Price of Everything Goes Up While Wages Stagnant (JJ 687)

Price of Everything Goes Up While Wages Stagnant (JJ 687)


Jack Butala:                         Jack Jill here.

Jill DeWit:                            Hello.

Jack Butala:                         Welcome to the Jack Jill Show. Entertaining real estate investment talk, we hope. I’m Jack Butala.

Jill DeWit:                            And I’m Jill DeWit, broadcasting from so-so sunny, partly cloudy southern California.

Jack Butala:                         Today, Jill and I talk about the price of everything seems to go up. Well, it actually does go up, while wages and how much money we all make seem to stay stagnant, unless you’re a real estate investor. Before we get into that, though, let’s take a question posted by one of our members on the online community. It’s free.

Jill DeWit:                            Okay. Matt asks, “Hello, all. I’m conducting due diligence on a five-acre property I’m looking to purchase from a lady who has owned it since 1987.”

Jack Butala:                         I like where this is going, Matt.

Jill DeWit:                            “Upon looking at the vesting deed, which is the last recorded deed, I noticed that at the bottom of the deed, before the signatures, that her purchase of the property was subject to a real estate contract the previous owner was paying on, and that the buyer, the lady who is currently selling it to me, would be assuming this contract. It appears that-“

Jack Butala:                         Right on the deed, huh?

Jill DeWit:                            Right above her signature. I haven’t seen that.

Jack Butala:                         You never see it on the deed.

Jill DeWit:                            “It appears that she was purchasing the property from her parents and assuming the land contract.” That makes sense. “The owner of the contract was a single guy. I searched the county records to see if there’s anything recorded that shows this contract had been satisfied, and wasn’t able to find anything.” Boy, Matt, by the way, I want to say I appreciate you doing your homework on this so it doesn’t come back to bite you.

Jack Butala:                         Me too. What a bright approach to this.

Jill DeWit:                            “I asked the seller about it. She told me that she was finished paying on the contract a long time ago-

Jack Butala:                         I believe her.

Jill DeWit:                            … but because it was so long ago, she didn’t have any documentation that could back it up. Does anyone have any idea … ” Oh God, I can’t believe she didn’t keep her receipt. “Does anyone have any ideas on how I could go about circumventing this issue? I don’t believe that there’s a big risk of the contract not being satisfied. However, I am not sure what is the best way to clear up title. Any suggestions would be greatly appreciated.”

Jack Butala:                         What do you think, Jill?

Jill DeWit:                            You know, my first thing would to do would be to really try to find the company. My first thought, and the easiest thing would be to find the company who had issued the land contract. Fingers crossed they’re still in business, ask for a document from them. Just say “Hey, would you guys mind sending a one page thing? I will even draw it up for you. At this property that everything’s been satisfied, she doesn’t owe you anything. Have a nice day.” And have them sign it. Then submit that.

Jack Butala:                         I think, Matt, you found a little gem here. In this business all kinds of owners respond to the letters that we send out. Some of them have really easily solvable problems, so you can turn a huge profit. These little tiny problems that some other buyers may have seen as “I’m just going to move on. I’m not going to buy it. I only want a perfect deal.” I think you found a situation here where, because of the age, she’s owned it for so long that it’s probably all gone. Any and all issues are probably gone, and hopefully there’s a big huge spread in what you’re buying it for and what it’s worth.

                                                That said, I really would purchase this property with title insurance, and if you don’t want to, I would run a lien report. Matt, I’m pretty confident you’re a member with us, so you have access to RealQuest and Title Pro 24/7. Run a lien reports in there. Spend a few bucks, and you’ll see if there’s any liens. Go ahead Jill.

Jill DeWit:                            One thing that makes me feel really good about this, too, is it’s not in the title as grantor or grantee, it’s not her and the person of the lien, so that makes me feel good.

Jack Butala:                         Yeah, so it’s a land contract.

Jill DeWit:                            Right, so this is sounding easier than harder-

Jack Butala:                         Me too.

Jill DeWit:                            Because it doesn’t say you’re buying the property from Mrs. Smith and the, you know, Dallas Land Company. You know what I mean? That they’re not right in there, because now we got to take it a step further like Jack’s saying. It’s just noted. It’s really interesting.

Jack Butala:                         It’s a very sophisticated question.

Jill DeWit:                            Like I said, we’ve never seen … I have one more thing to say. I have one other idea too. I would ask an attorney, okay “Hey, Joe attorney, I’ve done this, I’ve run a lien report, this company’s out of business.” Let’s just play this out here. “I’ve pulled a lien report, nothing comes up. I’ve tried to get the company, they’re out of business.”

Jack Butala:                         I like where this is going.

Jill DeWit:                            You know what I mean? She doesn’t … It was done from the ’80s, you know, kind of thing, and it’s not in the legal description, it is not in the grantor, grantee area, it’s like a PS above here signature.

Jack Butala:                         Right.

Jill DeWit:                            How much legally … How could they legally come back on this? Because they’re not even signing it, by the way. You know what I mean? I would really curious to say, because what if an attorney … An attorney could say that. “You know what? That means nothing.” An attorney could literally look at this, because I don’t know, I’m not an attorney, obviously. Attorney could say “You can write whatever you want there, it doesn’t mean that that, you know, it’s going to happen.” It might even just, that particular thing, I don’t know, her parents might legally be responsible.

Jack Butala:                         Well, you nailed it. There’s a lot more positive here than negative.

Jill DeWit:                            Right.

Jack Butala:                         The way that we buy land, I would just brush … I would pull the lien reports. If there’s nothing there, and I would have a real candid conversation with the seller, like “Hey, what’s this all about? Is it over? Do you know anything about it? Are your parents still around? Can I talk to them?” The whole thing could be cleared up in a couple of hours here and you own the property.

Jill DeWit:                            You know what? And even so, let me run this to you, and if we can’t find the company, even if the seller signs something, that makes me feel real good.

Jack Butala:                         A release.

Jill DeWit:                            You know, would you please sign something telling me that you’ve paid this off.

Jack Butala:                         Yeah, sign a release.

Jill DeWit:                            And, you know, whatever it is.

Jack Butala:                         We do that standard, you know, you know that, Jill.

Jill DeWit:                            Yeah.

Jack Butala:                         The standard release that we provide, that a seller signs, it says that anyway.

Jill DeWit:                            Everything that we’re talking about right now is really going above and beyond, you know, to cover your rear, so that’s good.

Jack Butala:                         This begs a bigger question. Jill went right down that perfect path on this. Let’s check all these boxes. I checked a lien report. I checked title report. I talked to an attorney briefly. Attorney said “I’m crazy to buy it.” I sign a release. Now, all right, so you’re standing there saying “Okay, should I do this deal?” There are a lot of people who just stop right there and they say “You know what? No one told me I could do this deal. Nobody gave me permission to do this deal. I’m not going to do it.” There are a lot of people that have … That risk thresholds, they just can’t jump over that.

Jill DeWit:                            Oh.

Jack Butala:                         They can’t jump off the cliff.

Jill DeWit:                            I have no fear.

Jack Butala:                         I don’t either. That is my whole point.

Jill DeWit:                            Here, I’ll catch you.

Jack Butala:                         That is my exact point.

Jill DeWit:                            All right, here I come.

Jack Butala:                         I think that that stops a lot of people from doing this successfully, or anything in life.

Jill DeWit:                            Oh.

Jack Butala:                         You have to ask yourself. Stare right at yourself in the mirror and say “What’s it going to take for me to buy this five acre property? How much assurance do I need? Does my mommy need to tell me it’s okay to do it?” I’m not busting on you, Matt, I’m just talking about people.

Jill DeWit:                            Well, you know what’s interesting? Here’s one of the things that I look at. At the end of the day, how much is it? All right, if it’s 500 bucks … Oh, I could stand it. If I did this all wrong, and I lost $500, do I care? No.

Jack Butala:                         How about 5,000?

Jill DeWit:                            I’d still do it.

Jack Butala:                         Me too. How about 50,000?

Jill DeWit:                            Now I’m going to think about it.

Jack Butala:                         My threshold too, Jill. At about 12 to 30,000 I’m going to say “You know this might be [crosstalk 00:07:40]”-

Jill DeWit:                            Say it’s 1,200 bucks, you know, it’s 1,200 bucks, Matt. That’s a good point to make. This is a discussion that we truthfully have ourselves and with our members.

Jack Butala:                         Yeah.

Jill DeWit:                            Because at the end of the day you have to say “Okay, hold on a moment. You might be wrong.” Are you okay if you’re wrong?

Jack Butala:                         Or you missed something.

Jill DeWit:                            Or you missed something and you goofed up.

Jack Butala:                         You made a deal mistake.

Jill DeWit:                            And you’re stuck holding a property that you can’t sell, and you paid 1,200 bucks. Then you go “You know what? I’m good with that.” Then fine. Power through.

Jack Butala:                         Yeah.

Jill DeWit:                            That’s a great conversation to have with yourself.

Jack Butala:                         Or if you’re Jill, you stand there and you say something like this to me “You should of caught that. You’re the real estate person, not me. I’m just the person who does” …

Jill DeWit:                            What?

Jack Butala:                         I’m just teasing you, man.

Jill DeWit:                            I don’t do that.

Jack Butala:                         I know you don’t.

Jill DeWit:                            Oh my gosh.

Jack Butala:                         I know, it’s my effort at a joke, which just … It just failed.

Jill DeWit:                            Oh, it failed. I’m like, I’m like, I don’t do that. No, if anything I’m like … I’m like, you know what, if anything I feel like I won’t ask you. I’ll just run with it and you’re going to go “What’d you buy?” I bought it. “Okay.”

Jack Butala:                         Once in a great while something like this happens, actually, I can’t remember the last time. When it does, we just look at each other and laugh and clink our glasses and say “We don’t have to worry about that for 15 more years.”

Jill DeWit:                            We’re so on the same page.

Jack Butala:                         Like that kind of thing.

Jill DeWit:                            This is one of the things I think we’re really lucky about. Seriously, Jack, in our career, and I know that there’s a lot of husband and wives out there that are doing some of this stuff, in businesses together, it’s hard. Part of it’s good. I agree with having one person in the relationship, or partnership, maybe it’s two partners, I don’t care. I agree with one person that’s going to be a crazy person that doesn’t think about any of the consequences and comes up with these crates ideas, and just bolts ahead. Then we have one that’s kind of a grounding person, or they look at the things going “All right, I’ll be over here taking care of the taxes. Don’t think about it, I’ll do all the busy work.”

Jack Butala:                         The straight man.

Jill DeWit:                            Yeah, the … You know what I mean? That’s not bad. You and I are … It’s amazing that we don’t dig ourselves into holes.

Jack Butala:                         I agree.

Jill DeWit:                            Because you go “I think this is a great idea.” And most people would say that’s crazy. Instead of me saying it’s crazy, I go “Oh, let’s do it even faster.”

Jack Butala:                         Right, let’s dig that hole faster.

Jill DeWit:                            Yeah, let’s do two of them.

Jack Butala:                         You do do that.

Jill DeWit:                            I know.

Jack Butala:                         So do I.

Jill DeWit:                            I know.

Jack Butala:                         Why start two companies? Let’s start 14.

Jill DeWit:                            Yeah. This is a great idea. Why not? Who needs sleep? Thank you.

Jack Butala:                         That’s why we do this show.

Jill DeWit:                            I know.

Jack Butala:                         So we don’t have to do any work, any real work.

Jill DeWit:                            But that’s a problem, there is real work.

Jack Butala:                         Today’s topic. The price of everything goes up, while wages stay stagnant. How can you capitalize on that as a real estate investor? This is the meat of the show. So what does that really mean? Well, Jill and I went to a real estate discussion. Let’s say we’ll call it a think tank. I don’t know what I would call it. It was a lot of people talking about their opinions about real estate, and one very intelligent person pointed out that everything goes up. The price of everything. Durable goods.

Jill DeWit:                            Cars.

Jack Butala:                         All of it.

Jill DeWit:                            Houses.

Jack Butala:                         But wages seem to stay the same. What does that mean. Jill, you brought up a couple of great points before the show. You know, what does it mean for real estate agents? Like what’s the real facts about real estate agent incomes?

Jill DeWit:                            Oh, that was kind of shocking and kind of sad. So this person had done their homework and they were showing us over the last … I don’t know however many years. It was either three years or ten years, but in the last few years the median income for real estate agents has only gone from like $48,000, that’s the median everyone, to like $50,000. Maybe it was the ten year. I trying to remember what the span was. Do you remember what it was?

Jack Butala:                         It was substantial.

Jill DeWit:                            It was even longer than that?

Jack Butala:                         Real estate agents are not, on average, making any more money than they did like 40 years ago.

Jill DeWit:                            Okay. It was even a bigger timeframe.

Jack Butala:                         It’s through $3,000 a month more, I mean a year.

Jill DeWit:                            Shocking. Like “Oh now we’re at $50,000.” That’s the median. There’s a lot that make less.

Jack Butala:                         Right.

Jill DeWit:                            And there’s a few that make more. That really surprised me.

Jack Butala:                         What this means is that any given piece of real estate, if the laws of supply and demand are real in a given market, gets priced at, let’s say, $120,000 for a house. That’s because two people that are earning the average wage in that area can afford it.

Jill DeWit:                            Right.

Jack Butala:                         So any time there’s an uptick in wages, which we’re really due for, this is all positive stuff, it’s not negative. Any time the minimum wage goes up or financing … The way that financing gets done, gets a little bit more creative, which you may or may not be a fan of, the price of real estate goes up. It’s really sensitive to how much money people make in the area. We’re all due for a massive price increase in wages.

Jill DeWit:                            I hope so, man, and I got to tell you right now-

Jack Butala:                         Any time the minimum wage goes up, like, in California, there’s really stringent minimum wage increases, which is … Guess what? California is the most expensive real estate market in the country. At least the last time I looked.

Jill DeWit:                            Another thing that’s going on right now is we are at a … I just heard this on the radio yesterday from the almost … She’s transitioning out of her role. Anyway, we are at a 17 year low for unemployment. It’s like now at or below 4%.

Jack Butala:                         That’s fantastic.

Jill DeWit:                            I’m like “That’s great.” That really is great.

Jack Butala:                         Is it 4%? Is that what you said?

Jill DeWit:                            Yeah it right around … It’s either 4.5, 4.1, something in there, but I remember her saying it’s a 17 year low right now for unemployment, which is awesome.

Jack Butala:                         When I was growing up in Detroit the unemployment rate was between 12 and 18%, and it broke 20% once.

Jill DeWit:                            Wow, that’s awful.

Jack Butala:                         Yeah.

Jill DeWit:                            That’s crazy.

Jack Butala:                         That may not have been the general population, but the auto industry.

Jill DeWit:                            Well, I wanted to talk again real quick about to this … The everything goes up while the wages stay stagnant, because it’s so true. I mean, look at all the public … There’s still a lot of public service slash union type jobs out there, and they set their wages … Why is that funny?

Jack Butala:                         I’m not. You’re looking at this from a worker’s perspective, and I’m looking at it, and I’ll explain it in a minute, on how as a real estate investor you can pile a bunch of cash in your checking account.

Jill DeWit:                            Well, let me … I’m going to get there. Wait, wait, follow me on this. So here’s my thoughts. There’s so many jobs out there that the wages are set federally. There’s a lot of national companies, right? I mean, come on. And you’re stuck, and you know what, and the only way out is to work more hours, put your wife to work, put your kids to work. I don’t know. You know what I mean?

Jack Butala:                         Yeah.

Jill DeWit:                            That’s the only way out that you have. Huh, so you know what happens? You got to think outside the box. That’s where I see us coming in. I’m saying I know that because of our community. That’s a lot of why we’re here. You know a lot of the people in our community, it’s like they hit their ceiling. “I’ve got my PhD, there’s nowhere else I can go.” Kind of thing. That’s true. So the only way to make more money, because I’ve got three kids in college coming up, you know, this is a true story all the time. You know is, I got to come up with another way to make some money.

                                                What’s one of the best ways to make money? Huh, real estate. Who knew.

Jack Butala:                         Yeah, if not the best way.

Jill DeWit:                            Right.

Jack Butala:                         What that means from a real estate investor’s perspective is that you can sleep just a little bit better at night knowing that the value of your property, in general, is going to go up. Especially when you tack it on the way we do it, which is purchase it for less than it’s worth today, and make sure you have some type of outlet. Make sure you have an exit on the property immediately. So you know you’re actually buying the piece of property on behalf of, or not on a representative way, you’re buying the property, but you know who you’re going to sell it to.

                                                If you get real organized … all these big … We’re not economists by any stretch, in fact, I have an accounting background, and economists and accountants historically just butt heads on everything, but that said, all these big forces are in your favor.

Jill DeWit:                            It’s true.

Jack Butala:                         That’s really what this whole point is. If wages were going up higher than real estate prices, we’d be in a Japanese situation where houses actually depreciate in value to the point of zero where then you have to get a new one.

Jill DeWit:                            Can you imagine?

Jack Butala:                         Like a car.

Jill DeWit:                            I can’t even imagine. Isn’t that … We are so lucky it’s not that way.

Jack Butala:                         Yeah. I just heard this too in the same meeting. Japan has about the same number of citizens, and their land mass is the size of … The US, but their whole entire land mass is the size of California, so they live on top of each other.

Jill DeWit:                            Yeah. That is just insane.

Jack Butala:                         Again, I’m not an economist, but I know that.

Jill DeWit:                            Could you imagine?

Jack Butala:                         And every time there’s a two dollar uptick in minium wage it really affects in a positive way, for an investor, real estate values.

Jill DeWit:                            Right.

Jack Butala:                         Get in while you can is what I’m saying.

Jill DeWit:                            I don’t-

Jack Butala:                         [crosstalk 00:16:48] right, don’t overpay. Go ahead.

Jill DeWit:                            I’m still trying to wrap my head around that. The property value … the concept of … I’m not even going to care.

Jack Butala:                         Here’s another fun real estate fact, since we’re talking about silliness. Did you know in Scotland that if you paint your front door red when your mortgage is paid off.

Jill DeWit:                            Okay, that’s so darn cool.

Jack Butala:                         Isn’t it?

Jill DeWit:                            Seriously?

Jack Butala:                         Yeah.

Jill DeWit:                            How did you know that?

Jack Butala:                         I just remember silly stuff.

Jill DeWit:                            That’s so darn cool.

Jack Butala:                         I save this stuff up to impress you, you know?

Jill DeWit:                            Wow. It did.

Jack Butala:                         Because you’re my girl.

Jill DeWit:                            Awe. What other big facts do you have for me, Jack?

Jack Butala:                         If I give them all to you at once, then what the heck, it’ll be done. Like “Next guy.”

Jill DeWit:                            You won’t have anything to string me along, keep me excited about.

Jack Butala:                         Next husband. Thank you. Next in line.

Jill DeWit:                            Oh, that’s cool. All right, that was awesome. Thank you, Jack. You’re so sweet.

Jack Butala:                         Join us tomorrow where we discuss how we list the ways to acquire undervalued property. Don’t you want to know, Jill?

Jill DeWit:                            Oh my gosh. And we answer your questions, should you have one, found on our online community. Go there to and click on online community, you’ll find it. It’s free.

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

Jill DeWit:                            That went long.

Jack Butala:                         Yeah, it did.

Jill DeWit:                            That’s okay.

Jack Butala:                         We were having fun.

Jill DeWit:                            I hope that’s-

Jack Butala:                         We’re the only ones.

Jill DeWit:                            Uh-oh. That’s good. Good points, good topics. I love that red door thing. I had no idea. I think that’s the coolest thing on the planet. I wonder where that started. It’s probably from some king back in … You know what it is? I wonder if it was like … Let’s imagine this. Maybe it’s … I’m just going to think out loud here.

Jack Butala:                         Yeah.

Jill DeWit:                            It might be from the old whatever days when the tax collectors, like, Robin Hood days where they would go door to door and you’d pay them taxes in your hand. You know, you’d put it in their hand and they’d put, you know, whatever. Maybe if you painted your door, that was their way of “Don’t even stop here. This house is paid off. I don’t owe you.” Or something. Do you think there’s any truth in that, or am I just …

Jack Butala:                         I wonder what goes on in that pretty little head of yours.

Jill DeWit:                            Well, now I have to look it up.

Jack Butala:                         Here’s some more fun facts real fast.

Jill DeWit:                            Oh my gosh.

Jack Butala:                         The vast majority of the places in the world don’t offer real estate financing at all.

Jill DeWit:                            I believe that one.

Jack Butala:                         If you buy a house in Mexico, you have to pay cash. What do you think, hold on, what do you think that does to prices? It narrows the amount of people in a given market who can actually afford a piece of property down to like one tenth of one percent.

Jill DeWit:                            Yes, but every property’s paid for. If it’s for sale, they can make the decision. That’s cool.

Jack Butala:                         Right. I agree with that, but what do you think it does to values? They just plummet.

Jill DeWit:                            You think?

Jack Butala:                         Yeah, if only one tenth of one percent of the people in the market can afford to pay X for a house.

Jill DeWit:                            Oh. You’re happy to find someone that can afford to buy your house.

Jack Butala:                         Right, so what ends up happening?

Jill DeWit:                            The families-

Jack Butala:                         Specifically in Mexico, is that the people who buy real estate are from another country.

Jill DeWit:                            Right.

Jack Butala:                         A lot has just changed there.

Jill DeWit:                            Well, I was just-

Jack Butala:                         It used to be that you couldn’t … As an American, you had to have a Mexican partner.

Jill DeWit:                            I remember hearing about this in Italy. That’s one of the reasons why the kids live with their parents until they’re 30 something.

Jack Butala:                         That’s right.

Jill DeWit:                            Because they have to save up and save up and save up to buy something. I would also think that’s why, too, like, I think that homes will get passed down generation to generation.

Jack Butala:                         Yeah.

Jill DeWit:                            That’s it.

Jack Butala:                         So imagine then what it does to the economy. If now there’s no financing industry, there’s no … A lot less real estate is changing hands, it’s not good for the economy.

Jill DeWit:                            There’s a lot less jobs.

Jack Butala:                         The more it changes hands the better. Right.

Jill DeWit:                            It’s very true. You’re right.

Jack Butala:                         Wow, we got all kind of, like … Sometimes we laugh for an hour.

Jill DeWit:                            Oh, no. Okay. Glad we’re cutting this now. Share the fun by subscribing on iTunes or wherever you’re listening, and while you’re at it rate us there.

                                                We are Jack and Jill-

Jack Butala:                         We are Jack and Jill. Information-

Jill DeWit:                            … and inspiration-

Jack Butala:                         … to buy undervalued property.

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