Real Expense to your Business Overhead (LA 724)

Real Expense to your Business Overhead (LA 724)

Transcript:

Steven Butala:                   Steve and Jill, here.

Jill DeWit:                            Hi.

Steven Butala:                   Welcome to the Land Academy Show. It’s velocity of money week, here. Entertaining land investment talk, we hope. I’m Steven Jack Butala.

Jill DeWit:                            And I’m Jill DeWit, broadcasting from beautiful, sunny Southern California.

Steven Butala:                   Today, Jill and I talk about the real actual expenses to your business overhead. It’s going to get a little money driven today, here, and that’s okay. I like it.

Jill DeWit:                            It’s velocity of money week. Welcome to Land Academy.

Steven Butala:                   Jill’s all set up to do her regular show during this whole show, I’m just going to sit here and talk.

Jill DeWit:                            What do you mean? Oh, wait, wait. I’m gonna talk about my day to day stuff?

Steven Butala:                   She’s got her email. Yeah, no, no-

Jill DeWit:                            Oh.

Steven Butala:                   I think you’re gonna clear out your email.

Jill DeWit:                            Oh.

Steven Butala:                   She’s just gonna work

Jill DeWit:                            I’m gonna work on the grocery list?

Steven Butala:                   Yeah.

Jill DeWit:                            Oh, yeah that’s exactly

Steven Butala:                   Like real life stuff, not show stuff.

Jill DeWit:                            Oh that’s exactly what’s gonna happen.

Steven Butala:                   Before we get into it lets make a question, post about one of our members on the landacademy.com online community, its free.

Jill DeWit:                            Okay, I’ll take a break from my other job here for a minute and I’ll help with this question.

Steven Butala:                   Alright, I know you’re answering that email.

Jill DeWit:                            Thank you. Elis asked “Hello, I’m a serious newbie to land investing so bear with me, I have a highly motivated seller who’s leveled motivation makes passing on this deal extremely difficult.”

Steven Butala:                   I bear with me, how do you spell bear with me? Like bear like are in the woods?

Jill DeWit:                            I..I think its like this, I think its like this

Steven Butala:                   Bare like bottom? I do to. Like in the woods.

Jill DeWit:                            Okay can I answer the question now?

Steven Butala:                   Sorry, Yeah.

Jill DeWit:                            Do you want to critique anything else here? Do you wanna-

Steven Butala:                   I’m great at math but at spelling, no.

Jill DeWit:                            Okay.

Steven Butala:                   Not so much there.

Jill DeWit:                            Got it. Alright so-

Steven Butala:                   I already forgot what the right answer.

Jill DeWit:                            I know I can help you here. Okay so lot size is 1.25, one and a quarter acres. Its out in the Texas country side, the lot shape is long and skinny. These are hilarious ones. Eighty three feet of road frontage and six hundred feet deep. That’s hilarious. There’s enough room for a manufacture / modular home. On the other hand it appears from the county website that there mare be some encroachment on the slot from the house on the left. Bear in mind I don’t have a survey and I’d rather not pay for one. Few questions, will an encroachment hinder me from selling to an manufacturing modular home owner? Will an encroachment hinder me from selling to a new build home owner? I would imagine so if the lenders involved. I almost feel like my only hope is to sell to one of the neighbors. Maybe the one that has already crossed the line. Being though I’m anxiously waiting any and all comments, and or suggestions? Thanks in advance.

Steven Butala:                   Manufacturing modular home owner

Jill DeWit:                            Will an encroachment hinder me from selling to a new build home owner? I would imagine so if the lenders involved. I almost feel like my only hope is to sell to one of the neighbors. Maybe the one that has already crossed the line. Being though I’m anxiously waiting any and all comments, and or suggestions? Thanks in advance.

Steven Butala:                   Should you go first or me?

Jill DeWit:                            You go first.

Steven Butala:                   Elis, why are you looking into this property this closely? You know way too much about this piece of dirt. Heres what I would do. The mail came back, somebody signed a letter. I- the first thing I look at as I pull it up on ParcelFact and see what’s around it. Is it usable? Is it road frontage? Are trees on it? Are there buildings on either side of it? What’s the general situation because I’m- that dictates whether or not I can sell it. We already know because you correctly sent out the mail and it got signed and sent back. We already know that the money part works. We just need to make sure there’s not something really wacky like its a side of a mountain.

Jill DeWit:                            Which sounds like I was trying to determine right here.

Steven Butala:                   So, than that’s it. Because chances are if we call these slivers all the properties are like that. Right?

Jill DeWit:                            In that area?

Steven Butala:                   Yeah. Or if its really strange its completely out not in a subdivision that’s in anomaly, and its weird than you don’t want to buy it.

Jill DeWit:                            That’s true too.

Steven Butala:                   But encroachments, heres the thing about encroachments you’re probably getting that information by looking at the satellite outline and go to some version of Google Earth and those they don’t line up perfectly.

Jill DeWit:                            Right.

Steven Butala:                   So I don’t believe that there’s an encroachment first of all. Second of all if there is it’s probably going to help you.

Jill DeWit:                            Exactly.

Steven Butala:                   So.

Jill DeWit:                            Like look on ParcelFact for the real stuff.

Steven Butala:                   And if this is your first deal and you have any question about whether or not you’re going to make money on it, than don’t do it. Pass it off to somebody else and take fifty percent. Cause the first deal that you do you want to be running at the bank, in your bathrobe, get such a good deal. Last thing you want to do is walk into a casino, for the very first time, pull the handle.

Jill DeWit:                            Find a chip on the floor.

Steven Butala:                   And win.

Jill DeWit:                            Right.

Steven Butala:                   So, on this

Jill DeWit:                            May I tag in here?

Steven Butala:                   Absolutely.

Jill DeWit:                            So, heres what I hear you saying, The first part of it you’re doing everything right. You’re doing your due diligence. You looked it up, you’re making sure its great, passes your test. Hey, there’s a road, that’s great, how’s road frontage? I love it. The shape’s kind of funky, who really cares? The guys motivated that’s great. Is your price still that good? If so that’s great. And is it not a lot of money that its if something goes wrong, you know I mean you know that, you know going into it and you know, you probably know who your sellers gonna be. Where, where  you’re  spending too much time is trying to figure out should I get a survey? No. Should I be thinking about who can what they can build on it? Should I be talking to the county zoning and making sure there’s enough room for this so. Cause that’s what I hear where yore going with that and I think that’s what Stevens trying it say is where you’re spending too much time.

Steven Butala:                   If there’s a property that’s developed right next to it it sounds like there is. Than you can build on it. Unless its got some severe gridding issues. Texas doesn’t, Texas is flat in general.

Jill DeWit:                            Exactly. And one and a quarter acres is a nice size.

Steven Butala:                   And eighty three feet isn’t bad at all.

Jill DeWit:                            I love it. I think its great. Someone can put a nice home on there and have a heck of a backyard or a heck of a front yard.

Steven Butala:                   The property that Jill and I live on is less than twenty feet wide.

Jill DeWit:                            Oh its hilarious, is it really that narrow?

Steven Butala:                   Yeah.

Jill DeWit:                            Is it really that narrow?

Steven Butala:                   Yeah.

Jill DeWit:                            Wow. Its hilarious. So funny.

Steven Butala:                   So you know eighty three feet I don’t know Texas everything’s bigger I guess but, I mean eighty three by six hundred is fantastic agriculture property.

Jill DeWit:                            Yeah.

Steven Butala:                   I mean Canada’s packed with properties like this because they’re really good for plowing and all that.

Jill DeWit:                            And Elis you know what  let me back up here the whole thing is here Elis is doing the exact great thing

Steven Butala:                   I Would do this to to three seconds.

Jill DeWit:                            He’s doing the right thing he’s its my I’m new heres the deal I wanna make sure I do this one right and he’s reaching out to the community, awesome! I’m sure everybody else is weighing in like we are here, awesome! And you’re gonna get better and better. And you’ll learn real quickly what to spend your time on, what not to spend your time on and that’s why were here.

Steven Butala:                   Heres what happens everyday in our business. I get a list property that comes in, and they all, the whole staff, nobody moves at an acquisition without me personally approving it. Including sell. And if I saw this, looked it yo on ParselFact I would say bye. Next. That’s as much research as I would do on this. Wait there’s a property next to it? And its got a house or a mobile on it and its working to buy a hundred twenty five acres you’d probably pay bout a thousand bucks for it or less? Buy. B-U-Y. Next. And Jill’s right, I’m being a little hard on him.

Jill DeWit:                            Thank you.

Steven Butala:                   Today’s topic, The real expense: the actual expense in operating your land business whether its fix or variable cost or lost of different ways you can set business overhead, everybody seems to know what overhead is but its fix your variable cost analysis that were gonna do here. This is the meat of the show.

Jill DeWit:                            This is fun.

Steven Butala:                   Every single company from Boeing to Microsoft to your little land company that you’re about to start or that you have has an income statement, and a balance sheet. And it has exactly two types of expenses, fixed costs, stuff like rent that you pay even if the company doesn’t make a dollar, you don’t sell a thing you gotta pay rent or do you? And than there’s variable costs, fixed costs and variable costs. Variable costs are things that are associated with sales. Like if you’re a Mcdonalds franchise or a Domino’s franchise that’s the dough and the pizza. You don’t have to buy any dough unless you’re actually going to sell some pizza. But you do have to pay rent and you had to pay for that sign that’s outside. So, you want the smallest amount of fixed costs in general, as in general accounting role. And the largest amount of variable costs, well guess what? Its not an accident that were in this business. I didn’t choose this without really taking a look at fixed and variable costs analysis. Every single cost that’s associated with real estate, land, and wholesaling and household sailing is a variable cost.

                                                For you its data and mail. And you only do that when you’re going to buy a property. There’s not rent, because you’re probably sitting next to you got a little desk set up in your kitchen or next to your bed wherever your wife not

Jill DeWit:                            You took over the dining room table

Steven Butala:                   Maybe its in your garage if you’re lucky.

Jill DeWit:                            Maybe

Steven Butala:                   We’re so far along that we have a separate house and that’s where my office is. In a whole separate house. Cause Jill’s had it. We call it “Jill’s house and Steve’s house”.

Jill DeWit:                            Front house, back house.

Steven Butala:                   And on a super good day, I don’t have to sleep in my house, I get to sleep in Jill’s house. How bout power? Electricity? No, you don’t have that you’re gonna pay that anyway its your house right?

Jill DeWit:                            Exactly.

Steven Butala:                   How bout people? No, its just you. Its all set up that way there’s is no real expense. Business or at expense until you get bigger, like us.

Jill DeWit:                            Right.

Steven Butala:                   You can’t do everything by yourself.

Jill DeWit:                            Exactly

Steven Butala:                   This is all set up by design that there’s no company no business that I know of where you can make an ROY of a hundred percent next week with no fixed costs. Its all variable cost.

Jill DeWit:                            When you really think about it really is. And you could even take it a step further as you’re growing and all that make your get a VA who’s a variable cost only per project as you need that.

Steven Butala:                   Per project.

Jill DeWit:                            As were doing mail this week whatever it is I need you to help aggregate this data whatever it is. You know kind of thing. That, that’s another variable cost its doesn’t mean well I gotta go higher help. Shucks now I gotta think about that every month, I gotta pay their salary or you know whatever it is.

Steven Butala:                   Wait a minute Steve, it cost two hundred fifty dollars a month, to access the data that you guys provide, that’s a fixed cost its a same amount every single month. I encourage you, you’re exactly right it is a same amount every month. However, whether you use it or you don’t but if you don’t if you choose not to do that the amount of money that you will pay for data to actually send one mailing out in one county in Oklahoma lets say will shock and amaze you. Because I used to do it that way.

Jill DeWit:                            Cause we didn’t have this option.

Steven Butala:                   And how much time ans money that you will spend on one mailing like that and not going through offers to owners going through like yellow letters is not comparable.

Jill DeWit:                            I remember when I came on board that’s when we found real quest. I remember that, I remember the contract I remember going and I remember at the time to I was like ” two seventy five a month?” And it was a year commitment and all that plus the data I’m like but it was still the best thing on the planet I was like this saves so much time.

Steven Butala:                   Until Jill got involved I was using Real Quest as a subscription for a lot of years pay way way more that two hundred and fifty dollars a month. I was paying retail rates, it was like five hundred bucks a month and you only got like six counties. We give the whole country.

Jill DeWit:                            Its changed that’s what it was its changed and you had stopped it for a while and were doing other things and than we circled back around that’s when I came in you circled back around because it got better and cheaper.

Steven Butala:                   Jill went out there, and she met with a vice president there and said heres the deal and she came back walked out of that smiling. I mean she cut the retail rates like fifth nine cents a record. And five or six hundred dollars a month and we negotiated a fantastic rate. And we’re passing it along. So, there’s no overhead. There’s no fixed cost to this. If somebody else has a better business idea, please email me. Honestly cause I’ll go do it.

Jill DeWit:                            This exactly where people drop this no.

Steven Butala:                   If you talked to seasoned experts like Land Shark types seasoned expert, Land Shark, shark tank, experts they will tell you that to maximally leverage your time you need to buy companies. And they’re right, but for most of us that’s just unrealistic. Best thing you can do to make a billion dollars is to buy a bunch of companies and hire some people to run em so that all you do is buy more companies that what the the shark tank guys did and do. They ground up started a couple companies, Cuban did right?

Jill DeWit:                            Right.

Steven Butala:                   And he’ll tell you right away that that’s if he went back he wouldn’t do it. Its better to buy companies. But that’s not real, that’s for professional business people and Jill and I do buy companies. But for they still dollar over dollar don’t make as much as a land companies.

Jill DeWit:                            Right, our start up companies that we have done separately kill it.

Steven Butala:                   They kill it. The web based start up companies fantastic.

Jill DeWit:                            And if they don’t we shut them down quickly.

Steven Butala:                   Or sell it.

Jill DeWit:                            Or sell it exactly.

Steven Butala:                   There’s still no better when you look at risk, reward, and a whole thing buying a forty acre property for four grand selling it for twelve. There’s still just I mean there’s nothing to it.

Jill DeWit:                            Can we talk more about some of the land [inaudible 00:14:15] expenses cause I want to get this out there cause I know a lot of people are like alright they’re listening and they’re in

Steven Butala:                   Go ahead I know you talk to people all the time

Jill DeWit:                            And they wanna know they’re like okay what do I need what do I really need to plan for? Okay like you just said Steven data, gotta plan for that. You gotta plan for sending out mail. Gotta plan for that. You gotta plan to have acquisition funds, you gotta plan for that, and than you gotta plan for when you buy them you still gotta have some money left over to get it recorded send a notary out.

Steven Butala:                   How much is that?

Jill DeWit:                            So-

Steven Butala:                   All variable costs

Jill DeWit:                            All variable

Steven Butala:                   Every single one

Jill DeWit:                            Fifty to seventy five bucks for the notary.

Steven Butala:                   They don’t vary. I mean they’re variable costs not fixed costs.

Jill DeWit:                            And both are true.

Steven Butala:                   You don’t record a piece of property unless you sold a purchase.

Jill DeWit:                            Right, exactly. But you’re going out buying it so you need to plan for that.

Steven Butala:                   You need a website.

Jill DeWit:                            You need a website, places to market.

Steven Butala:                   Its costs eight dollars and fifty cents a year.

Jill DeWit:                            So, if you can make your own or you could hire somebody cheaply off all kinds of places to make your website.

Steven Butala:                   Or you can go on youtube and do it yourself cause its a one or to page website.

Jill DeWit:                            Right.

Steven Butala:                   Which I would recommend.

Jill DeWit:                            Not everybody’s set up for that.

Steven Butala:                   You know what ill tell you, neither was I. And I did it anyway.

Jill DeWit:                            Okay.

Steven Butala:                   You gotta go learn.

Jill DeWit:                            I understand and I have as well slash however-

Steven Butala:                   You talk to these people everyday.

Jill DeWit:                            I know its nuts you know what baby i gotta tell you were honestly I love it its not the best use of  peoples time sometimes let me tell you if I make if I’m an attorney right now or like come on I’m talking to peop- we have plenty of people in our group that make up two hundred thousand dollars a year okay its not worth their time to take the weekend off to learn to do a website. Its so much cheaper to spend a couple hundred bucks and have somebody make a website.

Steven Butala:                   Alright fair enough.

Jill DeWit:                            Thank you.

Steven Butala:                   You’re right

Jill DeWit:                            Thank you. I didn’t mean to shoot down your idea.

Steven Butala:                   No, you’re right I mean I just think that the value is not the actual website itself its going onto youtube and learning how to do stuff.

Jill DeWit:                            I rather them watch the program on how to flip land.

Steven Butala:                   Because in the exactly so that was my leading up to that point you do have to learn, there’s a pretty steep learning curve in all this and I think if you come into it with the mindset that you can out source it we have competitors who teach out sourcing actually doing the data that’s insane! You gotta do that yourself.

Jill DeWit:                            Well you know why and I agree with you on that one because you can’t totally trust there’s somethings you can let somebody else do. Like you can tell someone I want a website that just says this this and this and it comes back and like I don’t really like that color blue but who cares? Whatever it is we can work with this.

Steven Butala:                   And you know what the name of our next show is?

Jill DeWit:                            But the data part of it is too too risky to leave to chance to trust that persons going to do exactly what you want, you gotta have your hands in that and that’s true.

Steven Butala:                   I love this topic that’s why the next tomorrows show is called “Land business expense”. Expenses line item by line item. So were just jumping in a little bit ahead and that’s okay.

Jill DeWit:                            Thank you.

Steven Butala:                   We’re gonna cut to the chase. Well you’ve done it again you spent another almost twenty minutes with us, well Jill jumped ahead which is good.

Jill DeWit:                            I did.

Steven Butala:                   Its a logical progression I like it.

Jill DeWit:                            I did.

Steven Butala:                   Join us tomorrow for another interesting episode where we discuss Land business expenses line item by line item.

Jill DeWit:                            So you’ll hear more about that and we’ll answer your questions posted on our free online community found off of LandAcademy.com.

Steven Butala:                   You are not alone, in your real estate ambition. Yeah Jill you were on the front lines about this topic. Because I know that if people call you potential members they call you and they ask you all this stuff like what can I really expect so.

Jill DeWit:                            Yeah they wanna know.

Steven Butala:                   I mean this I’m deferring to you.

Jill DeWit:                            I used to have it, I know my team is putting our FAQ back on the website it was taken off somehow and they’re refreshing it and putting it back on and I think I had an FAQ on there.

Steven Butala:                   Why would it take that off?

Jill DeWit:                            Somebodies grand idea so anyway.

Steven Butala:                   Somebody who is no longer with us?

Jill DeWit:                            I don’t know anyway the point is bring it back I think that was one of the questions was, how much money do I really need to do this? And that was such a valuable question that I think you had answered, originally and than we kind of added more.

Steven Butala:                   They’re not rewriting it are they?

Jill DeWit:                            Oh gosh no!

Steven Butala:                   Okay. Good.

Jill DeWit:                            Oh no. No but they’re taking out some old information and putting in new information, which happens.

Steven Butala:                   I have no idea what goes on in my own companies.

Jill DeWit:                            Like c’mon a year ago we didn’t have ParselFact.

Steven Butala:                   Right.

Jill DeWit:                            There you go. Love it. Hey share the fun by subscribing on iTunes or wherever you’re listening and while you’re at it rate us there please.

Steven Butala:                   We are Steve and Jill

Jill DeWit:                            We are Steve and Jill

Steven Butala:                   Information

Jill DeWit:                            And inspiration

Steven Butala:                   To buy undervalued property.

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