack Butala: It is a game-changing, business-changing event. If you do not accept credit cards, you’re going to lose 80% of your buyers. People are used to buying stuff online and real estate’s no different.
Jill DeWit: Yup.
Jack Butala: Here’s the problem. Credit card companies do not like the risk associated with real estate, in fact, they’ll cut you off. Until now, Jill and I have spent over a year dealing with a company called Heartland Payment Systems. They are the bank, or processor that’s in between Visa, MasterCard, American Express, and credit card companies like Apple Pay, BluePay, Stripe, PayPal, they literally are behind PayPal, so …
Jill DeWit: Now they’re behind us.
Jack Butala: They’re behind us, so Jill and I asked them to develop a department, an individual department to manage the people for real estate. If you call Heartland, you’re going to have to go through what we went through …
Jill DeWit: A year-
Jack Butala: … which took a year, or you can call-
Jill DeWit: A year and a lot of no’s.
Jack Butala: We’re about to put it on landinvestors.com, instructions on who to call there. On the landinvestors.com website, but if you email either one of us, I’ll send you … In fact, just email me jack@landinvestors.com and I’ll just get you pointed to the exact person that they have that’s going to handle this, that is handling it for everybody. We’ve got multiple people per day signing up for this, so … this is not meant to be a commercial. Honestly, it’s just really timely.
40% … no 60% less than actually Stripe is … and Stripe is the best. We’ve been using Stripe for quite some time but they’ve made it known recently that they do not want to process real estate transactions online, so we think we’ve solved it.
Jill DeWit: Yep. You need to do that.
Jack Butala: You need to do it.
Jill DeWit: Back to what he’s saying. Here’s my thing, too-
Jack Butala: We don’t make any money on this, by the way, we’re just trying to help.
Jill DeWit: Because you want them to pay online, it’s just the easiest thing. Worst case scenario, if you’re new and you’re starting out, let’s put it this way, you’re new, you’re starting out, you’re going through this process, you’re dying to do it, you’ve got some property for sale and the person wants to pay right now, there’s nothing wrong with them wiring money, there’s nothing wrong them with-
Jack Butala: Writing a check.
Jill DeWit: Exactly. Whatever you’re comfortable with accepting, I would accept. ‘Cause you don’t want to make it hard for them. That’s the whole point here, whether we’re buying or we’re selling, we set out to make it extremely easy-
Jack Butala: [crosstalk 00:03:31]
Jill DeWit: … for our customer to complete the transaction. If they’re afraid of recording a property, I will charge a fee and record it for them. It’s not hard. It’s really easy.
Jack Butala: Make no mistake, we don’t buy property this way, we buy property by … we send a notary to their door. We have a company called [inaudible 00:03:53], which we started that processes all of our transactions. They can process yours, too. Again, it’s not a commercial, I’m just saying. We traditionally, we buy property through a traditional mechanism, ’cause we’re in control of the deal and the seller’s already said yes and the seller doesn’t … they don’t accept credit cards, anyway. It just wouldn’t make sense. I’m just trying to be real clear, Jill.
Jill DeWit: Mm-hmm (affirmative), exactly. Thank you.
Jack Butala: If you have a question or you’d like to be on the show, reach out to either one of us on landinvestors.com. Today’s topic wholesaling SFR’s, single family residences, in 2018 by the numbers. This is the meat of the show, so before I get into anything, a new endeavor or … We do a tremendous amount of research. Jill’s nauseous at the amount of research that I do.
Jill DeWit: Mm-hmm (affirmative). I leave.
Jack Butala: Right. At the end of it, she’s like, “If it’s good-
Jill DeWit: If it passes your test-
Jack Butala: “If you’ve decided that we’re gonna do it,” yeah.
Jill DeWit: That’s my thing. By the time Jack comes to me and says, “All right, I think we should do this,” then I’m like, “Okay,” because I know what you did to it. I know what you put into it, so thank you, Jack.
Jack Butala: Of all these companies, there’s only been one that really just didn’t work out the way we thought. I mean, we’re like 40 for one.
Jill DeWit: Please, don’t discount that one ’cause I’m not done with that one. It hasn’t had the Jill touch, so let me at it for a little while.
Jack Butala: You sit around, you say, “You know what? It’s late in 2017, what can I look at on the internet? What kind of data can I check out to see if this is going to work? If I want to get into this? If I want to buy SFR’s in 18, and if so, where should I do it? Should I do it in Texas? Should I do it in Maryland? Should I do it in Connecticut?”
I went and pulled Census data. The government has ridiculous amount of data for free. Whether it’s accurate or not, we don’t know, but at least all of us are working off the same data. I ran the scenario and I looked at the number of detached properties in the country. This is 2010 Census data ’cause it happens every 10 years, and so I ball-parked it and added … There’s population growth. Long story short, there’s 70 million detached properties in the country. It’s a little closer to 75 million now because of the 2010 Census.
If you’ve just run our historic numbers, 50% of those do not have mortgages, and for every 1,500 to 2,500 letters we send out, we buy a house. We buy it for 50% to 60% to 70% of what it’s actually worth. If I do that in Alabama … I pick on Alabama because it’s the first state. It starts with the letter A. I mail every single house out, there’s 1.3 million houses, and I hit the strike percentage that we hit, I typically hit, we’re going to buy 474 houses there.
Jill DeWit: That’ll keep you busy.
Jack Butala: That’s one state. One mailing where you’re hitting those buyers the right time. If I mark those houses up.
Jill DeWit: Excuse me, 477 houses. I’m trying to think long that could keep you busy.
Jack Butala: I’m not going to bore everybody by just reading numbers on this show, but that’s the short of it, is I buy 477 houses, I mark ’em up 20,000 bucks and I make $10 million.
Jill DeWit: Wow.
Jack Butala: That’s one state. I’m here to tell ya, if you wait six months and send it out again, you’re going to get the same numbers. It’s not just one-off, one year, “Oh, I’m done with Alabama forever, I got it, the well’s dry.” It happens every single year.
Jill DeWit: What is it? 7% of the yield? It’s a small number.
Jack Butala: It’s .07.
Jill DeWit: .07, excuse me, .07.
Jack Butala: It’s not 7% of the mailings we sent out.
Jill DeWit: Got it.
Jack Butala: Oh, you’re looking over my shoulder-
Jill DeWit: I am looking over your shoulder. You got my attention, Jack.
Jack Butala: Really?
Jill DeWit: Yeah. You know what?
Jack Butala: Am I impressing you?
Jill DeWit: You are!
Jack Butala: That’s hard to do.
Jill DeWit: You impress me all the time, Jack, you know that, you are so smart.
Jack Butala: Men try to impress women all the time, they don’t even know it.
Jill DeWit: You do.
Jack Butala: Women are just like, “Oh my God, get out of here with that, put that away.”
Jill DeWit: Wow! Woo, hello, okay. [inaudible 00:08:14] talking about? Okay.
Jack Butala: Let’s pick another state like California. Oh my God, California.
Jill DeWit: By the way, before you say California, I want to thank you for doing this because I read a lot of other online communities that are not ours, other real estate online communities, and a lot of the word is [inaudible 00:08:32] preparing for the sky to be falling.
Jack Butala: Yeah.
Jill DeWit: I’m like, “What? Hold on, everyone.”
Jack Butala: Well, the sky fell in 2011, remember?
Jill DeWit: Right.
Jack Butala: What happened to us then?
Jill DeWit: We’re still here.
Jack Butala: We’re still here.
Jill DeWit: Yeah.
Jack Butala: Did we make buckets of money? No. Did we buy some super cheap real estate? Yeah!
Jill DeWit: Yup.
Jack Butala: That’s what happened.
Jill DeWit: Did I sell some assets for maybe not what I wanted to but I still made some profit? Yes. Why was I okay with that? Because I bought it right-
Jack Butala: Because we both did.
Jill DeWit: … and we paid cash. Next!
Jack Butala: We went out.
Jill DeWit: Oh, sorry.
Jack Butala: Oh my gosh, that was like a show earlier this week. You’re in charge.
Jill DeWit: Leadership!
Jack Butala: Jill’s in charge.
Jill DeWit: Get over it!
Jack Butala: Oh, geez.
Jill DeWit: I’m sorry. Woo!
Jack Butala: Next stop drill sergeant.
Jill DeWit: Woo! No.
Jack Butala: Let’s take another state, real quick. I don’t know, Illinois. There’s 2.8-
Jill DeWit: Dude, I want you to do California, but go ahead, get back-
Jack Butala: Oh, okay-
Jill DeWit: Do California last, for me, please.
Jack Butala: Illinois in 2000 and … Bear in mind, this is just detached houses. There’s data for attached houses, like condos. There’s way more condos than there are detached houses, by the way. There’s mobiles. There’s apartment buildings. There’s land. There’s more land than any of it, combined. This is just houses.
The key here is I can hear everybody right now like, “Wait a minute, you’re making this sound too easy, Jack, what’s the bad news, all right? Why doesn’t everybody do this?” Here’s the deal. You have to know how to price your mailer. You have to know how to send out a mailer. You have to get educated. That’s what we do here at Land Academy. We show you exactly how to send a mailer out correctly to get the results that we get. Is it going to happen overnight? No.
If you send out post cards and say, “Hey! I’d love to talk about buying your property.” Is it going to work? No. You have to send offers with a dollar amount and you have to have a bunch of money, or person who has a bunch of money and understands this process behind you, because when they come back, you want to close the deal. If you’re smart, you’ll have a buyer for it right after it happens.
Let’s get back to numbers. In Illinois, in 2010, there were 2.8 million detached houses, which probably ends up being around 3 million. If you mail out every single property, 50% of the properties are going to have a mortgage, that’s just a fact, that’s a national fact, 50%. There’s ways to mail out properties that do have mortgages, but I’m just being super simple and conservative here. It ends up being about 1.5 million properties that don’t have mortgages and same yield .07%, so less than 1%.
Jill DeWit: 1% that you’re going to buy, so it’s conservative.
Jack Butala: Right. Very conservative. Our numbers are way better than this.
Jill DeWit: Right.
Jack Butala: You’re going to buy 1,000 houses.
Jill DeWit: It’s awesome.
Jack Butala: You’re going to mark them up $20,000. You’re not going to get greedy. You’re not going to try to squeeze the juice out of every single transaction and get this top dollar. You don’t want to do that, you want buyers for life. Wholesale buyers for life.
Jill DeWit: Right.
Jack Butala: You’re going to make 20 million bucks.
Jill DeWit: It’s awesome.
Jack Butala: Well, how much does it cost … Jack, how much does it cost to send out that many letters? I’ll answer that. In the Illinois example, it’s 1.5 million houses that are going to get a letter from you.
Jill DeWit: Yeah.
Jack Butala: It costs 50 cents a letter, if you do it through Offers 2 Owners. Ballpark, about 50 cents.
Jill DeWit: Right.
Jack Butala: Would you spend $750,000, Jill, to make 20 million?
Jill DeWit: Hmm, let me think. Yes. ‘Cause I know, it’s not like it’s a lottery ticket. It’s …
Jack Butala: You’d have to be a special kind of kook to send those all out at once, because there’s no way you could manage it.
Jill DeWit: Correct.
Jack Butala: You need a call center in India and you don’t want to do that, either.
Jill DeWit: Exactly.
Jack Butala: This is my point. There’s a lot of details to this, it’s a fantastic business, it’s all we teach, but you gotta do it right. You can make a lot of mistakes, you can spend 20 years and make a lot of the mistakes we made.
Jill DeWit: I love it.
Jack Butala: Oh, California.
Jill DeWit: Give me California.
Jack Butala: Detached houses now, not condos, not land and not mobiles. Mobiles are for a different topic because your numbers on mobiles … Numbers on mobiles are triple what they are on regular houses. Seven million houses in 2010, just below seven, so half of that-
Jill DeWit: Wow.
Jack Butala: 7.5 million is a accurate number for this day and age. Cut those in half with a mortgage roll, 3.7 million houses, you purchased over 2,500 properties. Those are all real numbers. In fact, real conservative. Here’s what’s not real. Are you going to markup a house in California $20,000 or 200,000?
Jill DeWit: Exactly.
Jack Butala: At 20,000, if you mark it up, you make 50 million bucks.
Jill DeWit: Right.
Jack Butala: If you mark it up 100,000, let’s just be real conservative, this is me typing, you make a quarter of a billion dollars, $250 million.
Jill DeWit: Wow.
Jack Butala: I’m not joking about this.
Jill DeWit: Yeah.
Jack Butala: I am not joking about these numbers.
Jill DeWit: Wait, wait, wait.
Jack Butala: It’s staggering.
Jill DeWit: If I do it all wrong, uh-oh, I only made 125 million?
Jack Butala: Yeah, yeah, if you do half of what you-
Jill DeWit: I did it all wrong, I only made a half. I only make 125 million.
Jack Butala: Maybe you just do five deals.
Jill DeWit: Darn.
Jack Butala: And you make half a million dollars.
Jill DeWit: Exactly.
Jack Butala: Five deals in some suburb of Los Angeles.
Jill DeWit: I’m with ya.
Jack Butala: I’m not selling anything here, I’m just telling you these are the facts and I don’t know why everybody doesn’t do this?
Jill DeWit: Yeah. That’s okay, we will.
Jack Butala: If it all crashes tomorrow, all you doomsday people, you’re going to do what Jill and I do, you’re going to now even buy it for less and even sell it for less.
Jill DeWit: Yeah.
Jack Butala: You’re going to do less deals.
Jill DeWit: You’re still going to have a good margin in there and you’re going to be great ’cause you know how to buy it.
Jack Butala: It’s not going to change your lifestyle ’cause when times were good, you didn’t buy stupid cars and huge house payment or any of that stuff. You were smart, you did what Jill said. You lived way below your means.
Jill DeWit: Right, I’m waiting for you to throw in you didn’t get married and you didn’t have kids.
Jack Butala: That always helps. You bring that up more than me.
Jill DeWit: ‘Cause I know it’s coming. Oh, boy.
Jack Butala: All right, have I sufficiently bored everyone?
Jill DeWit: Those are good numbers!
Jack Butala: I tried to keep it … I could do this for four hours and really get into exactly how to do it and why, but …
Jill DeWit: Jack, those are great numbers. I’m really glad that you … You know what? I read the title and I went, “This is going to be interesting,” and you know what? It was very interesting and I’m glad that you shared it with us, so thank you.
Jack Butala: Get some mail out. That’s the moral of this story.
Jill DeWit: Yup.
Jack Butala: Join us in the next episode where we discuss staying motivated by Jill.
Jill DeWit: Yay!
Jack Butala: That’s her counter-balance to my boring numbers situation.
Jill DeWit: Oh yes, and we answered Jared’s question about multiple mailers.
Jack Butala: Yeah, if you’re not alone … You are not alone.
Jill DeWit: I’m alone.
Jack Butala: What are you talking about?
Jill DeWit: I’m just kidding.
Jack Butala: You couldn’t be less alone.
Jill DeWit: I’m joking.
Jack Butala: Jill could not be less alone.
Jill DeWit: I know.
Jack Butala: In her real estate ambition.
Jill DeWit: Thank you, Jack, you’re right. That’s good show.
Jack Butala: It was.
Jill DeWit: Yeah, I really-
Jack Butala: It turned out better than I thought.
Jill DeWit: Yeah, those are good numbers. I quickly had to look over your shoulder and start looking at the numbers and I’m still glancing at some of the properties, is that Michigan? Or what’s that?
Jack Butala: I kicked it off the-
Jill DeWit: Yeah, Michigan’s got a lot of numbers there.
Jack Butala: Yeah.
Jill DeWit: I mean, the states that you could pick up a thousand properties, easy, there’s several. Pennsylvania, Texas. This is great information. You know what? That would be awesome to share.
Jack Butala: That spreadsheet?
Jill DeWit: Yeah. I might have to talk you into doing that, that’s a good one.
Jack Butala: Happy to share the spreadsheet. With the live education.
Jill DeWit: Aw yeah.
Jack Butala: This is the kind of stuff we’re talking about.
Jill DeWit: [crosstalk 00:16:52] it’s going to be awesome.
Jack Butala: If this doesn’t motivate you, if someone is sitting there and just saying, “Oh, whatever, there’s no way that can happen.”
Jill DeWit: Do the math yourself.
Jack Butala: If anybody’s been in this business, all of our members, the successful members that we have, know this, and they all said it in the beginning, and we changed their mind. One of the biggest things that you have to overcome, is making people believe that this isn’t a joke.
Jill DeWit: Right. That’s exactly-
Jack Butala: They just don’t believe it.
Jill DeWit: Two things-
Jack Butala: This whole show is probably fiction for most people.
Jill DeWit: Right, I have two things. Number one, they have to get in to do a deal and they go, “Oh, wow.” Then they flip their first property and they go, “Oh, that did work, oops, I’m eating my words.” Yeah, I’m telling you, it really works. That is number one.
Number two, I also have the problem when I’m selling properties, ’cause I’m selling it so cheap, they almost don’t believe me. “Why is it so cheap?” I’m like, “You know what? I can add to it if you want, but I’m just passing it on, because I’m a wholesaler.”
Jack Butala: What’s wrong with it?
Jill DeWit: Isn’t that funny?
Jack Butala: Yeah, it’s funny.
Jill DeWit: They almost don’t believe me ’cause they’re like, “This can’t be right,” and they’re like, “Oh my gosh, this is right.” I’m like, “Yeah, I’m trying to tell you,” you know?
Jack Butala: When I was a little kid, my parents bought the house, my childhood house, for $13,000. I don’t remember that, they bought it before I was born.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: And they sold it for 187,000. This was like when I was in seventh grade, so … ’cause I went to high school somewhere else.
Jill DeWit: Right.
Jack Butala: ‘Cause when you’re that age, that’s all you care about. It’s like, “Well, I don’t want to leave my school.”
Jill DeWit: Exactly.
Jack Butala: I remember my dad telling me this right after we moved. I’m like, “Why the hell are we moving? This is a pain.” He said, “Well, look, 13 and 187.” I said, “Well, why didn’t you buy 13 houses then?”
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: I never got off that.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: I don’t remember what his answer was, but I’m like, “This is what I want to do then. If you can buy ’em for 13 and sell for em 187, then I want to do like 5,000 deals.”
Jill DeWit: Exactly.
Jack Butala: And here we are.
Jill DeWit: Here we are.
Jack Butala: Here we are in 2017 and that’s what we’re doing.
Jill DeWit: Exactly. Preparing everyone for 18. If you like our show and you like those numbers, please subscribe and write us on iTunes or wherever you are listening.
Jack Butala: Information and inspiration to buy undervalued houses.
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If you have any questions or comments, please feel free to email me directly at jack@LandAcademy.com.
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