Cash Deals Make More Money over Terms (LA 722)
Cash Deals Make More Money over Terms (LA 722)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
Steven Butala: Welcome to The Land Academy show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting from beautiful, sunny, Southern California.
Steven Butala: Not so sunny today.
Jill DeWit: Right.
Steven Butala: Today Jill and I talk about cash deals actually make more money over terms. That redefines arithmetic.
Jill DeWit: It’s true.
Steven Butala: It has to do with the velocity of money.
Jill DeWit: I love it.
Steven Butala: So if … Well I’ll talk about it later. Before we get into it, let’s take a question posted by one of our members. On thelandacademy.com, online community, it’s free.
Jill DeWit: Okay, Matt asks: “I have heard that the state of Arizona limits, has limits to how many properties one can buy or sell in a year. I think they said it’s six-“
Steven Butala: Wrong.
Jill DeWit: “I’m not sure if this pertains to certain counties. Is this true?-“
Steven Butala: Nope.
Jill DeWit: “Do any other states have this limitation?-“
Steven Butala: Yes.
Jill DeWit: “Perhaps I misunderstood. Or it could be bogus, not sure that’s why I’m asking the experts. Thank you. Of course if this is true I would assume that I could purchase six in my name, six in my LLC, and create other LLC’s when needed. Thanks.”
Steven Butala: Thank you, Matt, for asking this question. This is masters degree, maybe PhD level question and I’m happy to answer it. Arizona has something called bulk sales act. It’s directly in response to in the fifties and sixties, groups of people buying a bunch of property, huge acres of property, sub dividing it because there were no rules back then, and then advertising in a magazine. And cold calling people in eastern part of the country, and selling them bogus … selling them property five and six and ten times.
So, it gives us a bad name in this industry.
Jill DeWit: It’s true. There was a whole scam back then.
Steven Butala: There was a movie about it. What is that movie called?
Jill DeWit: I can’t remember. But yeah, they would have-
Steven Butala: Glengarry Glen Ross, that’s it.
Jill DeWit: They would have signs up, they oh yeah, it was just-
Steven Butala: Rio Rico. If you haven’t seen, if you’re in the land business you gotta see Glengarry Glen Ross. These salesmen sit in a room in the fifties and just scam people out of their dough.
Jill DeWit: I know.
Steven Butala: So, Arizona’s answer back then was to pass a law called bulk sales law. So, and it says you have to file a public report-
Jill DeWit: Right.
Steven Butala: Anybody can file a public report on property that they own if you’re gonna sell a single property in a sub division. I’m gonna get tons of mail on this because that law is not clear. What a sub-division is, it’s not clear. But, what they say is if you have, I don’t know, 25 properties in a subdivision you have to sell them off in sixes. If you only own one there, like lets say you own a house for instance, you don’t have to file a public report when you sell your house do you?
Jill DeWit: Right.
Steven Butala: Or do you? If you read the law, it says yeah.
Jill DeWit: It’s really screwy.
Steven Butala: So, this is what happens. On the way to work today, you probably went over the speed limit and that’s basically the same thing here. So, that’s a law, to answer Matt’s question. Limit how many properties you can buy? No, it has nothing to do with that. It has to do with if you own a bunch of properties in one sub division, you have to sell them in what’s called six packs or file a public report, that’s the law.
Now, I will tell you this, no one follows the law. No one.
Jill DeWit: Exactly.
Steven Butala: It’s all complaint driven.
Jill DeWit: Right.
Steven Butala: I went to court over this, and I lost.
Jill DeWit: Yeah.
Steven Butala: A lot of years ago before Jill. And what did I have to do? Write the Arizona department of Real Estate a fifteen hundred dollar check, they slapped me on the wrist, and pay my legal fees.
Jill DeWit: Right. Because they just were-
Steven Butala: And I’m gonna leave it at that.
Jill DeWit: What was it, they were just jealous of what was going on?
Steven Butala: No, it was complaint driven-
Jill DeWit: I know.
Steven Butala: Because I bought a bunch of property in [inaudible 00:03:48] county and sold it, and a guy up there who lived up there, who is very in tune with the law and sick and tired of people driving down his … this guy, like a hermit, you know? He went and filed all the … it was all complaint driven.
Jill DeWit: Just to make an example of you, just because he had nothing better to do.
Steven Butala: Just all complaint driven.
Jill DeWit: I believe that.
Steven Butala: There’s a guy who owns landcentral.com, what’s his name?
Jill DeWit: Steve.
Steven Butala: Steve Seal, took this to the Arizona supreme court because he got sued over a real large property, and he won. So, there’s precedent, setting, case. Is this gonna happen to you? No. Is somebody gonna call you if you … there’s people listening to this going “I’ve been selling property in Arizona like this, ranches, my whole life.”
Jill DeWit: Right.
Steven Butala: “What are you talking about bulk sales?”
Jill DeWit: “Never heard of this.”
Steven Butala: Don’t worry. You didn’t hear that from me, but don’t worry. Do other states have rules like this he asks? Heck yes. California’s not one of them. Every time you go to vote for [inaudible 00:04:49] propositions and stuff, sometimes they’ll throw it in there. They want to undo it, or make it worse or whatever, but it’s just something that you need to know about, and be aware of, and not flaunt is what needs to happen. You know there’s a speed limit, you know that the speed limit’s 65, and that if you go 75, you’re probably gonna be okay. Could you go 140? No. So, it’s the same kind of a thing.
Jill DeWit: And if you do it right in front of a cop, no.
Steven Butala: Exactly, Jill.
Jill DeWit: Yeah, and if you’re racing around pissing people off, they might report you. It’s kind of like that, don’t race around pissing people off.
Steven Butala: I don’t think you can say that on this rated [inaudible 00:05:22] show, but okay.
Jill DeWit: I just did.
Steven Butala: Well, it is half your show.
Jill DeWit: Thank you. I will find out.
Steven Butala: So, his last question says “Of course if this is true I would assume I could purchase six in my name, six in my LLC, and create other LLC’s when needed?” Okay, please listen carefully.
Jill DeWit: That’s hilarious.
Steven Butala: This puts you in what’s called rico status, which is the exact same rico laws is how they get gangsters. It’s co-illusion, and premeditation. Never, ever want to do this. This is like going 140 in a 60 mile per hour zone.
Jill DeWit: Are you saying because this means you’re obviously trying to get around the law, and it’s premeditated-
Steven Butala: Yeah. What you’re advertising to the planet; lawyers, and judges, and everybody is. I know there’s a bulk sales law, and I’m intentionally working around it-
Jill DeWit: Working around it.
Steven Butala: To deceive and deceit and cheat, and now I go to prison for that instead of just saying “I don’t know, I own a bunch of property in a sub division and I sold it. I really didn’t know about this, sorry. I’m happy to pay, I won’t do it again.”
Jill DeWit: Exactly. Or-
Steven Butala: Just pull a Jill there, you know? Jill’s an expert at asking for forgiveness, not permission.
Jill DeWit: Right. Some of these laws are so ridiculous, it’s like good luck figuring them out. And number one, one attorney will say one thing, and another attorney will say another. That’s another thing, too. Now, however should this ever come up, all you do is shop for the attorney that is on the same page with you. Seriously.
Steven Butala: Which is what I did when I got my wrist slap.
Jill DeWit: Exactly. It’s like, whatever. You know what, and I’m sure at the end of the day you probably could have pushed it and won, but it was easier just to bow out and pay the stupid fine.
Steven Butala: That’s exactly what the lawyer said.
Jill DeWit: Yeah.
Steven Butala: Almost that exact words.
Jill DeWit: We will win this if you really want to push it, because we have three laws, right. We have three laws saying this, and four laws going against it over here. This undoes this one, this undoes that one, whatever. That’s exactly what goes on.
Steven Butala: Right.
Jill DeWit: Thank you.
Steven Butala: Today’s topic, cash deals. Making more money than terms. This is the meat of the show. Well Steve, that defies logic. You just said yesterday that if you sell a property on terms you make 500 to 1000%. If you sell a property for cash you make 100%. Maybe a little more or less.
Well, here’s the deal, and Jill knows this. We talk about it all the time actually. Let’s say you buy property, 40 acre property and you spend four grand on it. You have two choices, you can sell it for cash immediately for eight to ten thousand, or you can sell it for 20 grand over terms forever. And then you get your money back $200.00 at a time until now you’re just making a ton of money. Let’s say it’s a 20 year term, how many 40 acre properties could you flip with that four thousand dollars? That initial four thousand, it’s four thousand then eight thousand, then 16 thousand, then 32 thousand. Over 20 years, how many properties, what’s your cash balance gonna be at the end?
Jill DeWit: Bingo.
Steven Butala: My way, the cash way, you know you have hundreds of thousands, if not millions of dollars in 20 years.
Jill DeWit: Right.
Steven Butala: We are living examples of that, or you can have $28,000.00 at the end.
Jill DeWit: Right.
Steven Butala: On that four thousand dollar investment. Which one do you choose?
Jill DeWit: Exactly.
Steven Butala: The real answer is both, because some properties that you just get a smoking deal on that are fantastic. Like, dreamy postcard properties you do want to sell in terms. But, a vast majority in my opinion, and I think Jill’s too, is double your money and get out of there.
Jill DeWit: Well, I just had a conversation with a guy named Tim in Portland the other day. Hi Tim, and that was the question I asked him. I said “Okay, what’s your goal here? Are you trying to get a big bank balance?”
Steven Butala: That’s my goal.
Jill DeWit: Right? “Are you trying to get a big bank balance, or do you want a ton-
Steven Butala: I just did this for fun.
Jill DeWit: A ton of property and payments coming in?” His answer was perfect, he’s like “Both.” I said “All right, I gotcha.” So, totally on the same page, so this is what I told him, kind of like what you’re saying. I said “All right, so then dive in. It will work itself out. There’s gonna be properties that are so great and so awesome that you might want to hang on to. Those are gonna sell on terms because we all know at the end of the terms 90% of them are gonna fall off, they’re not gonna pay them out. So, you will end up owning the property forever, and somebody else is gonna pay for it. So, that’s your residual, if you will.”
Steven Butala: And that’s … go ahead, Jill. That’s the truth of it.
Jill DeWit: Right, and then the other part is just go in the mindset that I’m just gonna get in, get out. Double my money and yeah, watch your bank balance grow.
Steven Butala: Yeah, everybody wins.
Jill DeWit: I mean that’s what happens to us and our members. Over night, when you really … I love getting these emails by the ways, so please keep them coming. I love getting emails when people are like “I wasn’t even looking at my balance, I just was head down, working really hard,” and they come up and they log in to check their bank account and they’re like “Holy cow, where did that come from?”
Steven Butala: Yup.
Jill DeWit: That’s exactly what happens to people, and it’s the best thing.
Steven Butala: Incidentally, it’s velocity of money week.
Jill DeWit: Oh.
Steven Butala: This is the definition of the velocity of money-
Jill DeWit: I love it.
Steven Butala: You take the same four thousand dollars, how fast can you turn it? We have investors for our house academy which we haven’t launched yet. When we buy and sell houses, sometimes we use our money. More often than not we use other members money because they want … they’re not interested in sending mail out and having a business like we are, they’re just interested in placing money, and getting 10 or 12 thousand dollars back. And their number one question, and they’re correct is “What? Can we do this any faster?” Because I’m using the same four, three hundred thousand cash that I have saved up to buy these houses so that we can split the money. “Can we do it faster please?”
And think about that. So, they’re using the same four hundred thousand dollars, which we usually … we use their four hundred thousand dollars to buy a house, and then we give them 410 thousand dollars back.
Jill DeWit: Right.
Steven Butala: Once or twice a month.
Jill DeWit: Right.
Steven Butala: If we did it every week, think about how much money they’d be making.
Jill DeWit: Exactly.
Steven Butala: There [inaudible 00:11:40] now 100% over analyzed over a year, so it’s all about making that money and using it faster, and faster, and faster. The same investment capital.
Jill DeWit: Exactly. It’s too easy to start with. You know I talk to people about this all the time. Start with, I don’t know 10, 20 thousand dollars, whatever it is. Learn to double it in a month, and then do that, and then double that, and then double that, and double that. They kinda go “Wow, really?” I’m like “Yeah, that’s really all you do.”
Steven Butala: Yup.
Jill DeWit: You know, and you could never-
Steven Butala: It’s that easy.
Jill DeWit: And the thing is too, you can never change a property’s size. So, you’re really comfortable buying them for five thousand dollars, selling them for 10 thousand dollars because they’re worth 20 thousand dollars. You know? Stay with the property type, ride that wave for a while.
Steven Butala: Right.
Jill DeWit: And that’s how you make it easier for yourself too, by the way. People are like, shocks them you know “I don’t know if I can do that much double.” Sure you can, because as you go you’re gonna get a system created and Tim and I talked about that. His girlfriend is the system person, I think yay, I’m glad you have that. We all need that person in our world, that’s why I have you.
Steven Butala: That’s right.
Jill DeWit: So, and now Molly. But that’s why you have a system and it’s not painful. You go “wait a minute, now I gotta do double the work.” No you don’t, you’re gonna get faster every time.
Steven Butala: Has it occurred to you guys … this is absolutely true. Has it occurred to your new hire Molly that her name is associated with illicit drugs?
Jill DeWit: I’m sure it has. We have not had that conversation, but yes, I’m not doing a Molly, I have a … I don’t even know what the right terminology is. How funny is that?
Steven Butala: Molly came to the party.
Jill DeWit: Is that really, you say that really?
Steven Butala: Yeah.
Jill DeWit: That’s hilarious.
Steven Butala: Molly’s here, come on over.
Jill DeWit: Really?
Steven Butala: Yeah.
Jill DeWit: That’s hilarious, I did not know that. That’s so funny.
Steven Butala: Everyone knows that now, so probably nobody says that anymore. It’s probably got a different name.
Jill DeWit: It was like … wasn’t that from like 19-
Steven Butala: Yeah, like 1991. Believe it or not, I’m actually not in tune with these kinds of things.
Jill DeWit: That’s hilarious. Oh my gosh, we have listeners that are in their twenties right now. Right now they’re rolling their eyes going-
Steven Butala: Just like the kids do.
Jill DeWit: They’re like “Dad,-“
Steven Butala: Oh my gosh.
Jill DeWit: “it’s not even called that anymore, that’s not even a thing.”
Steven Butala: Right.
Jill DeWit: “We’re so past that, Dad.”
Steven Butala: Oh my God, Dad.
Jill DeWit: Yeah.
Steven Butala: Oh my God, Dad, please put your shirt back on.
Jill DeWit: Yeah. “My friends are here, your embarrassing me.”
Steven Butala: Somebody sent me a link to a website called dads on vacation. It’s the funniest thing I’ve ever seen. It’s just guys out on the beach and stuff that should never, ever.
Jill DeWit: Oh, like hairy guys?
Steven Butala: Just all of that.
Jill DeWit: Oh, I can’t stand that.
Steven Butala: Dad’s on vacation, I know you can’t.
Jill DeWit: I can’t stand hairy men wearing tank tops. It’s awful. Please don’t do that.
Steven Butala: What bugs you so much? It cracks me up, man.
Jill DeWit: No, I know or they cut the sleeves off it, and I don’t understand the cut. Please don’t ever cut your sleeves off a shirt. I don’t care how good you look.
Steven Butala: People are looking down at what they’re wearing right now.
Jill DeWit: That’s hilarious.
Steven Butala: Well, you’ve done it again. You’ve spent another 15 minutes or so listening to the Land Academy show. Join us tomorrow for another interesting episode, we hope. Where we discuss better ROY, do you get a better ROY with land, or houses?
Jill DeWit: I have an idea. And, we answer your questions posted on our online community found off landacademy.com. Go there, it’s free.
Steven Butala: You are not alone in your real estate ambition. Yeah.
Jill DeWit: We dress appropriately.
Steven Butala: I wonder if we do. Well, someone would tell us.
Jill DeWit: No, I’m not sure they would.
Steven Butala: Like, the kids would tell us.
Jill DeWit: I’m not sure they would. Maybe I should ask them.
Steven Butala: Yeah, we dress for our age.
Jill DeWit: Well, I do know this, they’re not embarrassed to be seen in public with us. So, I take that as a positive.
Steven Butala: So they day.
Jill DeWit: Like, even Friday night. I mean, I can do Friday night movie night with multiple kids and their friends.
Steven Butala: Well, you pay for everything, too you know?
Jill DeWit: Nevermind I’m buying. That’s true. But if it was that bad, I’m not sure I’d go. Wait a minute, they are taking me to a dark theater.
Steven Butala: They would tell you.
Jill DeWit: Shoot.
Steven Butala: They would say.
Jill DeWit: One of them, well … I’ve all gone to their work establishments. They have totally taken me to their work establishments and-
Steven Butala: Wow, really?
Jill DeWit: Yeah.
Steven Butala: That’s good.
Jill DeWit: Yeah, even some friends. So, that’s okay too.
Steven Butala: Were you embarrassed of your parents when you were young?
Jill DeWit: No, I wasn’t. My parents are cool. They took us on a … Remember when we were talking about vacations and stuff?
Steven Butala: Yeah.
Jill DeWit: There were no tents. They were all like four and five star, that was our vacations. Like, we’d go to a nice resort in Mexico and my dad would rent all the boating equipment. We just would rip it up, it was really fun.
Steven Butala: You and I had very different childhoods. Good for you.
Jill DeWit: I’m so sorry. Hey, share the fun … poor Steven didn’t have much fun so please help us share the fun by subscribing on iTunes or wherever you’re listening. While you’re at it, rate us there.
We are Steve and Jill-
Steven Butala: We are Steve and Jill. Information-
Jill DeWit: And inspiration-
Steven Butala: To buy under valued property.
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