See a Real Estate Deal for What it is (JJ 629)

See a Real Estate Deal for What it is

Transcript: 

Jack Butala:                         Jack and Jill here.

Jill DeWitt:                          Hi.

Jack Butala:                         Welcome to the Jack and Jill Show, entertaining real estate investment advice. I’m Jack Butala.

Jill DeWitt:                          And I’m Jill DeWitt, broadcasting from sunny southern California.

Jack Butala:                         Today, Jill and I talk about how to see a real estate deal for exactly what it is and nothing more, nothing less.

Jill DeWitt:                          I’ve got to say, I’m really happy to be back in sunny southern California.

Jack Butala:                         I have to say that too, Jill.

Jill DeWitt:                          It was fun being up north. I love San Francisco and I loved spending some time in Monterey. I thought that was so-

Jack Butala:                         Monterey, the redwood forest.

Jill DeWitt:                          Pretty. And it was very interesting seeing some of the fire stuff on the way south. I was blown away by some of what we saw.

Jack Butala:                         Every time I come back, specifically this time of year, in early January, I just love getting back to work. And that’s no joke.

Jill DeWitt:                          Yeah, I don’t.

Jack Butala:                         I always feel like it’s like three days too long. Like, “Come on. Can this end already.”

Jill DeWitt:                          Hilarious.

Jack Butala:                         And you want to stretch it out.

Jill DeWitt:                          I do. That’s just so funny. Jack, I love you, but you’re like, “Thank goodness the holidays,” that’s not how you say it, but, “Thank goodness the holidays are over.” And I’m like, “Oh man. Can we back it up and do that again?”

Jack Butala:                         I know.

Jill DeWitt:                          I know.

Jack Butala:                         I want to know everybody’s back at work, all our staff’s here.

Jill DeWitt:                          I know.

Jack Butala:                         I want to see the numbers again.

Jill DeWitt:                          Well, I’m not. So I couldn’t tell ya.

Jack Butala:                         I know you’re not.

Jill DeWitt:                          Yeah.

Jack Butala:                         I’m sorry. Do you ever go to work?

Jill DeWitt:                          I’m mentally … You know, about February 1st, I will let you know.

Jack Butala:                         Oh my gosh.

Jill DeWitt:                          Oh yes.

Jack Butala:                         Before we could actually get into this with what we’re talking about on this show, let’s take a question posted by one of our members on the JackJill.com online community. It’s free.

Jill DeWitt:                          Okay. Matt asks, “Hi everyone. After a successful first year trying out the land investing business, I’m hoping to scale up. Jack often says that the most experienced members of the group have scaled up from the $1000 profit properties to $10,000 profit properties or higher.”

Jack Butala:                         Or 40.

Jill DeWitt:                          Right. “I would like to sell my properties for cash, and so I’d like to find the balance between time on the market and profit per deal. Has anyone experienced what the tipping price point might be for cash buyers?”

Jack Butala:                         I have a lot to say about this at the end of the question.

Jill DeWitt:                          Right. “Obviously fewer and fewer people can buy for cash the higher up you go. I’d like to hear from people’s experiences where that might fall off.” This is a really good question. “I made these numbers up, but for example, $5000 selling price for a $10,000 market value, property flies off the shelves. $10,000 for a $20,000 market value sells fairly quickly as well. But $20,000 for a $30,000 value takes a long time. Most cash buyers are 10,000 or below.” He wants to ice out with this is. “Or something along those lines. Please reference your selling price and your determined market price. Thanks in advance for your time and consideration of this question.”

Jack Butala:                         I should also say that if you do go to the JackJill.com or LandInvestors.com, it’s the same thing. Community, there’s lots of people that answer these questions, not just us.

Jill DeWitt:                          With their numbers and their experiences.

Jack Butala:                         Yeah, with their experience.

Jill DeWitt:                          And yes.

Jack Butala:                         The highest margin, there’s two ways to look at this. Number one … Oh, may I answer this question? Do you have a lot to say about this?

Jill DeWitt:                          Yes, you may. Mother, may I? Yes you may. Oh my gosh.

Jack Butala:                         This is not how we talk to each other in real life.

Jill DeWitt:                          This is hilarious.

Jack Butala:                         If we had a recorder.

Jill DeWitt:                          No, what really is … You would have said, “Jill, stand down.” Oh my gosh.

Jack Butala:                         Yeah. It would go something like this, “Can somebody ask a question again? We have to answer another question.”

Jill DeWitt:                          What the heck?

Jack Butala:                         How many times have we covered this?

Jill DeWitt:                          Yeah, exactly. Mother dang it. My favorite is when you said for the whole planet, “You know what. I’m not even gonna tell you. There are such things as bad questions.” That’s a Jack quote.

Jack Butala:                         If people around our office, have all these things, these quotes, this stuff I’ve said.

Jill DeWitt:                          Oh my gosh.

Jack Butala:                         There is such a thing as a bad question.

Jill DeWitt:                          Yes.

Jack Butala:                         You’re right. That is something I had said.

Jill DeWitt:                          Yep, you have said that.

Jack Butala:                         This actually, Matt, happens to be a good question. In between my stomach hurting because she’s making me laugh so hard, I’m gonna try to answer it.

Jill DeWitt:                          Do you have an answer, Jack?

Jack Butala:                         My favorite, there’s two ways to look at this, from a profit margin standpoint, like a percentage. For us, it’s always been five acre properties. Five acre specific desert properties. That’s not all we buy and sell. The whole group buys and sells. And for the lots, we buy acreage, but desert property. You can buy a whole slew of them for 500 bucks each sometimes, and sell them for 2500 for cash. And you don’t keep them around for long.

Jill DeWitt:                          Right.

Jack Butala:                         That’s a huge profit margin. That’s what, five times? Five, 10, 15, 20, yeah. Five times your money. You’re not gonna retire on that dollar amount, but as a product-

Jill DeWitt:                          If you do 100 a month, you can.

Jack Butala:                         Yeah, right. Yeah you could. Exactly. That’s one way to look at it, but if you’re going for the, I really just like to do one deal a month perspective and not have a job, I find that $40,000 property is great. That sale price, if you can buy a property for 5 to 10, maybe 15,000 bucks to sell if for 40, people don’t seem to have trouble coming up with 40 grand for some reason.

Jill DeWitt:                          No. I was just gonna say that. For me, that’s still a good … Yeah. Anything up to 42 is easy. The phone calls usually go, “Hi, I just want to make sure it’s still available. I’m gonna move some money around.”

Jack Butala:                         Yes, exactly.

Jill DeWitt:                          That’s all they do.

Jack Butala:                         That’s exactly right.

Jill DeWitt:                          I’m like, “Okay. And where do you want me to wire it? Here you go.”

Jack Butala:                         The whole key is, and this is our whole business model, and everybody in the group knows this. If you’re gonna sell a property for 40 grand, a piece of dirt, make sure it’s very usable, whatever that means to you. And make sure that it’s worth 80 grand, 80 to 100.

Jill DeWitt:                          Right.

Jack Butala:                         It sells itself then.

Jill DeWitt:                          Right. It’s big.

Jack Butala:                         Yeah.

Jill DeWitt:                          It’s got something cool that’s an attribute.

Jack Butala:                         Some kind of cool attribute, right. Close to the Grand Canyon.

Jill DeWitt:                          Maybe it’s this gorgeous acreage somewhere, rolling hills. Who knows.

Jack Butala:                         Yeah, exactly.

Jill DeWitt:                          That’s it. Someone can put a ranch on it.

Jack Butala:                         Yeah, if you can see yourself-

Jill DeWitt:                          Or put cattle on it or something.

Jack Butala:                         You know, I haven’t talked about this in a while. If you as a seller, like you’re sitting there looking, wondering if you’re gonna buy a property to re-sell it, if you see yourself in that and you start thinking this thought, “Well maybe I should just buy it for myself. See that spot between those two trees, that’s where that cabin’s gonna go.” If you have that thought, then you should buy it because everybody’s gonna think that.

Jill DeWitt:                          That’s good. That’s really good. Thank you, Jack.

Jack Butala:                         Today’s topic, see a real estate deal for what it is. It’s pretty simple. Before the show, Jill was asking me, “What do you mean, see it for what it is?”

Jill DeWitt:                          Like, “What are you talking about?”

Jack Butala:                         What I mean by this is if you’re interested, or you listen to the show for a reason. It’s certainly not because it’s entertaining.

Jill DeWitt:                          There’s nothing else on. My phone has a mind of its own. I don’t know what this is, it just came up. Next.

Jack Butala:                         Most people, me included, are like, yeah I’m gonna listen, gather a bunch of information, and figure out how I can not work anymore and just work for myself and make 50, 60, 10, 40, $50,000 a month. And that’s it. That desire makes you see things that are not there. It’s like dating. Women will see a man-

Jill DeWitt:                          Everything comes back to dating with you.

Jack Butala:                         It does.

Jill DeWitt:                          I do have to ask, in all of your examples. You never say it’s like fishing. You never say it’s like riding a motorcycle.

Jack Butala:                         Because fishing and riding motorcycles are not complicated. They are exactly what they are.

Jill DeWitt:                          Oh, here we go.

Jack Butala:                         There’s tiny little variables in fishing.

Jill DeWitt:                          Well why don’t you say like building a rocket?

Jack Butala:                         I don’t know anything about that. I am a tremendous failure in dating.

Jill DeWitt:                          Well this is my point-

Jack Butala:                         So I feel like I know a little about it.

Jill DeWitt:                          My point sounds like, based on your analogy, you know as much about dating as you do about building a rocket. So there we go.

Jack Butala:                         If you’re sitting across a table on a third date, and you kind of like the girl or the guy, and you’re sitting there and you start to see things that might not be there.

Jill DeWitt:                          Oh, yeah.

Jack Butala:                         Like, “God, he’s really handsome.” No he’s not. He’s not handsome at all. “What’s his last name? That works great with my first name.”

Jill DeWitt:                          It does. Look how pretty this is.

Jack Butala:                         Yeah.

Jill DeWitt:                          Yeah, that’s true.

Jack Butala:                         He’s just an idiot. That’s really what he is. Let’s just see it for what it is.

Jill DeWitt:                          “Man, I hope our kids have his eyes.” I’m sure they do. I’m sure there’s an app somewhere that you can download photos.

Jack Butala:                         Put your face together and see what your kids are gonna look like.

Jill DeWitt:                          I think so. I really think there is. I hope it’s on TLC. That’s a whole show for that channel, too, by the way. What our kids would look like.

Jack Butala:                         Oh god, Jill. That’s brilliant. If there’s not an app for that, there needs to be one.

Jill DeWitt:                          Because some women are that crazy, by the way.

Jack Butala:                         So when you’re buying these properties, or you’re getting into this or anything else, I know you want it that bad. We all want it that bad, but just see the deal for what it is. If the property’s in a … It’s priced $5000 too high, don’t buy it anyway. Tell the seller, it needs to be $5000 less or I’m walking.

Jill DeWitt:                          Yeah, you can’t talk yourself into it. What’s so funny, my mom and I would have this thing, maybe we’re shopping and I really like something, and maybe it’s more money than I can afford to get this jacket, let’s just say. So my mom would come to me and say, “All right. Do you want me to talk you into it or do you want me to talk you out of it because we could go either way.” And it’s just like this. Okay. You’re obviously falling in love with it for the wrong reasons. How do you want this to go?

Jack Butala:                         Like the price.

Jill DeWitt:                          Yeah.

Jack Butala:                         If you buy a jacket because it’s expensive and that’s the only reason, which I see women do frequently.

Jill DeWitt:                          Oh no, mine was it looked really good, but I’m like, “I just shouldn’t.” This was a long time ago where I really couldn’t afford it. You know what. Actually it was a ring. I can think of an exact situation where it was a ring. Seriously. And I wore the ring. I was at an art show. The guy said, “Just wear it around.” I’m like, “Oh great.” You know how that goes, because then you’re not taking it off. That was brilliant of him. I remember going … So how I justified it was, at the time-

Jack Butala:                         I was with you.

Jill DeWitt:                          Serious, I don’t have a car payment. So the ring was the equivalent of what could have been a hefty car payment, so that’s how I justified buying the ring.

Jack Butala:                         That’s insane.

Jill DeWitt:                          I know.

Jack Butala:                         Do you still have the ring?

Jill DeWitt:                          I do still have the ring.

Jack Butala:                         Okay, so that’s not so bad.

Jill DeWitt:                          I really like the ring.

Jack Butala:                         The real tragedy is when you do that kind of thing, and you don’t use it.

Jill DeWitt:                          Right. So if you-

Jack Butala:                         If you buy a $4000 coffee maker and you only have a coffee once a week, that’s not good.

Jill DeWitt:                          Right. This property, if you relate this to property, like, “I know that there’s a buyer out there for this one, it’s a small market, I know but I know because I’m an expert marketer and I know it’s gonna look great in my inventory because this one’s so different.”

Jack Butala:                         You never, ever want to have that conversation with yourself.

Jill DeWitt:                          I know that I’m gonna find it. It’s gonna be great, too, because I’m gonna have a story to tell when I find the one person that fits this property type. You don’t want to do that.

Jack Butala:                         It’s such a bad idea.

Jill DeWitt:                          Exactly. You’re talking yourself into it. Yeah.

Jack Butala:                         Here’s what should happen. “Oh my god, this property’s $5000. It’s worth 58,000, easy. In fact, it’s probably worth more than that. 50 I can get for it probably next week.” Then, you’re seeing the deal for what it really is.

Jill DeWitt:                          Exactly. And what I’ve noticed, too, is that-

Jack Butala:                         In [inaudible 00:11:53], it’s even easier. Go ahead.

Jill DeWitt:                          I was gonna say, when I talk to people when I’m just like, especially talking about land, I’m like, “You have to see it as a line item. You can’t,” and I learned that term from you. And you can’t fall in love with it. This is what I see people doing, too, is that they spend too much time on it. They find themselves wasting time on it. Seeing it for what it is, is one thing, and just moving on. Like good deal, good deal, not a good deal, good deal, good deal. That’s how you should be doing it.

Jack Butala:                         You nailed it, Jill.

Jill DeWitt:                          And it’s easier, too, when you have a ton. Say you send out a hefty mailer. This is the goal here. You send out a hefty mailer, and now you’re staring at 20 people that either returned your offers or called you back and have said yes. And you can go, “All right, this is cool. I’m gonna go through them all quickly. I don’t want to spend a month on this. Pick the cream of the crop and then move on.” When you have a lot, it’s easier. When you’re really, really new or maybe you don’t have that many, and you’re staring at six or, you know, just a few, it’s hard. I get it.

Jack Butala:                         This is gonna sound crazy, but we actually do exactly what I told everyone not to do, and here’s why, because we’ve been doing this for 20 plus-

Jill DeWitt:                          What did you just say?

Jack Butala:                         Because we’ve been doing this for 25 years.

Jill DeWitt:                          Do as I say, not as I do.

Jack Butala:                         I’ve been doing this for 25 years. And so, the fact is, when I look at the 15 deals we’re gonna buy tomorrow, there’s always a couple in there where I’m not running to the bank, but I have some other thing that I see in it. For example, oh I know Sean up in Washington would by these all day. But I know he’s not gonna be happy about the price, but I know that he’s actually gonna buy them because we send him a bunch of deals that are great. And he happens to have a bunch of buyers for this one specific property. That’s okay. I’m not necessarily seeing something in a deal that’s not there, but it’s just not our norm. It’s not our regular, wow, you know mind boggling deal.

Jill DeWitt:                          I understand because yeah, I know what your … That does make sense. I know this guy’s gonna want five of these, and I’m just gonna pass them on to him. I’ve done two where I’ve even kind of showed the guy before I pulled the trigger.

Jack Butala:                         Yeah, exactly.

Jill DeWitt:                          Okay, because we have a good relationship. He’s not gonna go around and do it himself. I just say, “Hey this is coming in. This is coming into my inventory. Do you want them?” And then basically if they say yes, then I will go pull the trigger.

Jack Butala:                         When it’s me, I say, “Good, you want them? You can take all the other ones, too.” If you want these that bad, you can take the good with the bad.

Jill DeWitt:                          Exactly.

Jack Butala:                         My point is to reiterate Jill’s point, which is you make different decisions on this topic based on where you are in your career.

Jill DeWitt:                          True. It’s easier.

Jack Butala:                         That’s all. If you’re brand new, you should be running to the bank on every deal to make sure you don’t lose.

Jill DeWitt:                          Yeah, you want to have that really … You don’t ever want to have this bad feeling in your stomach that you’re like, “Oh shucks, did I overpay for that? I don’t know.”

Jack Butala:                         Yes, you never want to ask yourself-

Jill DeWitt:                          You don’t want to be losing sleep at night.

Jack Butala:                         Right. “Should I have bought that ring?”

Jill DeWitt:                          Yeah. Oh, gee. I’m thinking about my ring.

Jack Butala:                         After all this time, because I was with you, and it was right when we met, so it’s been like a decade. Are you glad you bought the ring?

Jill DeWitt:                          Oh, heck yeah.

Jack Butala:                         Okay, good. That’s great then.

Jill DeWitt:                          Yeah, I made a good decision. But you know what?

Jack Butala:                         Sure if you buy a car, you don’t want a, “Man, I should have not bought that car,” after driving it for a month.

Jill DeWitt:                          Oh, maybe the little green car. Well, no I had fun in the little green car. I still don’t know how do you feel about the little green car.

Jack Butala:                         I think that was the worst car I’ve been involved in in my life. Ever.

Jill DeWitt:                          I liked that little green-

Jack Butala:                         Of all cars.

Jill DeWitt:                          You know why. Oh, here’s why. The little green car, for me, was a sound investment because I got my money’s worth out of it. I had however many thousands of dollars of fun in that little green car.

Jack Butala:                         I bought Jill a green Porsche Boxster several years ago, and it ended up being-

Jill DeWitt:                          It’s been gone for a while.

Jack Butala:                         A terrible car from a maintenance standpoint.

Jill DeWitt:                          Well, because it was a Porsche, and it was a little Boxster, and yeah.

Jack Butala:                         This is just facts.

Jill DeWitt:                          When the top broke.

Jack Butala:                         That is not the first, or the last, Porsche that we have ever had, and all the other ones were fine.

Jill DeWitt:                          And I had to drive it to the repair place with the top a third of the way up.

Jack Butala:                         The top broke in the halfway position.

Jill DeWitt:                          It was so funny.

Jack Butala:                         It’s funny now. I was not laughing about it at the time.

Jill DeWitt:                          I know. You’re following me to this place, and then it was like, “You want how much to fix it?” At that point, it was like … It became a disposable car.

Jack Butala:                         That’s exactly right.

Jill DeWitt:                          It was like don’t bother fixing it, just put it in the closed position. I’ll leave the light. Now I know it’s a convertible that the top doesn’t go down.

Jack Butala:                         There’s a whole point to this, that you know when we sold that car, when the guy, he made me a stupid low offer, just like we do with real estate. And I hugged him.

Jill DeWitt:                          I know.

Jack Butala:                         I said, “Here’s the keys.”

Jill DeWitt:                          Have fun.

Jack Butala:                         “Please make sure you pay in cash.” I gave Jill all the money, because I didn’t want the bad juju. And I said, “Just please take it out of our lives, please.” And he said, “Okay.”

Jill DeWitt:                          I was mentally done with that car way before that. That was good. I know you were even further beyond that. Oh that was good.

Jack Butala:                         Well you’ve done it again. You’ve wasted another 20 minutes listening to the Jack and Jill show. Join us tomorrow where we discuss what the definition of the yoga pants syndrome. This is my show.

Jill DeWitt:                          And we answer your questions. Should you have one, post it on the JackJill.com online community.

Jack Butala:                         You are not alone in your real estate ambition. I hated that car, Jill.

Jill DeWitt:                          I know.

Jack Butala:                         I hated it. I don’t know why. Well I do know why.

Jill DeWitt:                          You always thought it was silly.

Jack Butala:                         And I’ll tell you-

Jill DeWitt:                          Or it really is a chick car.

Jack Butala:                         It was a first generation Boxster, first of all. It was uncomfortable.

Jill DeWitt:                          Was it first? I don’t think it was the first.

Jack Butala:                         It was first generation.

Jill DeWitt:                          No. It wasn’t. I’ve seen older Boxsters. Are you sure?

Jack Butala:                         Who are you talking to here?

Jill DeWitt:                          All right.

Jack Butala:                         It was a first generation Boxster. It was black leather in Arizona.

Jill DeWitt:                          That’s true.

Jack Butala:                         A black top. It was hot. The air conditioner really didn’t work. Nothing was perfected.

Jill DeWitt:                          It was green. I liked that silly little car. It was a fun little zippy thing.

Jack Butala:                         It was constantly overheating.

Jill DeWitt:                          It was fast. It was fun. All right. Well that’s why it was my car. You know, we went into it knowing this was gonna be my car, and it was good, and I liked it. Okay. If you like green cars, please share the fun by subscribing on iTunes or wherever you’re listening, and while you’re at it, please rate us there. We are Jack and Jill.

Jack Butala:                         We are Jack and Jill. Information.

Jill DeWitt:                          And inspiration.

Jack Butala:                         To buy undervalued property. I think you just liked the color.

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