Driving for Buyers not Dollars (JJ 634)
Driving for Buyers not Dollars
Transcript:
Jack Butala: Jack and Jill, here.
Jill DeWit: Hi.
Jack Butala: Welcome to the Jack Jill show, entertaining real estate investment advice. I’m Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny Southern California.
Jack Butala: Today, Jill and I talk about Driving for Buyers not Dollars. If you’ve heard any of our shows, up to this point-
Jill DeWit: You know how I feel about this.
Jack Butala: You know how Jill has a problem with driving for dollars. What is that?
Jill DeWit: Yes, basically anything that is a huge waste of time. You know, because it … I got to say this. To me, it’s like common sense to know that putting five business cards in my pocket and walking around going door to door for anything, there has to be a better way. Seriously, you know what I mean?
Jack Butala: It’s inefficient, there’s no doubt about it.
Jill DeWit: Here’s an example, when was the last time … I don’t about the planet, but for us I haven’t seen a Girl Scout cookie person in a long, long time.
Jack Butala: Why is that?
Jill DeWit: You know what? I don’t see them door to door. I only see them in front of the grocery store. They can hit a lot more people in front of the grocery store, than they can going door to door the old way.
Jack Butala: It’s hard to get murdered in front of the grocery store, too.
Jill DeWit: Jack, what the heck?
Jack Butala: Before we get into this, let’s take a question posted by one of our members on the Jackjill.com online community. It’s free.
Jill DeWit: Okay, Jeff U. asked, “For me, I am concerned about making any money in this venture.” I love it. He’s in it, because I’ve been seeing a lot of questions here. He may or not be concerned, because he’s sure involved, and he’s doing a lot of work thinking. I don’t see you concerned, Jeff, I see you planning. I appreciate this. This is good.
Jack Butala: Well said, Jill.
Jill DeWit: You’re doing all your homework. I appreciate that, too. I think that’s where this is going, because I wouldn’t be answering this question if it weren’t this way.
Jack Butala: Jill’s going to read off the fees that he believes are associated with starting a land buy and sell business. I’m going to comment as you go.
Jill DeWit: Okay, good. Comment or interrupt?
Jack Butala: Yeah, interrupt.
Jill DeWit: Just kidding. All right, so Jeff says, “I’m concerned about making any money in this venture. I might be missing some costs or have some costs wrong, so please feel free to correct me if I’m off in the numbers. Here is my breakdown of the fees. One-time fees, the Land Academy Education.
Jack Butala: Yup.
Jill DeWit: Legal documents.
Jack Butala: Nope.
Jill DeWit: One time fee, an LLC.
Jack Butala: No, you don’t need that.
Jill DeWit: Logo design.
Jack Butala: No, no, no.
Jill DeWit: Thank you. Well, that was easy.
Jack Butala: This is fun.
Jill DeWit: Education. This is really good. I’m trying to think is there anything else? I can’t think of anything else. He’s right, just the one-time education fee. That’s it, done. Now monthly fees.
Jack Butala: I’m right?
Jill DeWit: You are right.
Jack Butala: Okay, getting off to a good start.
Jill DeWit: Today. Right now. This moment.
Jack Butala: The name of the show tomorrow, I think is, How to Work with Your Spouse.
Jill DeWit: Oh, this ought to be good.
Jack Butala: We can start it right now, if you like.
Jill DeWit: Yeah, we can. Let’s not take away from the fun we’re going to have tomorrow, because I have some good stuff for that. All right. Oh yeah, you’re going to have to hold me back. How much time do we have?
Then Jeff asked, okay, here are the monthlies. This is really good. He has one-time fees, monthly fees and he has per transaction fees, so I’m going to keep going here. The monthly fees, and he’s right the best is through us, because what you get, geez. The data access and doing your do-diligence and all that good stuff. The data service, is there a monthly fee and is that needed, Jack?
Jack Butala: The Land Academy data monthly fee, data service monthly fee is imperative to succeed. Yes, you need it.
Jill DeWit: Want to go on to say that we’ve changed it recently. Where, not only does it include the data service, but it includes engineering and mapping. We threw ParcelFact in there.
Jack Butala: Yeah, so it’s not just the data. Jill’s right. We get the engineering service with ParcelFact. That’s included now.
Jill DeWit: Deed are included.
Jack Butala: LandPin, itself, where you post a property to sell it, that’s included.
Jill DeWit: Sell a property for free, that’s included.
Jack Butala: That’s imperative. You don’t want to just buy property and not sell it.
Jill DeWit: Exactly.
Jack Butala: Yeah, at the Land Academy, data fee is imperative. Let’s not call it a data fee. It’s a monthly subscription.
Jill DeWit: It’s like the membership you see on subscriptions. It’s like everything that you need is all rolled into one.
Jack Butala: Have people been buying and selling property long before Land Academy? Yeah, they’ve just been doing inefficiently.
Jill DeWit: Yeah, and spending a lot of money.
Jack Butala: That’s right.
Jill DeWit: Yeah, so we have some members that are here for just one or two products, because they know the value of that one product.
Jack Butala: Now’s a good time to say, look you can do this cheaper. You can buy and sell real estate without Land Academy, or House Academy or without us. In the end, it’s going to cost you money. It’s just inefficient.
Jill DeWit: It does, you’re not saving money. I haven’t had this conversation in a while, but every time that I talked to someone that said, “Well, I went to the county. I got this list. That cost me $200, and it took 6 weeks.”
Jack Butala: That’s right, Jill.
Jill DeWit: Then I had to send it to my VA.
Jack Butala: Then I got discouraged, that’s what happens.
Jill DeWit: Then spent 50 more dollars and took another 4 weeks or whatever it was, maybe 2 weeks, said they were fast.
Jack Butala: The tragedy is it just doesn’t … You get discouraged and you get off track. You end up not doing it.
Jill DeWit: Right, and you don’t even know if they did it the right way, got what you want. There’s so many problems there. They’re like, “Oh, forget it. I’m done. I wasted time and I wasted money.” I said, “Yeah, I get it.” Okay, so that’s all included. Then he talks about monthly maintenance for his website.
Jack Butala: No, 75 bucks he has in here for that? No.
Jill DeWit: That’s too much.
Jack Butala: You don’t need it. It costs $9.
Jill DeWit: You don’t. You can do it through GoDaddy or something. A postal box fee, monthly.
Jack Butala: You need that.
Jill DeWit: That’s a good, yup. Internet fee, well you got to have that.
Jack Butala: You could go to the library and work.
Jill DeWit: This is true. Yeah, you could go to the library and work, if you had to. All right, or from a fancy hotel room in San Francisco.
Jack Butala: What’s that?
Jill DeWit: Sorry.
Jack Butala: Where did that come from?
Jill DeWit: I don’t know. I’m just saying. I know people do that.
Jack Butala: We just got back. That’s what she’s saying.
Jill DeWit: Totally. Taxes on the land, monthly. Oh, gosh. No. That’s a pass-through event job.
Jack Butala: Jill and I are not big fans of paying out real estate taxes, believe it or not. That’s a whole show.
Jill DeWit: Yeah, how to get out of taxes.
Jack Butala: How ironic is that?
Jill DeWit: How to buy and sell property and never pay taxes, the property taxes. That’s a pass-through event, Jeff. We’ll help you there. This is why we could save this guy. As we’re going down this list, there’s so much money we’ve just shaved off for him, it’s awesome. Dedicated phone line, monthly.
Jack Butala: No necessary.
Jill DeWit: Don’t you have a cell phone?
Jack Butala: Yeah, that’s going to happen anyway. Go ahead.
Jill DeWit: Financial software, monthly.
Jack Butala: No, no, no.
Jill DeWit: Oh, goodness, no. It’s called a spreadsheet when you’re starting.
Jack Butala: That’s right.
Jill DeWit: Do you renew the LLC, the monthly thing? Oh, whatever.
Jack Butala: No, I don’t understand that.
Jill DeWit: I don’t know. Yeah, not yet. Don’t worry about this stuff. A monthly subscription to Simplifile for recording.
Jack Butala: No, send it in. Send it in.
Jill DeWit: Nope, don’t. Let me tell you, by the way, well you could do a la carte for like three to five bucks. I’ll tell you Simplifile. Oh, what was the other one? I tell you, because with our TitleMind company-
Jack Butala: What this is, is an online recording service when you purchase property to send it in to record it. That’s what it does. It electronically does that for you.
Jill DeWit: I’m here to tell you there are many, many counties that are not covered.
Jack Butala: It’s not all that. It’s really not.
Jill DeWit: No. It’s like … I don’t know. We’re at 5 to 10% of the closings that we’re doing right now in TitleMind that are counties that are covered. So, don’t worry about this at all. Go old school and mail it in.
Jack Butala: You got to learn how to do it anyway.
Jill DeWit: This is true. We’ll get to that. Now, per transaction fees, okay, so this is … Oh, my goodness. Boy, we can save this guy so much money here.
Jack Butala: Title insurance, don’t need it.
Jill DeWit: No, not on some of these deals.
Jack Butala: Raw land purchase, yeah.
Jill DeWit: You know what else? He’s looking at this wrong.
Jack Butala: I agree, that’s why I put it in here. I had the producer put it in here.
Jill DeWit: Yeah, Jeff, don’t look at title insurance like, “Oh, this is going to cost me.” This is coming off the top. The reason you’re buying it so low and selling it and if they want title insurance, you accounted for that. It’s a bigger number. When you’re doing title insurance, maybe it’s a $20,000 acquisition that you’re selling for 50. Could you afford title insurance in there, if your buyer wants it? Yeah, you’ve accounted for that. It’s really not something I even think about. What about you, Jack?
Jack Butala: Title insurance is a variable cost. You’re not going to incur … I’m going to get to this if we can ever actually … If Jill could actually just read it.
Jill DeWit: Stop. Again, don’t jump to tomorrow’s topic. All right, raw land purchase per transaction, $2,000.
Jack Butala: Man, that’s why we’re here.
Jill DeWit: Exactly, but on a $2,000 deal, you better not be spending $750 on title insurance. Land Academy request fee-
Jack Butala: The data.
Jill DeWit: … yeah, the data.
Jack Butala: I defy you to find a cheaper source of data than $.10 a record.
Jill DeWit: Totally. Okay, state and county tax transfer fee.
Jack Butala: Again, that’s why we’re here.
Jill DeWit: You know what? This varies, not all of them have them. Deed recording.
Jack Butala: Where does he get that number?
Jill DeWit: That’s hilarious. Who spends $125? That’s like $20.
Jack Butala: Yeah, if that.
Jill DeWit: It’s like $13 or $15 and then an additional $2 for the 2nd page, if you have one. $2,000 letter offers, yeah, you do need to plan on sending out mailers.
Jack Butala: No, 2,000 letters.
Jill DeWit: 2,000 letters, excuse me.
Jack Butala: Again, that’s why we’re here.
Jill DeWit: Yup, we got that covered.
Jack Butala: Post office.
Jill DeWit: USPS, well, yeah, you’re going to spend a little money when you get going sending the deed out.
Jack Butala: Title search, $125. I don’t understand that.
Jill DeWit: Oh, you don’t need that, because you have that for free in the membership.
Jack Butala: Right, Simplifile.
Jill DeWit: Simplifile, we already covered that.
Jack Butala: So, the subtotal she’s got here for everything is four grand.
Jill DeWit: Wow.
Jack Butala: So, he’s saying it’s going to cost about $8,000 according to his … To get that first deal done.
Jill DeWit: I’ve got to ask.
Jack Butala: Hold on a second. If you get a Domino’s franchise, how much does it cost? All you’re doing is starting a business.
Jill DeWit: Yes.
Jack Butala: If you start a dry cleaner, how much does it cost and on and on and on.
Jill DeWit: $100,000? $500,000?
Jack Butala: I’d love to see a cheaper business that you can start.
Jill DeWit: Wow, you’re right when you look at it like that.
Jack Butala: You can be in business and be in business correctly, by the way, where you’re almost all but eliminating risk with Land Academy, or House Academy, for a couple grand. Your costs are almost always variable costs. They’re associated with a transaction. You’re not really incurring any fixed costs except for access to the data, which theoretically, we set up this way. It should motivate you, if you’re going to pay for it anyway, to use it to succeed.
Jill DeWit: You’re not on the hook for rent or a pizza oven.
Jack Butala: 90% of the stuff that he said here, is not necessary. After you do three, four or five deals, you’ve got ten or twenty thousand bucks in the bank, then you can start filing for an LLC, which doesn’t cost $500. It costs like $90. The reason I had the producer put this in here, as painful as it was to listen to Jill list it all.
Jill DeWit: And comment on it.
Jack Butala: It costs a couple grant to get in business. I think, Jill, what do you say? $5,000 for everything?
Jill DeWit: Yeah, I say if you have $5,000 coming in-
Jack Butala: That includes the purchase of property.
Jill DeWit: Yeah, includes buying a couple properties, getting education, having a couple months of stuff paid for, having a mailer paid for. Everything you need to get going.
Jack Butala: We’re not picking on you, Jeff. We just use it as an example.
Jill DeWit: Yeah, I appreciate you doing all this work here. We are here to save you.
Jack Butala: Listener, what you’re setting yourself up to do is to be knowledgeable and effective at purchasing undervalued properties. Think about that for a second. Is there anything better? Is there any skill that you can think of that can put food on your table for the rest of your life? Buy undervalued real estate. You can apply it to skyscrapers. It’s almost limitless. If you don’t believe in real estate, then you need to find another podcast.
Jill DeWit: That’s awesome.
Jack Butala: It’s the greatest business there ever was, I’m here to tell you. Jill and I rented a yacht. When was this? I don’t know, six, eight months ago?
Jill DeWit: A couple of months ago.
Jack Butala: During the summer, last summer. The guy that was the captain on the yacht actually owned it. He asked us, “What do you guys do?” We said we’re in real estate. He said, “Every single person who rents my yacht is in the real estate business.” This is not Southern California, it’s Los Angeles. Before we left, he said, “Look to your right and look to your left. Every single one of these people on this dock that own these yachts, is in real estate.” I thought they were movie producers or something. Nope. It’s all about real estate.
Jill DeWit: Bingo, you are correct.
Jack Butala: Today’s topic, Driving for Buyers not Dollars. This is the meat of the show. Jill’s going to first describe why she can’t stand driving for dollars. I’m going to follow it up wwith hy I think it’s so incredibly inefficient and sending you down the wrong path. Go ahead, Jill.
Jill DeWit: As I was making my notes for this show, I wrote this one’s good, Driving for Buyers, is a whole different thing, not dollars. Driving for dollars is just ridiculous. For people who have not heard this term before, and it’s basically going out looking for deals, doing it backwards.
Jack Butala: In your car.
Jill DeWit: Literally, getting in your car. There’s apps for this, too. I’ve seen apps where you can drive down a street. As you see a boarded-up house, ping it on your phone, you can get back to the office and look up the ownership. What you’ve done, say you went out and spent four hours canvassing this whole subdivision, if you will. Walk around, looking at them, peaking in windows. This is what people are doing. Trying to see, “Oh, look, this is great.”
Jack Butala: What is an undervalued house look like, by the way?
Jill DeWit: It doesn’t look like that. What do you think it looks like, Jack?
Jack Butala: I want you to picture in your mind, three houses. They’re all the same house in one of these subdivisions where houses are all the same. One’s falling down. The garage door is missing. You name it, right? It’s just falling apart. It’s vacant. If you drive to dollars, you’re going to choose that house. You’re going to market and it’s going to be a property that you would identify as a possible acquisition.
The second house was completely renovated. It’s all done and it’s for sale. It’s completely upgraded. The third house, it’s still got the 1976 kitchen in it. Judging by the kind of car that’s in the driveway, probably an older couple or an older woman lives in it. Which one are you going to identify as an acquisition candidate? The one that’s falling down.
Here’s why this is so bad and why it wrecks real estate careers. The other two houses, you don’t know what situation they’re in. They need to be approached, also. Every house needs to be equal in the eyes as an acquisition candidate. Do you really want to just buy falling down houses anyway?
Jill DeWit: Deal with all the mess.
Jack Butala: How do you know the older couple haven’t paid their taxes in 10 years? We don’t know. Everybody needs an offer. Maybe the guy who just renovated his house overextended himself to the point where he’s got 10 houses that are renovated and he just needs some cash. He needs to liquidate one for way below what he put into it. You’re not going to know until you send him an offer.
Jill DeWit: Bingo.
Jack Butala: Jill’s reasons for driving for dollars are correct, the reasons that she can’t stand it. It is inefficient, but all kidding aside, it will wreck your career. You don’t want to buy problematic property your whole life.
Jill DeWit: Right, that’s the reason people get a bad taste about this, I think. They go out thinking this is what you’re supposed to do. Then they come back with a bunch of awful properties like you’re describing, Jack. Now they’re trying to go through all their resources to find out who owns them and everything. It’s just a mess. Those are often the problems ones. Let’s be honest. There’s a reason why it’s been boarded up and sat that way for two years.
Jack Butala: Exactly.
Jill DeWit: You are not the first person that just found it. You know, that’s what people think like, “Oh, I got one. Shh, don’t tell anybody.” Oh, trust me. They’ve all been done this path. You’re the next guy to go down the path.
Jack Butala: You want to send an offer to every property. What you’re looking for … Forget about the real estate. Real estate is insignificant. What you’re looking for is a social situation. Somebody’s going into a long-term care facility, somebody passed away, maybe they just got a new job on the bright side.
Jill DeWit: Yeah, kid just went to college, empty nest. Who knows?
Jack Butala: Exactly, there’s a million reasons why people sell their real estate.
Jill DeWit: Or there’s just a disgusted wife that wants a new house.
Jack Butala: Disgustedwife.com.
Jill DeWit: I think I have that website, myself, already.
Jack Butala: Maybe a disgusted wife lives there.
Jill DeWit: I already have that, don’t bother.
Jack Butala: What you’re looking for is a situation. No one cares about the real estate. Who cares about the real estate if you buying it for 50 to 70% of what you can resell it for that day? Nobody cares. I don’t care if it’s falling down, if it’s renovated or if it’s somewhere in between. The social situation dictates the transaction, not the actual piece of real estate.
Jill DeWit: Do you know that there are crazy wives out there? I got to say this, because it’s killing me.
Jack Butala: You know, I can answer that. I do know there are crazy wives out there.
Jill DeWit: Thank you, Jack. My point is … That was not is. My point is that I know these women, too. I know some of them. They’re not in my immediate circle. I just know of them. They literally, there’s a piece of them that’s missing if they’re not decorating, upgrading, remodeling and doing something. Once the house is complete, even though they made all the promises to get their husband into this house, we all know who we’re talking about here. “Oh, this is it, baby. This is the last one. I’m so excited.” Once they’re in and it’s decorated and they stand around there’s nothing to do, now they’re on looking for the next bigger and nicer house. Seriously, so those are the people that we should get our offer.
Jack Butala: The male version of that is woodworking in the garage or something or renovating a car. Always have to have a project, because I don’t think they want to talk to the person they’re married to. That’s why.
Jill DeWit: They never get finished.
Jack Butala: Yeah, never finishes.
Jill DeWit: We know those people. There’s always a vehicle under a tarp. It’s not you and it’s not me.
Jack Butala: No, no, no. I gave my tools away a long, long time ago. That’s not for me.
Jill DeWit: You know what? I’m happy with that. I think that’s really good. You know what I was going to say? I’m so excited that you’ve brought up this topic, because to me it’s one step closer, you know, we’re sharing more about House Academy. From the numbers that you shared with me today, Jack, I just have to say this rocks.
Jack Butala: Yes.
Jill DeWit: You redid our numbers today on some of our acquisition goals.
Jack Butala: We’re going to make about 50 million dollars this year.
Jill DeWit: I’m so excited.
Jack Butala: I’m not exaggerating.
Jill DeWit: If we do it all wrong, it’s 25.
Jack Butala: Right, and we might.
Jill DeWit: I think that’s okay. That’s okay, I love those numbers.
Jack Butala: It’s actually closer to 70, but we’ll see what happens. Anyway, the name of this topic is Driving for Buyers not Dollars. Now that we’ve bashed driving for dollars enough, what does this title really mean? Driving for buyers is a hell of a way, a great way, to find who you’re going to sell this property to. If there’s a dumpster in the front yard of a house, and you’re driving around, walk up and introduce yourself. Say, “Hey, I’m buying four or five other properties in this zip code. Give me your email address. I’ll just let you know when they come up.”
Jill DeWit: Bingo.
Jack Butala: That guys already figured everything out. He’s figured out how to finance it, price it, how to sell it. You don’t want to end up with “for sale property.” It’s an old commercial real estate rule. You want to know how you’re going to get into in and get out of it. You want to know what’s going to happen with it and you want to do it fast. Driving around, if you have to, if you must drive around-
Jill DeWit: If you have this burning desire.
Jack Butala: … if you can’t help yourself.
Jill DeWit: You have to get out of the house.
Jack Butala: You want to waste your time. What you need to do is look for buyers. Is that the best way to do it? No. The best way to do it is to send everybody … If you look at a zip code from a data standpoint, and there’s let’s say four or five, or ten or twelve thousand properties there, a substantial portion of them will be owned by LLC’s or owned by anything other than a person, like Sam and Sally Smith. Those people are either, they own the house and they’re renting it out or they’re going to renovate it. Chances are they’re in the business at some way. Those are your buys.
Jill DeWit: Mm-hmm (affirmative), pretty easy to spot them. They’re not the one-offs, there’s 10 of them.
Jack Butala: When we release House Academy, there’s a whole chapter on finding buyers. That is, by far, the easiest, most efficient way. Is it the cheapest or the most free? No, it’s not the cheapest, but that’s I put the question in the front of the show here, at the beginning of the show. This isn’t free. We’re not here for free. The show’s free.
Jill DeWit: No, there’s a … You know, though, you get what you pay for.
Jack Butala: Yeah, you get what you pay for with this show, too.
Jill DeWit: And with women. I’m just kidding
Jack Butala: Well, we’ve done it again. We’ve wasted another 25 minutes listening to the Jack and Jill Show. Join us tomorrow where we discuss the topic, Working With Your Spouse.
Jill DeWit: We answer the question. Should you have one, post it on our online community, Jackjill.com.
Jack Butala: You are not alone in your real estate ambition.
Jill DeWit: That was good. I feel very passionately about all of this.
Jack Butala: I know you do, you should.
Jill DeWit: It’s just …
Jack Butala: I hate to see people doing stuff wrong, get discouraged and then it’s over.
Jill DeWit: Well, you know what? My thing is quit trying to do it for free. If you can’t afford to put some money into something and do it right, then you shouldn’t be here. You shouldn’t be doing it, no matter what it is. I don’t care what you want to start.
Jack Butala: I agree, Jill. I agree.
Jill DeWit: There’s no reason. Say you want to open a sunglass hut, I mean whatever it is. You got to have money to do this. You can’t just walk in and expect it to work.
Jack Butala: There’s no more effective business model than buying and selling real estate from an accounting perspective, in my opinion.
Jill DeWit: The numbers are just staggering. You’re typical ROI, I guess …
Jack Butala: I tend to look at everything in fixed costs and variable costs. Picture a manufacturing facility that makes nuts and bolts. Think about how much it costs to get that all up and running, the real estate, a whole bunch of people. Then you don’t even know if you can sell it. Think about you could be in business buying and selling real estate tomorrow, for nothing.
Jill DeWit: Exactly.
Jack Butala: You already have a phone. You already have a roof over your head. Chances are you have a desk and you’re-
Jill DeWit: And a computer and internet.
Jack Butala: … all of that. Does it cost a little bit of money to send a mailer out? Yeah, but.
Jill DeWit: I’m agreeing.
Jack Butala: I have said it.
Jill DeWit: Yeah. Hey, share the fun by subscribing on iTunes or wherever you’re listening. Please, while you’re at it, rate us there. We are Jack and Jill.
Jack Butala: Information.
Jill DeWit: Inspiration.
Jack Butala: To buy undervalued property.
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