List of Ways to Acquire Undervalued Property (JJ 688)
List of Ways to Acquire Undervalued Property (JJ 688)
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hi.
Jack Butala: Welcome to The Jack Jill Show, entertaining real estate investment talk. I’m Jack Butala.
Jill DeWit: I am Jill DeWit, broadcasting from sunny Southern California.
Jack Butala: Today, Jill and I provide a list, a comprehensive list, of ways to acquire undervalued property. Then as always, give you our opinion of the ones that have worked best for us over the last 20 years, seriously.
Jill DeWit: That’s what every woman wants to hear, every man wants to hear. “I’m going to tell you this, and then I’m going to give you my opinion.”
Jack Butala: How should it go?
Jill DeWit: I don’t know, it just-
Jack Butala: Seriously. How do you get a girl?
Jill DeWit: Not that way.
Jack Butala: Tell us how. I want to know. The whole world wants to know this, Jill.
Jill DeWit: Oh, my gosh. You don’t give your opinion. Okay? Let’s just talk about this. When we come to you and ask you a question, we do not want your opinion. We only want you to support us. Period.
Jack Butala: Like, “Does this property make me look fat?”
Jill DeWit: Bigger than that. Like, “Sweetheart, I don’t know. What do you think about this diamond?”
“Oh, Babe, you need bigger.”
We want you to be always positive, always building us up, always tell us we’re beautiful and smart. Not like-
Jack Butala: What if it’s not true?
Jill DeWit: “You know, that really does not go with your hair color.” Or, “Why did you buy that car?” Or, I don’t know, we-
Jack Butala: Are you speaking from experience here?
Jill DeWit: Oh, my gosh, yes.
Jack Butala: I mean, recent experience?
Jill DeWit: Oh, my gosh, yes.
Jack Butala: What the heck?
Jill DeWit: Jack, I love you. Okay. No, not recent. I’m just kidding on that.
Jack Butala: I don’t think so.
Jill DeWit: There’s times that-
Jack Butala: I don’t think you’re kidding.
Jill DeWit: A lot of them, we really don’t want your opinion. I’ll just leave it at that. We want you to help us justify our decisions. That’s it.
Jack Butala: What if you’re standing by, as a man, and you’re watching it all headlong into fireball of disaster.
Jill DeWit: Yep, let me go. Oh, my gosh. Because, if you don’t let me figure that out on my own, you’re the bad guy.
Jack Butala: What the heck?
Jill DeWit: It’s the truth.
Jack Butala: As a civilization, we’ve been around for so long, how do we even survive together?
Jill DeWit: I don’t know, but you need to let me just … if I’m going to make the mistake, let me do it.
Jack Butala: Oh, now it’s becoming personal, too.
Jill DeWit: No, I don’t mean me.
Jack Butala: I think you do.
Jill DeWit: No, as a woman. Anyway.
Jack Butala: This is a talk to another show.
Jill DeWit: Yes, it is.
Jack Butala: Before we actually get in to it, even though we just did, let’s take a question posted by one of our members on the JackJill.com online community. It’s free.
Jill DeWit: Okay. Jordan asks, “I have a parcel of land that I just put on Craigslist. Right off the bat, I received a question that actually threw me off, though it’s admittedly something I should have probably already thought of. Because, I’m still working on my first deal.”
Jack Butala: Good for you, by the way.
Jill DeWit: “The question was simply if the land comes with mineral rights, and that’s not something I know. The question then is how do I accurately determine mineral right status?”
Oh, I know.
Jack Butala: Go ahead.
Jill DeWit: Okay.
Jack Butala: I don’t want to correct you in case you’re heading off into a path and give you my opinion, or anything like that.
Jill DeWit: You should just let me go. Do not give me your opinion on this answer.
Jack Butala: I’ll just sit here. I’m going to hang my mic up right now. It’s The Jill Show.
Jill DeWit: I’ll tap you on the shoulder when it’s okay, and you can come back. Just kidding. I am just kidding.
The mineral rights goes all the way, way, way, way, way, way, way, way, way, back to the beginning. Really, the only true way to know this is to sit down and pull deed, after deed, after deed, after deed, after deed, after deed. Correct me if I’m wrong, Jack.
Jack Butala: I can’t. I’m not allowed to talk.
Jill DeWit: Yes, you are. Come on.
Jack Butala: The general way that mineral rights are conveyed is actually in the deed. If you read any given deed, it’ll say, “We’re conveying this property and everything that’s attached to it fee simple, excluding mineral rights.” Vast majority of the deals that we [inaudible 00:03:57] land deals. At some point, and Jill’s exactly right, when you go back at some point, that sentence won’t be in there. That’s when mineral rights either got withheld or didn’t convey. It’s nearly impossible for people like us to figure it out.
Jill DeWit: Okay. I want to say this one more time just a little … I’m going to make it even simpler. Once upon a time, the first person on the property, they had mineral rights. They may have conveyed them with the property. If they didn’t, that’s what Jack’s saying. There’s a clause in there saying, “I’m giving you the whole property, but I’m keeping the mineral rights, the water rights whatever I want to keep.”
What happens then, the next deed may or may not reiterate who still has those. That’s why you have to go all the way back. Because, what often happens is five deeds down the road, they go, “Oh, you know what? Why do we keep repeating that stupid clause? We don’t need to keep saying Bob Smith owns the mineral rights. We all got it. I’m just giving you the land.” So, here’s where we come in. We’re five and 10 deeds later, and it doesn’t say anything one way or the other. That, I’m sure, Jordan, is what you’re looking at.
Jack Butala: Right.
Jill DeWit: You’re looking at the deed going, “Well, how do I know? It doesn’t say it has them. It doesn’t say it doesn’t.” To solve this, every one is. Because, the way we do deals, we’re in it to get in, get out, and just not spend a lot of time on it. And, just say, “Here is the thing.” We tell everyone, “You’re buying this for the property. We don’t know. It may have them. It may not. If you want to find out, knock yourself out. You’re buying this for the land, and you’re paying that price.”
Do we know that there’s some people that have bought properties from us, and then unbeknownst from us, got some water and mineral rights? And, then it was worth way more than what they spent and all that good stuff. I am positive that happened, and I’m happy for them. I don’t care. That was a bonus. That’s kind of how we tell people.
Jack Butala: That’s the long way to answer your question, Jordan, “How do I accurately determine if I have mineral rights, or if I own mineral rights in this property?” The answer is you don’t.
Jill DeWit: Right.
Jack Butala: You can just tell the seller you don’t know.
Jill DeWit: Right. You got to go all the way back.
Jack Butala: Or, you can really be straight about it and say, “Probably not,” or, “No.”
As you can imagine, the oil industry has a huge interest, a vested interest, in whether or not they own the mineral rights to whatever they’re drilling. They’ve spent billions of dollars trying to figure this out. In the end what happens is, when the find oil, they wait for somebody to contest it.
Jill DeWit: Right.
Jack Butala: This could be billions of gallons afterward.
Jill DeWit: I have a question. Do you think that the majority of properties that are valuable … they are have some mineral, or oil, or water asset, everybody knows it and it’s properly conveyed. So, what percentage of the time do you think, Jack, that-
Jack Butala: It’s correctly conveyed?
Jill DeWit: No, no. Let me ask the question a different way. What percentage of the time do you think that … If it’s not even talked about, it probably doesn’t exist, so it’s probably not an issue. So, don’t even go there.
Jack Butala: It only ever comes up when somebody contests it.
Jill DeWit: It’s true.
Jack Butala: Which, I don’t think is very often.
Jill DeWit: Yeah.
Jack Butala: Here’s an example. Jill and I, you may or may not know this, but we purchased a property in New Mexico with an oil well on it that was generating …
Jill DeWit: I know that.
Jack Butala: We had an active lease.
Jill DeWit: I saw the paperwork coming in.
Jack Butala: Right, I was hoping-
Jill DeWit: That we can get money.
Jack Butala: Yeah. We bought a property, and there’s an active … I think it was natural gas. It wasn’t a lot. It was a lease. They were pulling whatever they wanted to pull out, and I think it was like $1,200 a year.
Jill DeWit: That’s exactly what I remember, like three, $400 a quarter that they’d say, “Hey, do you want it? I don’t know where to send you a cheque?”
Jack Butala: Do you think that we own those mineral rights on that property? No, I really doubt it. And, do you think that the company was pulling whatever they were pulling out of there owned them? I really doubt it.
Jill DeWit: It’s true.
Jack Butala: What they were doing, I think … I read the lease … is leasing the surface rights from us, so that they could do their business.
Jill DeWit: Right.
Jack Butala: This gets very complicated, and quite honestly, it sounds like a dream, a great novel. It would make a great novel, but in fact, it caused problems for us selling that property. We ultimately did sell it, but it’s like, “Man, it’s just out of our wheelhouse.” It’s too far away from what we regularly do, which is just buy a piece of property and sell it.
Jill DeWit: For the property. For the property. That’s why we’re here to make it easy. We’re trying to sell a property, a beautiful treed fishing site, for someone to put a cabin on.
Jack Butala: Yes, exactly.
Jill DeWit: That’s really the end game here. That’s the people that we want to work with that they’re like, “Oh, I just want to put my cabin here, and fish, and hunt, and put a tent up with the kids,” or whatever it is. That’s the beauty of this. Otherwise, we’d be doing commercial stuff and seeking these out, and that’s not our game. There’s a lot of work.
Jack Butala: Right. Today’s topic, this is a list of ways to acquire undervalued property in the universe of possibilities. This is the meat of the show. I’m going to quite simply list them, but please be bear in mind they fall into one of two categories. The first category being, you got to get up in the morning and go find them. The second category, which we prefer, let them come to you.
Jill DeWit: I like this. Are you going to tell us as we go through-
Jack Butala: I’m actually pleasing you today.
Jill DeWit: You are, Jack.
Jack Butala: Should I give my opinion? I’m just poking with her stick. She’s going to reach across the studio here and bonk me.
Jill DeWit: It’s all good.
Jack Butala: Prospecting, advertising, networking. Looking for vacant houses, knocking on doors. Not to mention getting up today, putting your galoshes on, based on the weather.
Jill DeWit: Galoshes.
Jack Butala: Isn’t that funny?
Jill DeWit: Who says galoshes?
Jack Butala: Jack, how old are you? And, knocking on doors to see who wants to sell their house.
Jill DeWit: I’m sure Number Three doesn’t even know what galoshes are. I’m going to test him later.
Jack Butala: Working the For Sale By Owner’s lists. Driving the neighborhood, driving for dollars. Houses for sale. Oh, geez, here we go. Advertising, postcards, letters. You can work probate lists. You go down to Los Angeles County. Imagine today, you wake up in the morning, go down to Los Angeles County … because, you don’t have a job or anything, right?
Jill DeWit: Oh, no. I got all the time in the world here.
Jack Butala: Go down to the probate area. All the people who have died recently and their houses are estates, and send their kids a letter.
Jill DeWit: Sure, that’s easy. That’s always a nice thing to get.
Jack Butala: Mail them a postcard, which is on the right track, actually.
Jill DeWit: Could you imagine getting a postcard, “Hey, I noticed your dad died.”
Jack Butala: Mail them a postcard. Mail everybody a postcard that says, “I’m really interested in buying your property.” What do you think is going to happen then? You’re going to have seven million phone calls. Again, because you don’t have anything better to do. You don’t have a job, and you’re figuring it out.
Jill DeWit: Give us more. I want more. If you don’t mind, I have some.
Jack Butala: Go ahead.
Jill DeWit: Trustee sales.
Jack Butala: Okay, trustee sale.
Jill DeWit: Evictions.
Jack Butala: That’s an auction. So, you have to go to an auction, stand there, figure it out. You don’t really know what you’re buying. Eviction notices, you can track those back. And, figure out if the landlord is so frustrated and the house is so destroyed, that you want to buy it in a distress situation. These are all distress situations.
Jill DeWit: This is deferred maintenance.
Jack Butala: Driving for dollars.
Jill DeWit: Abandoned.
Jack Butala: Right. Okay.
Jill DeWit: Out of state owners. Wait, wait, one of my favorite ones-
Jack Butala: tax liens. Tax deeds.
Jill DeWit: Unsafe red tagged homes. I just heard about this, and I thought, “Wow.”
Jack Butala: That’s a fire department situation. Whatever the governing authority is on that, they tag the house. And, you only know this, really, by … I don’t know. I guess you can get a list. But, still, you’re proactively searching to find this list, and then working it. You have to look up every property to see if fits your acquisition candidate.
Jill DeWit: Here’s what I hear you saying, Jack. I could do these things, and I could spend a week working on a list, and maybe have a hundred to work with.
Jack Butala: Yeah, that’s stretching it. Maybe 20.
Jill DeWit: Okay. So, now I’ve done all these things. I have, maybe, 20 that meet my criteria, by the way. Let’s even go there. Now, I got to see if they’ll sell to me.
Jack Butala: Then let’s not forget tax deeds and tax liens. All of these things have what we just described, all of them, have one thing in common. You have to wake up in the morning, proactively go get a list, review each property on the list to see if you actually want to buy it. You’re wasting hundreds and hundreds of hours to see if you can find a deal.
Here’s our way. Subscribe to a professional data company. And, there’s three of them, in my opinion, that are worth anything. DataTree, RealQuest, and …
Jill DeWit: Black [inaudible 00:12:56]
Jack Butala: Black Knight Title Pro 24/7. We’re licensed providers for all three. Send everybody in a market, whether it’s land or houses, an offer with a number in it that you’re willing to pay for it. Now, you’re just researching prices. “Oh, wait a minute, Jack, you just said you don’t have to do anything proactive.” Well, hold on. Hold a second. Send everybody a letter. Thousands and thousands of letters for less than 50 cents a letter. Then you sit back, take a sip of your Coke, light a cigarette if you’re in to that kind of thing. That’s too bad for you. Trying to paint a picture.
Jill DeWit: What the heck?
Jack Butala: See what comes back. And, very, very predictable people will sign the letter, sign your offer, and send it back. Then you just have to look at that deal. You don’t have to look at the tens of thousands of letters that you sent out. You don’t have to analyze anything until you know the seller’s ready to sell.
Jill DeWit: Right.
Jack Butala: It makes so much sense.
Jill DeWit: Right. One of the things that I was just going to ask you about, Jack, I think that holds people back, is I think they worry about the cost of getting the data and the cost of sending a mailer. Will you please cover that, please?
Jack Butala: Well, I can give you my opinion, but earlier on in the show, you didn’t want that.
Jill DeWit: I do now.
Jack Butala: You know, you’re never going to live this down?
Jill DeWit: No.
Jack Butala: I think you were talking about, “Do these jeans make me look fat?” Not like-
Jill DeWit: Oh, no, here it comes. I know it’s coming. This is one of those beautiful topics that, and honestly this warms my heart, everyone. Our member community … I want to pause for a second. We have a lot of really good people. We all help each other, play off each other. I’m waiting. This is going to come up on a member call. Someone’s going to go, “Oh, Jill, but I can’t give you my opinion, can ?” It’s like, “Oh, they’re going to do that to me. I know it.” It’s coming. Cathleen will save me. Go ahead.
Jack Butala: To address the up front cost of mail, you just have to get your head around it. Contrary to what people say, getting started-
Jill DeWit: That’s what I want to talk about.
Jack Butala: Getting started in real estate investing is not free.
Jill DeWit: No.
Jack Butala: You can make it really minimal and really make a ton of money with very minimal up front costs, like no other business I’ve ever seen. But, does it cost zero? No. It costs some money. You have to pay money … get offers in the mail. That’s the best … and, education.
Jill DeWit: Well, you know what? I think one of the first things that people need to plan on that doesn’t cost money … well, it does kind of cost money, but it’s your time. The number one thing I think people need to plan on is spending some time. You’re not going to go buy a list. [inaudible 00:15:34] call up somebody, buy a random list, not know what it is, and massage it [inaudible 00:15:41] it just blasts out in the mail. You really need to learn this a little bit.
Jack Butala: Yeah, you got to learn.
Jill DeWit: Because, you want to do it right.
Jack Butala: That is wasting money.
Jill DeWit: Right. You don’t want to just go, “Hey, I just got a list of all the property owners in this county. I’m just going to mail them all an offer.” Well, hold on a moment. You don’t want to mail everybody that has a mortgage, because they can’t even make a decision. You got to take those out. See there? You got to learn that. You want to make sure that you price them right, so you got to learn that. There’s some things, and all that is up front. More time, I think, than money. But, I’ll tell you, spending that time and learning it, yeah, it might take you a couple weeks.
Jack Butala: Right. Or, more.
Jill DeWit: Right. Then some people it comes naturally, some people it doesn’t. But, man, if you can just wrap your head around that, you will win. That’s my point on this whole thing, for me, Jack. You and I win when we buy it, but we win before we buy it, because we know what we’re putting our offer in on. And, we know what it’s worth, and we know how it’s going to go.
Jack Butala: We win when the mail goes out.
Jill DeWit: That’s right.
Jack Butala: I can tell you, it’s very predictable outcome the way that we do it.
Jill DeWit: Yes. Brilliant.
Jack Butala: Here’s the numbers. When we buy land, for every 150 to 200 letters that go out, we buy a piece of property. This is rural vacant land. This is not a building site in Manhattan. That’s not what I’m talking about. Rural vacant land. And, generally info ops, the same numbers.
For houses, we buy one property for every … I’m being very generous here … 2,500 unites that we send out. So, it costs about … I don’t know. Retail, it costs 50 cents to send a letter out -ish. It costs us less, because we have agreements. So, it costs 750 … What did I say, 2,500? It costs $1,200 to send out an offer, and we generally make about 20 to $40,000 per wholesale on a house. Is that an acceptable number? I think so. Return on investment, I think so.
With land, it’s staggering. Land is where you really can hit a home run. It costs 50 to $100 between data and mail to land a property that you can easily make 20, 30, 40, $50,000. Those are the numbers.
But, my whole point of the show is … and, we’ll wrap it up on this. There are proactive ways, and then there are relatively passive ways to get to the same results. You don’t need to make this a full-time job, and then start hiring employees to review tax lien lists to see which property you’re actually going to buy. It’s really time intensive and energy intensive.
Jill DeWit: I would like add that we all, as a society, are now finally understanding what you have known, Jack, for your whole life. Which is, let the stupid data work for you.
Jack Butala: Yeah, it’s all about the data. It really is.
Jill DeWit: Just call a spade a spade. Do you really want to go knock on doors? Or, do you want to use data to tell you even whose door to knock on? There you go.
Jack Butala: Yeah. I will say that they all work. I’m not knocking it. There are people, their whole careers, they’ve knocked on doors in the middle of the day and found a person. They do a deal a week.
Jill DeWit: You know what? That’s fine-
Jack Butala: Yeah, and I’m proud of them.
Jill DeWit: They’re happy making that $50,000 or $60,000 a year. Well, you know what? That’s not enough for us.
Jack Butala: Well, I think they make a little more than that. But, I’ll tell you, they work a lot harder for it.
Jill DeWit: That’s true.
Jack Butala: There’s no way you can do that without having a job.
Jill DeWit: Well, you can’t scale, too, that we talked about, too. That’s the thing. You’re limited to how many hours you have.
Jack Butala: Right, exactly.
Jill DeWit: Thank you, Jack.
Jack Butala: Well, you’ve done it again. You’ve spent another 20 minutes with us listening to The Jack Jill Show. Join us tomorrow where we discuss how to price these offers we just talked about. How to price house offers, specifically.
Jill DeWit: Nice. I love it. And, we answer your questions. Should you have one, post it on our online community. You can find it from JackJill.com.
Jack Butala: You are not alone in your real estate ambition.
Good stuff, Jill. You’re right, I’ve known about this for a long time. We don’t talk about the obvious stuff enough.
Jill DeWit: Isn’t that funny? Back to that business that new business channel that I found, the Wharton School of whatever, on Sirius Radio. I’m not plugging them. I don’t get anything out of it. It’s just I can’t stop listening.
Jack Butala: You notice how I’m agreeing with everything you say, now? You know, you’re right?
Jill DeWit: What the heck?
Jack Butala: You know, you’re pretty and [inaudible 00:20:02] beautiful.
Jill DeWit: Wow, all I had to do is change my radio station, and now you’re in to me?
Anyway. Anyway. The point is, they were have a whole discussion about data. Data, data, data, data, data, data, data.
Jack Butala: Oh, really?
Jill DeWit: I’m like, “Duh, duh, duh, duh, duh.”
Jack Butala: Really?
Jill DeWit: Yep. That’s all I could say. But, for some reason, as a society, we’re just figuring this out. Kudos to you, Jack.
Jack Butala: [inaudible 00:20:30] right.
Jill DeWit: Share the fun by subscribing on iTunes, or wherever you’re listening. While you’re at it, rate us there, please. We are Jack and Jill.
Jack Butala: Jack and Jill. Information-
Jill DeWit: … and inspiration-
Jack Butala: … to buy undervalued property.
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