Power of Data in Real Estate Investment (LI 701)
Power of Data in Real Estate Investment (LI 701)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hi.
Steven Butala: Welcome to the Land Investors Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: I am Jill DeWit, broadcasting from sunny southern California.
Steven Butala: Today Jill and I talk about the power of data in real estate investment. Surprise, surprise. We’re gonna talk about data. How can you guys, this is a question we get.
Jill DeWit: We talk about data all the time.
Steven Butala: How can you guys possibly have 700 shows about land?
Jill DeWit: Right?
Steven Butala: It’s gotta be the most depressing, awful, monotone, Ferris Bueller type discussion there ever was.
Jill DeWit: No way.
Steven Butala: How do you keep it fresh?
Jill DeWit: I love data.
Steven Butala: Any of you have been in a relationship for longer than 10 years, you know the tricks. Gotta keep it fresh.
Jill DeWit: There’s tricks?
Steven Butala: You either just accept the fact that you’re gonna be … Jill and I just have a really close friend and he just disclosed a, and he does not listen to the show. He said, “I just accepted the fact that I’m gonna be unhappy.”
Jill DeWit: Yeah, that was really sad.
Steven Butala: Both of us just gasped, just like Jill did.
Jill DeWit: Really sad. I’m like, wait. He’s making some changes in his life right now, and remarried, and I would think it’d be the most exciting, happiest time in your life.
Steven Butala: Right.
Jill DeWit: I was asking about that, and it was the exact opposite. I hope you don’t feel that way.
Steven Butala: I don’t. I have the exact, exact opposite sentiment about data and real estate and whether it just keeps getting better, and better, and better. We live in a perfect time.
Jill DeWit: Isn’t it?
Steven Butala: To buy real estate using data, because data gets better and better.
Jill DeWit: Hold on. Part of me is ticked off that there’s so many people in the real estate community that are not using data and don’t understand data, number one. I’m like, you guys are ding dongs. Why is this so hard? Then number two is, you know what? That’s great.
Steven Butala: Good.
Jill DeWit: I’m happy that they’re spending 20 hours a week going door to door-
Steven Butala: Or placing bandit signs.
Jill DeWit: Handing out business cards and showing up at little meetings. I’m like, you know what? Actually, that’s great, because then I’m gonna get there faster. So-
Steven Butala: Today’s, this week is data week. It’s all about data. All five shows. This is obviously the first one, but in a minute here, we’re gonna tell a story about we just bought a house and sold it for $25,000 more. Didn’t even sweep the floor.
Jill DeWit: Exactly.
Steven Butala: Three days later, the person who’s cleaning it up put a dumpster out in front, and we got a call from somebody down the street, three doors down, who got a letter because we sent out the same mailer and said, “Wait a minute, did you guys buy that house?” This is all, I’m gonna let Jill tell the story in a few minutes here.
Jill DeWit: Okay.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free.
Jill DeWit: Okay. Mike asks, “I have a seller that is looking to unload over 100 parcels in a southern Arizona county. These are lots part of the infamous”-
Steven Butala: Horizon Corp. That’s okay.
Jill DeWit: Okay. Subdivisions of-
Steven Butala: I’ll tell everybody about Horizon.
Jill DeWit: Okay. “Subdivisions of the early ’60s. I’m concerned ultimately about marketability. I understand that if I buy at the right price, then I shouldn’t have a problem. That said, there’s a huge supply on the market, which makes me think these things would sit regardless of the price. My gut tells me to stay away”-
Steven Butala: Then stay away.
Jill DeWit: “But I wanted to see if anybody had any experience with these lots. Thanks in advance. Mike.” Yeah, that’s … you want to answer first?
Steven Butala: So, Horizon is a company in the ’60s before there were subdivision regulations out west that just went in and bought three, four, 5,000 acres in any given market for next to nothing and subdivided them into quarter acre lots without any regulations at all. They didn’t put roads in. Sometimes they did, sometimes they didn’t, and they did several of these subdivision, and ultimately raised enough money to do some good with it. They developed Fountain Hills, Arizona.
Jill DeWit: Oh, really?
Steven Butala: Yeah.
Jill DeWit: Oh, that’s cool.
Steven Butala: So, if you’ve ever been to Fountain Hills, people go there from all over the world to play golf.
Jill DeWit: There’s a huge casino there now.
Steven Butala: Yeah. There’s casinos, it’s right on the edge of-
Jill DeWit: It’s actually pretty [inaudible 00:04:14] highway.
Steven Butala: Yeah.
Jill DeWit: Motorcycle rides, not that we’ve done that, but we have. That’s cool.
Steven Butala: We should do that. Still do that.
Jill DeWit: Yeah.
Steven Butala: Although we have increasingly had more reasons not to die, you and I.
Jill DeWit: That’s funny.
Steven Butala: If your gut tells you not to do a deal, never do a deal.
Jill DeWit: Right.
Steven Butala: Hate to be Captain Obvious here. I know the exact subdivision that you’re talking about, and there are many, many members in our group who love to buy properties for $100 each in a large volume like this, package them all up. It’s real easy to do one or two or three version of HTMl instead of 100, and sell them for four or $500 each everywhere on the internet. They go really fast. You don’t need a calculator for that. You can pretty easily clear three, or four, or $500,000 in a deal like that. Jill and I have done it many times.
That’s not what we do now, but if you’re cutting your teeth and you really want to get used to this, that’s not such a bad way to go.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Just make sure that you represent the properties for exactly what they are. You may need four wheel drive to get there. The roads may or may not be there. All that stuff.
Jill DeWit: Exactly.
Steven Butala: So, it’s not so bad as a business model. I’ll tell you what it does. It drives a lot of traffic because you’ve got 100 properties sitting out there in different places all over the internet, and then you roll in a few large acreage properties, some info lots, maybe even some houses, you’re driving a ton of traffic to your website and then people are, they get to know you.
Jill DeWit: Right. The other thing to point out is if this person has that many, first of all, what else do they have? Can you buy more from them in different areas, too, and do a whole big package deal? Then if they aren’t really moving, that’s stuff you could point out to the seller to negotiate a really good price.
Steven Butala: Yeah.
Jill DeWit: I’m sure the person knows that. That’s the whole point here. If there wasn’t a lot of demand, they might be selling them on their own, or they’re not into it. Whatever it is. So.
Steven Butala: What’s your take on this? It doesn’t fit with me. My gut says don’t do this deal, even though my head says yes.
Jill DeWit: Seriously?
Steven Butala: Yeah. What’s your take on that?
Jill DeWit: Your gut should oversee your head.
Steven Butala: That’s what I think.
Jill DeWit: But, having said that, you still, if the numbers … there’s times that I go, “I’m gonna push through anyway,” and it works out fine. But-
Steven Butala: Yeah, right. That’s right.
Jill DeWit: It’s gotta have six redeeming qualities, I don’t know if that’s the right term, but there’s got to be a lot of other factors that I look at. So, but the bigger point for me in this whole question is not about who they are, not about how you’re gonna package it up, or anything like that. There’s a lot of them sitting there. That’s one of the things that I don’t like.
Steven Butala: I know you don’t.
Jill DeWit: When I have a seller reaching out to me, I want to see, when there’s one or two similar properties out there available, then I’m like, this is awesome. There’s not a lot. It’s funny, remember there’s some counties you and I have found in Utah where there’s nothing. So, I get excited when I find some of those properties.
Steven Butala: Yeah, when there’s no for sale property in a county that you’re buying property in, that’s good.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: That’s really good.
Jill DeWit: Exactly. Some people go, “Oh no, I don’t have any comps.” I’m like, “Great, you can set your own.”
Steven Butala: Yeah.
Jill DeWit: This is awesome.
Steven Butala: That’s really right, Jill.
Jill DeWit: There’s nobody else to compete with. This is great. You’re the only one.
Steven Butala: Diversification is really key here. Diversification as a universal concept is almost always good. I always said it’d be great if we could do an acquisition and buy one property in 50 states from one seller, how cool would that be?
Jill DeWit: Exactly.
Steven Butala: You could sell those in probably two weeks time and really, really do well.
Jill DeWit: Exactly.
Steven Butala: Track how many different types of audiences.
Jill DeWit: Right.
Steven Butala: So, yeah. You’re changing my mind now.
Jill DeWit: Well, we talked about this because Jack, you and I talked about this one time. I started to go down that path. That’s where I created our deal board with our members with a lot of properties. We could put together a five pack or a 10 pack or something.
Steven Butala: Yup.
Jill DeWit: That’s something that we would do, too. So, another project. We’ll get to that.
Steven Butala: Packages, huh?
Jill DeWit: Exactly.
Steven Butala: I hate it.
Jill DeWit: No, you don’t.
Steven Butala: I strive for buying lots of APNs to separate for doc prep fees and all of that.
Jill DeWit: No, but what you just said though, for him was … nevermind.
Steven Butala: Yeah, I know what you mean. Sometimes the law makes you package.
Jill DeWit: Well, that too.
Steven Butala: We’ve done that, too.
Today’s topic: the power of data in real estate investment. This is the meat of the show. I can’t understate this concept enough. Data as the collection of data and everything that surrounds data in 2018 here, we’re in early 2018, and really for the last five, maybe eight years, is imperative, and it’s grown by leaps and bounds. As we are recording this, Mark Zuckerberg is going in front of a senate committee and he’s on the hot seat for collecting people’s data and how powerful it is and how it’s gonna get used and how unregulated it is. So, we are truly in maybe the first or second inning of the data ball game. So, why not jump on that wave, so to speak, and use it to buy and sell real estate, and be in the mass, massive minority of people that really get it and understand it?
Jill takes calls from people and her staff all day that they say something like this: “God, I’m tired of [inaudible 00:09:27]. I’m tired of cold calling people to see if they want to sell your property. How do you guys do this?” It actually makes a lot of sense.
So, this is data week, as I mentioned earlier, and the topic of this show specifically is just the big picture concept of how we use it.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Why we believe … while lots of stuff’s gonna change, the actual fact in the data collection process for somebody who owns a piece of real estate and how they’re showing the signs of why they may want to sell it or buy it, is really, really powerful. In short, and this is the takeaway from the show, it removes the risk and replaces it with serious predictability about whether or not you’re gonna buy a piece of real estate and sell it for more. Removes the risk.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Why take risk?
Jill DeWit: I agree. It’s not to add. I’m like, I’m just sitting here, going … it should be so easy for everyone to grasp this concept.
Steven Butala: Before the show, Jill’s like, “Duh.”
Jill DeWit: Right.
Steven Butala: That’s because we’ve been doing it for 10 years.
Jill DeWit: I know.
Steven Butala: Doing it together. I’ve been doing it for a lot of, a lot of years before that. So, we’ll explain it.
So, Jill, I know you took some notes before the show and you kind of broke it down in a regular real estate transaction, how you use data in the beginning, middle, and end you said?
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Share with us.
Jill DeWit: I was seriously kind of thinking about this, and I know we’re gonna get into it more in shows this week, but when I read this title, I was thinking, all right. How do I use data in the beginning? How do I use it in the middle, and how I use it at the end of every transaction.
Early on, we use data, we pull assessor data. This is more you, but I know what goes into it. Comps, days on market, what’s available …
Steven Butala: So, I’ll give you the overview about what’s available. I hate to interrupt you, but I did anyway, I guess.
Jill DeWit: You’re fine.
Steven Butala: There’s three major data providers in the country. RealQuest Pro, TitlePro247, and DataTree, which is First American Title’s data arm. All three, we are licensed providers for all three. This is not a commercial, but we are licensed providers are all three, and when you sign up with Land Academy or House Academy and eventually Mobile Academy, you get all three. That’s the huge … eventually. That’s the huge benefit to signing up with us among many, many other things, but education, the group, but if you walked in and tried to get that data yourself, it would cost three times that much.
So, there is, and what is that data? What’s a dataset look like in any given one of these companies? Well, they have all the information that the assessor has for every single piece of property in the country. Land, houses, apartment buildings, skyscrapers, every single one. In DataTree’s case, they have 100% coverage.
So, bear in mind that the downside is the data is only as good as the country data is collected, but I’ll tell you, I have not been stumped yet in collecting the data that I need to send out a mailer, a very sophisticated mailer. So, that is what we start with. Those datasets. We don’t use lists anymore. We don’t use List Source. We don’t mine for, oh geez, what’s some of the stuff we’ve heard lately, Jill?
Jill DeWit: Oh …
Steven Butala: We don’t look into divorce court. We don’t set foreclosures. We don’t look at back tax properties.
Jill DeWit: Out of state owners, all of that.
Steven Butala: Vacant property schemes.
Jill DeWit: All the-
Steven Butala: Just send everybody that doesn’t have a mortgage-
Jill DeWit: And foreclosures or anything like that.
Steven Butala: Whether it’s houses or land, an offer.
Jill DeWit: Well, let me back up. That’s one of the things that I wanted to, so that’s what I’m trying to say. Early on we use it to save money and target the right buyers with all of that information. One of the key things that I don’t think people understand, which is so crucial in what we do, is that we also can see who has a mortgage and where the mortgage is and all of that information. That is so huge. The last thing you want to do is be wasting your money and your time sending offers out to someone who just bought their house and maybe they’re upside down. If you’re doing a house, and that’s just so powerful.
Steven Butala: Same thing with land.
Jill DeWit: Mm-hmm (affirmative). Exactly. Most of those don’t have a mortgage, if they’re vacant land, because they can’t. It’s hard to, you can’t usually get loans on that. But that proves my point.
So, that’s the early on data.
In the middle, I use the data for my due diligence. So, now we’ve done our offers, they went out, the person gets it, gets our offer, they’re calling back, I’m still going right back to the same dataset, double checking my numbers. I’m double checking the ownership. I’m double checking the taxes. I’m looking at the offer, making sure it’s still a good, valid offer price. I’m looking at what I think I could sell it for and using data for that.
So, that’s where I use data in the middle, and then do you want me to keep going?
Steven Butala: Yeah, so in a real world example, we send an offer out to a zip code or a county for a certain data set of property, like everybody who, in the case of land, everybody who owns a five acre property in XYZ county, and we send out an offer for $4,000, let’s say, because we think based on our research, we can sell them for eight or 10. I’m oversimplifying, but.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: They call. Some people, a very predictable and consistent number, call us back and at that point, we check. We actually check ourselves. We check our numbers, we check to see if the property’s actually not on a sloping hill and completely unusable for our purposes. That’s what Jill’s referring to. We use our own data to check to see if it actually is what we thought it was, and a very predictable number are. They pass our test. Go ahead.
Jill DeWit: I just thought of other the little component of the data that we have and what we use, which is Parcel Fact. That’s a huge thing right there. We have collected data with all the GPS coordinates-
Steven Butala: Corner point GPS coordinates.
Jill DeWit: It could have 19 points on this property, we have it, and that’s one of the things I do, too. Especially when you don’t have an address, when some of our properties, good luck finding it. It’s very, very, very hard.
Steven Butala: Right.
Jill DeWit: Now, we have that, and it’s awesome. So, that’s another thing we use the data for in the middle, and then why it’s so powerful.
Steven Butala: Yeah, we’ve made, Jill and I own the company Parcel Fact, F-A-C-T. For the years and years and years was nearly impossible to take an APN or a [inaudible 00:15:51] parcel number and find the damn property.
Jill DeWit: Right.
Steven Butala: We’re all used to typing in an address.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: We type it into Google, bang. Oh my gosh, there’s my house.
Jill DeWit: Yup. Doesn’t work now.
Steven Butala: It looks old. That stuff’s not in the backyard anymore. That kind of thing. Well, with the vast majority of property in the country, you only have an assessor’s parcel number because nobody lives there, so the post office has not assigned it a physical address.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: So, it’s hard to find. So, Jill and I developed a product that it’s fully functional and operational now. You just type in an APN and it gives you the corner points.
Jill DeWit: The whole thing.
Steven Butala: Man, it just takes the due diligence-
Jill DeWit: It’s so powerful.
Steven Butala: I was thinking about it yesterday. I was actually talking to somebody because the site was down for a while.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Not a long time, an hour, and the emails were pouring in, “I don’t know what to do with myself.”
Jill DeWit: Right. It’s so powerful.
Steven Butala: “I can’t find, I cannot complete my world.”
Jill DeWit: One of our resources, and just to give an idea how powerful it is, through TitlePro, we can get the center point. I remember being excited for that, just when we got the center point GPS. I thought that was good.
Steven Butala: Mm-hmm (affirmative).
Jill DeWit: But that doesn’t tell you, what if it’s 20 acres, and you don’t know how it’s facing. It’s not always a square, everyone. You can’t always just count out X amount from the middle.
Steven Butala: Yeah.
Jill DeWit: No, that doesn’t work.
Steven Butala: I bought a property one time that was on a ridge just like that, and 90% of it was actually in the ridge-
Jill DeWit: And you wouldn’t know.
Steven Butala: You could never tell with the pin.
Jill DeWit: Right.
Steven Butala: Unless you pull up plat map, and plat maps are all, saying the word “plat map” is kind of like saying “landline.” It’s just kind of over. People still use them. People my age still use them, actually.
Jill DeWit: Right.
Steven Butala: But with GPS and GIS, you don’t. It’s over.
Jill DeWit: Exactly. So, then at the end, where does data come in? Gosh. For marketing, to find buyers. Again, I go back to the same data. I can see who are the neighbors of this property I’m gonna buy. I can market to them. Who are the heavy hitters owners of a lot of properties or similar properties in the area? I can market to them.
Steven Butala: Right. So, the real world version of what Jill just said is you mail all these mailers out in a given county for all the five acre properties. A predictable number call you back, and congratulations, you buy a few. You buy a handful of them. Well, who the heck’s gonna buy them from you?
Well, there’s no more likely candidate to buy property from you than another land owner in the immediate area. Potentially even one that owns an LLC and put all their property in there because they’re serious about it.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: It’s too easy to send them a little letter or drop them a note. It’s too simple to say, “Hey, by the way, I purchased a property within a mile of the property that you own over there, and I’m pretty sure mine’s cheaper than the one you bought.”
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: “So, please go to this URL, and if you want it, just check out right there. Have your credit card handy. Check it out.”
Jill DeWit: Mm-hmm (affirmative). Exactly.
Steven Butala: It’s too easy. Data is the nucleus of the way property gets purchased and sold in the 21st century and if you’re not a part of it, well, you are a part of it. If you’ve ever been on the MLS or on RedFin or Realtor.com looking at areas, that’s all data driven.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: The MLS is data driven now.
Jill DeWit: Yup.
Steven Butala: It’s just if you want the inside track … Here’s the deal. If you send out 300 letters for land in any given market and you do it correctly, and the first time you do it you probably won’t do it correctly, because it takes some practice.
Jill DeWit: Right.
Steven Butala: You’re gonna buy a piece of property. You’re gonna buy a piece of land that is worth half probably of what you can sell it for that day.
Jill DeWit: Yup.
Steven Butala: With houses, it’s closer to 3,000.
Jill DeWit: Right.
Steven Butala: It’s 2,500. For us, it’s a lot less, but we’re finding with some of our beta members, it’s 2,500 to 3,000 to buy a house. So, it costs maybe, I don’t know, about $1,000 to do that, a little bit more, in data, and in mail, to buy a property that you can, in the house case, sell for 20 to $30,000 more immediately without sweeping the floor.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: So, at the risk of being redundant and boring you, data is better than driving for dollars. It’s better than scouring the MLS. It’s better than putting up bandit signs. It’s better than cold calling. What are some of the other things that I’ve heard people do, or that you’ve heard people do, that are just-
Jill DeWit: Calling their neighbors.
Steven Butala: Use a broker.
Jill DeWit: Well, you know what they’re doing? Well, they go to their broker. They’re using their neighbors. They walk around with their ear to the ground, listening for anybody that mentions the word “So-and-So’s moving,” or they want to sell, and I’m like … Talk about chasing deals. It’s just kind of, what a time drain. That’s the whole thing.
Steven Butala: It’s just, you’re setting yourself up for failure.
Jill DeWit: That’s true, too.
Steven Butala: That’s my real concern. How many people get turned off to real estate investing that are total viable candidates for this to be their career, and somebody said, “You should drive for dollars at least eight hours a day.”
Jill DeWit: Right.
Steven Butala: If you do it for a week and you’re like, nothing happened.
Jill DeWit: Okay. Here’s my question. My big question is why is this so hard for people to grasp? Are they afraid of it? Do they not understand it? Does the word “data” just make them want to run?
Steven Butala: Yup.
Jill DeWit: Okay.
Steven Butala: That’s the answer.
Jill DeWit: Okay.
Steven Butala: I think there’s people where you say, there’s a lot of math involved in this, and I think they just say, they turn off right there because they didn’t have a good experience with math. So, if you’re not good at math and you’re really uncomfortable in spreadsheet and you love people and psychology, this is not for you. Find another podcast.
Jill DeWit: Or get a partner. I don’t think that’s crazy, Jack. Get a partner who is.
Steven Butala: Yeah-
Jill DeWit: It’s not like you can’t do it.
Steven Butala: Or, if you’re a couple and you want to invest in stuff and somebody’s real technical and somebody wants to talk on the phone all the time-
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: That’ll work.
Jill DeWit: Exactly.
Steven Butala: That’s pretty much us.
Jill DeWit: Just find a partner. We just had some, two brothers join us last weekend, and I love when I, when there’s a duo like that-
Steven Butala: Yeah.
Jill DeWit: I think that’s the best, honestly.
Steven Butala: Yup.
Jill DeWit: That’s you stand the best chance of succeeding, you have someone else to share the workload, one of you’s gonna definitely be better at one thing than the other person.
Steven Butala: Yeah.
Jill DeWit: It’s awesome, so.
Steven Butala: Well said, actually.
Jill DeWit: Thank you very much.
Steven Butala: Join us tomorrow for another interesting episode of the Land Investors Show. It’s called how to market data, how market data, excuse me, removes the risk entirely, or almost entirely, in real estate acquisitions specifically.
Jill DeWit: We answer your questions, should you have one. Post it on our online community, landinvestors.com. It’s free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: I loved your comment before this show, I have to say this. It was really good. You said, “Look, Jill. You’re not the only one that can be inspirational. I can be inspirational, too.” I thought that was really good. You are right, Steven.
Steven Butala: For the vast majority of my life before I met you, I had to do it all.
Jill DeWit: Oh. Yeah?
Steven Butala: Now I don’t.
Jill DeWit: Thank you.
Steven Butala: But I still, I can turn on the sales, not sales, but I can turn on the what’s possible.
Jill DeWit: Yeah.
Steven Butala: And not be a curmudgeon once in a while. It got me this far. Wherever that is.
Jill DeWit: It got me.
Steven Butala: Yeah. That’s true.
Jill DeWit: There you go. You turned it on a little bit there. Hey, share the fun by subscribing on iTunes, or wherever you are listening, and while you’re at it, please rate us there.
We are Steve and Jill.
Steven Butala: We are Steve and Jill. Information-
Jill DeWit: And inspiration.
Steven Butala: To buy undervalued property.
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