So You Have Completed Ten Deals Now What (LA 736)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hi.
Steven Butala: Welcome to the Land Academy Show. Entertaining land investment talk. I'm Steven Jack Butala.
Jill DeWit: I'm Jill DeWit, broadcasting from beautiful southern California.
Steven Butala: Today, Jill and I talk about, so you've completed ten deals, now what? That's incidentally the name of this week. I think that that's the theme for this week.
Jill DeWit: But now what? Now what? I like ... Now what? I love it.
Steven Butala: Do you remember at that point ... can you think that far back?
Jill DeWit: I can, but you know what's funny. I had you, again. Let me back up, I had you, so I felt like I was a little bit cheating. It wasn't brand new for me, you filled in all the pieces. I'm convinced that's what a lot of our members feel like. If not, they should, and I hope they do. I feel like they have us, so it's a little bit cheating, but it's not. It's called doing it correctly. Don't try to reinvent the wheel. So ... you're rolling. At 10 deals you should be rolling, and I know we're going to talk about that.
Steven Butala: I did, this is a spoiler, well this is what I'll talk about during the meat of the show, but I did a pretty large acreage deal in Arizona, doubled my money. Realized that there was some dough there, and I called a guy that owned a bunch of property, because I pulled the tax records ... I pulled the assessor database. Just called him, and he sold me all of his properties, like for $400 and up, a unit. I did one deal, and then I did about 80 properties. Then from there it was like, "This is it."
Jill DeWit: That's exactly the conversation I had with someone the other day. That's what very well could come, and I've seen a lot of members have. Every once and a while you're going to get a letter in to the right hands, and you're going to get a broker, or someone calling you going, "We have 500 properties. Let's work something out." Next thing you know you're never buying from anybody else again. You're just buying as fast as you can from the same guy, and you're set for a couple years. It's awesome.
Steven Butala: Exactly. Before we get in to the real topic though let's take a question posted by one of our members on the LandAcademy.com online community. It's free.
Jill DeWit: Okay, Brock asks, "It's okay if you aren't a lawyer, I still want your opinion. I'm going to set up a LLC, and I have a couple of questions."
Steven Butala: This is perfect for this topic today.
Jill DeWit: "One, According to the internet, Nevada, and Wyoming are the friendliest LLC states. My partner and I live in separate states. Don't intend to always remain residents of these states, and are doing most of our meetings, and deals in other states. Do we just go with a friendly state like Wyoming?
Number two, we know you need to pay taxes to the states in which you do business, but what counts as business? Buying a property would require us to register for taxes in a given state I assume. What about selling to a resident of another state?"
Steven Butala: Okay, Brock this is such a fantastic question. It's one of these questions where if you get 10 accountants in a room, or lawyers in a room, you're going to get 10 different answers.
Jill DeWit: That's so true.
Steven Butala: But you're stuck with us for the next few minutes so-
Jill DeWit: And we're not attorneys. So here you go.
Steven Butala: I used to be sort of an accountant.
Jill DeWit: This is going to be good.
Steven Butala: You have to take it in stages. You can't bite it all off at once. So, yes, you nailed it. Go get a Nevada LLC. That's my recommendation. Again, I'm not a lawyer, and if this all blows up in your face, please don't email me. If I were you, let me put it that way. If I were you I would go to Nevada, and start an LLC. Even if you live in who cares where. The real reason your search came up with Nevada and Wyoming is, both of those states don't require state taxes. Let me give you a real quick example on that. California has a 13% state tax rate. Meaning if you make a million dollars, you're going to pay $130,000 in state tax. If you're in Nevada, and you make a million dollars, you pay exactly zero. It's a pretty substantial difference. However, here's what I want-
Jill DeWit: It's worth a couple plane trips. If you have to.
Steven Butala: This is what I want you to retain about this. All this stuff is going to change over time for you. You don't just get a Nevada LLC, and then you have it forever. You say right in here you're going to move around the states, and do ... Whatever's going to happen you're going to file your taxes one year, and your accountants going to say something like this, "Well, congratulations you made $380,000 this year. But, if you would have done this, this, and this in June of last year, I could have saved $22,000 in taxes." Or some numbers like that, and you're going to say, "What! I need to go maybe make some changes for next year." That never stops, I don't care who you are. I don't care what business you're in. Unless you have a drugstore for 82 years on the corner, and you go there every day, and you work there, and you own it. Stuff changes a lot with taxes. Especially in our business because we're always going back and forth over state lines, and all of that.
Jill DeWit: You know what's interesting too? I was going to add is that, and Brock be ready for this. You might outgrow your accountant. We did too.
Steven Butala: Yeah, we did. A few times.
Jill DeWit: At some point, the accountant that you start with today is probably not the accountant you're going to have 10 years from now. You're going to be so much that it's just out of his area of expertise.
Steven Butala: If you're doing everything right, the only groups of people that you're not going to outgrow is your spouse, and your kids.
Jill DeWit: Thank goodness, I was waiting for that. I was like, "Oh, no. What are we going to say?"
Steven Butala: In fact in some cases you really do outgrow your spouse.
Jill DeWit: You might outgrow them.
Steven Butala: Kids not so much, but. Well the kids are going to decide on that, not you. Really when I look at the whole thing I kind of get off the hook for everything.
Jill DeWit: Wait a minute. Maybe I outgrew you, sorry.
Steven Butala: I've gotten that speech, have you?
Jill DeWit: What the heck, no!
Steven Butala: Oh, you've given that speech I bet?
Jill DeWit: No.
Steven Butala: Jill you're awesome.
Question two is about paying taxes. So, here's the good news about real estate, there's no sales tax on real estate. This would beg the question, and I'm not saying you should do this, or shouldn't do this. Do I need a sales tax license in the state where I filed my LLC? Do I need one where I just sold one property in California, one property in Oregon, and one ... You're going to have to decide that for yourself.
Jill DeWit: May I add one more thing too?
Steven Butala: Then there's this, real quick. There's this matter of in some states, "business license." Which I've never understood what that is. What that is, is let's get you into our database as a business owner. Now you're on our radar, so we can really probe around, and see what you're doing, and maybe send you a bunch of threatening letters.
Jill DeWit: You're assuming that Brock doesn't have any employees. Now when you start bringing employees in to here though, then you have to do some of those things. You have to be, it's a ... You have to do it for the employees, but you don't have to do it for these parts of the business. It gets really confusing, so.
Steven Butala: That's why he's asking, and I'm trying to answer as best I can. I will tell you this, in my experience, Nevada rocks for all of that stuff. It's very business friendly. Used to be Delaware. Delaware, for years and years, everybody filed for a Delaware corporation. I would heavily look in to Nevada for lots of reasons.
Jill DeWit: You know what Brock not to scare you, but we've had ... Not to scare you, but to scare our employees I should say. They don't usually listen to this anyway, but you and I have talked ... I don't think our employees are listening so I can be safe here.
Steven Butala: I hope they're working.
Jill DeWit: I hope they're working. No, but Steven you and I have even talked about seriously moving our operation to Nevada. For some of these reasons. We have employees in multiple states, and I have to pay multiple different state taxes, and follow multiple rules. It gets a little nutty. We've actually thought about consolidating, and moving our office to a different state, but everybody if you are listening, we're not doing that yet.
Steven Butala: Here's what else ... It wouldn't matter to you anyway. Here's what else is going to happen. This is all under the theme of, so you've done 10 deals, what do you expect? Here's what else you can expect, as you go through this, and you start making more money, and more money, and doing more deals. People will pop up in your life that are ahead of you. Way ahead of you in some cases. We have a next door neighbor that they're doing the whole Nevada thing. I'll leave it at that. So we ask them a lot of advice, they have a lot of answers. I have some very, very, very wealthy friends. Multi-billionaires, and I asked this question recently, "What do you do about these taxes, because I know all your companies are in this high tax state." He said, "We pay all of our taxes. We pay it, and we don't horse around with that. All I do is focus on making more money." Let me give you a math example real quick. I know we're spending a lot of time on this, but it matters. If you make a million bucks, and you pay 13% tax. If you make two million, and paying 13% tax. Now you're paying $260,000 in taxes. You can cry about that, or you can work on making $100 million, and paying $26 million. Or $13 million in tax, but does it matter at that point? If you make $50 million after tax every year in real estate, does it matter that you paid that tax? That's his attitude. We're not there yet, we're actually on our way to throwing off numbers like that in the next 36 months, and I'm not sure it would matter at that point. Would it matter to you?
Jill DeWit: No.
Steven Butala: It's the in between that you have to get yourself out of. Next week the theme is, so you've done 100 deals, now what? We're going to cover some of that stuff. At some point, and you really should start thinking about it now, how much money-
Jill DeWit: Do you really need.
Steven Butala: Where you stop all this nonsense, and you say, "You know what, I'm going to start" ... Yeah, taxes are awful, and there's a lot of stuff, but you should just accept it, and then only focus on making more money. Because you have people in place to manage it for you now. Right?
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Today's topic, so you've completed 10 deals, now what? This is the meat of the show. Jill I know you wrote some stuff down before the show, what do you think?
Jill DeWit: Here are my thoughts. I've taken this from many, many people who have completed 10 deals, because we have a lot of them. This is fun. The first thing I want everyone to think about is, do you like this? Is it for you?
Steven Butala: Do you like making money?
Jill DeWit: Do you like this? That was going to be my ... My second point is, a. Do you like this property. And b. Do You like your bank balance. Usually that will tell you right there. Even if you didn't really like this, but you're like, "Aww, this part stinks." Doing the paperwork, or recording, or whatever it is. Or, "Gosh I have to answer the phone now and then for a tire kicker, but man look at my bank balance. I can get over that. I love that." That's the first statement I want everyone to think about, and when you're at this point, or those of you who are there. Do you like it? Number two, if you can do 10, you can do 20.
Steven Butala: Yeah, Jill. Reading my mind. I'm checking them off my list right now too.
Jill DeWit: Right. Think about that. Right, so many of us, once you've done 10, everybody here. You know who you are. You've done 30 right now, you forgot what 10 was. You didn't stop.
Steven Butala: You stop looking, yeah.
Jill DeWit: Yeah, you didn't. Sometimes ... In a few months you're going to look back and go, "Holy cow, I just did 130 deals." Something crazy like that. You won't even look. You just know you hit it. You just have to go back and go, "I didn't know I did that." That time we did that call with Michel in Florida, and he said he had a year in, and he said, "I didn't realize how much I made until I sat, and did the math to get ready for this call with you guys." To do a show with us. It was so funny. He's like, "I didn't know I made that much."
Steven Butala: You know we do ... Jill knows this, but we separate it all in different bank accounts. Jill and I obsess on one operational account pretty much. Just to make sure that everything's okay. Real estate and all that goes in to a separate bank account, and it's just ... balance just ... nothing comes out, it only goes in. That's pretty cool.
Jill DeWit: It is. That's what I think everyone here is experiencing. You turn around and go, "Whoa, how much moneys in there? I wasn't even paying attention, that's awesome." Now number three is, you turned around, your bank balance is there. Please don't make any big life changes. Please don't run out and buy a car, or the Rolex, or whatever it is.
Steven Butala: A Rolex?
Jill DeWit: I don't know, whatever the watch is.
Steven Butala: There will be no Rolex's.
Jill DeWit: I see that. This bugs me, have you noticed this on social media, Steven?
Steven Butala: Don't get me started. Yes. I know what you're going to say.
Jill DeWit: Why is this? It drives me bananas-
Steven Butala: Me too Jill.
Jill DeWit: It just keeps popping up recently. I have seen more than one person showing them standing next to a Rolls Royce on their social media. Like that's supposed to inspire me, and all it does is make me go, "You're an idiot."
Steven Butala: You have no idea what you're doing.
Jill DeWit: I don't get it.
Steven Butala: Yeah, I've never understood any of that.
Jill DeWit: Why would that ... Does that really inspire ... I don't know, does it really inspire somebody?
Steven Butala: I guess if I was 23, and some [inaudible 00:14:01] guy was standing with sort of gray hair like me, and standing in front of a Ferrari, and say, "You can do this in five years." No I wouldn't. I would say, "You know what, no I don't trust you at all." He had my attention, now I think it's a bunch of garbage.
Jill DeWit: See, it rubs me the wrong way. You could have rented it, and you look great. I don't know.
Steven Butala: You know what actually what I ... I've seen a toned down version in certain places on the internet that I love. I actually got a message from one of our members recently who said he bought a new pick up truck for the first time in his life.
Jill DeWit: That's different.
Steven Butala: I love that.
Jill DeWit: I know that person that you're talking about. I know that guys doing it right. I know he waited, and did it right. That's-
Steven Butala: I think he said it was his first new car ever.
Jill DeWit: Right, and it wasn't crazy. Yeah he bought a nice pick up truck.
Steven Butala: I've only ever purchased one new car from a dealer, in my life, brand new. In my whole life, and I still own it. The number three kids going to get it. Number one got it, number two got it, and number threes going to get it.
Jill DeWit: That's hilarious. Well the really the sentences are, that number one wrecked it. Number two wrecked it. Number threes going to wreck it. So every single kid has gotten in to an accident with this car.
Steven Butala: Yep. It's kind of rite of passage.
Jill DeWit: Yes. It's a older SUV, and thank goodness we feel very comfortable with each child in this car. Number threes going to get it, just we don't really care at this point.
Steven Butala: Jill won't get in the car any longer.
Jill DeWit: Oh it stinks. It smells like a locker. It smells like a middle school boy's locker room, and I refuse to ride in that car.
Steven Butala: I had squid bait in there for a while.
Jill DeWit: It's awful.
Steven Butala: You can't get smell out.
Jill DeWit: Hauling bikes, soccer equipment. Oh, forget it. All right, so here's number four. You've done 10 deals, now what? Automate, automate, automate, and sub out the stuff you don't like. You now know what doesn't need your hands on everyday. You now know what you hate to do in the process.
Steven Butala: Yes. That's what it is. You know what you like, and what you don't like.
Jill DeWit: Exactly, and you now know all the ends, and outs. You don't have to do it anymore. I don't care if you go get a VA from the Philippines, or you hire your wife, or whatever it is. Now's the time.
Steven Butala: Every time I talk to experienced members, or anybody for that matter, and I ask them, "What's hard about this? What's got you down right now? What are you working on?" None of them without exception say, "Oh, you know I sent some mail out, and I didn't work" or "I can't buy property cheap enough" or "I can't sell it fast enough." None of them say that. They all say, "My inbound phone traffics too high. I have these 10 re-record deeds that I made mistakes on." It's all stuff that once you get the right people, or systems in place, you won't even think about it anymore. I personally don't think about any of that stuff anymore. You're a little closer to it than I am, but ...
Jill DeWit: Still we have a team.
Steven Butala: My jobs just to get the mail out. Priced right, and make some decisions on the deals. Everybody else can do all the other work. With the right people, they love it.
Jill DeWit: Exactly. That's it. The right people, ding ding.
All right number five, my final point. It's time, you can now ditch the dining room table. It's time to be serious.
Steven Butala: You think at 10?
Jill DeWit: I think at 10. Maybe between 10 and 20. Depends on the person. Maybe it depends on the deals that they're doing right now, but how about this. At 10 deals, you could start to think about ditching the dining room table, and getting your own office. I don't mean you have to rent an office.
Steven Butala: Start thinking about it.
Jill DeWit: Maybe you need to move a kid out, just kidding. Could you imagine.
Steven Butala: Do the [inaudible 00:17:48] thing. Move a kid out, that's awesome.
Jill DeWit: Son you're going to boarding school. Daddy needs your office, your room, no just kidding. You need to be ... this doesn't have to be a part time on the evenings, and weekends where you roll out your ... Set up the office after the family dinners done, and you pack it all up, and you move it away. You need your own space.
Steven Butala: What about this? So you've done 10 deals. Do you think about how many deals you want to do next year? Do you think about that? Like how-
Jill DeWit: No, honestly no. I think of 10, now 20, now 40, now 80.
Steven Butala: I don't even think, I mean I know that back then I did, but now I think about ... I think of all of it in terms of the mail. I think, because I'm so obviously [inaudible 00:18:38]. I think, "All right, there's 2400 units going out this week, and that worked. I micro watched this. Next week I'm going to probably kick in another zip code, or in the case of houses, another county. Or another acreage specific type, like all five acre properties in a county." I kick it up that way. I really increase it slightly that way. It all translates in to cash in the bank.
Jill DeWit: Why didn't you go big? Out of curiosity, would you recommend anyone just go big?
Steven Butala: Yeah, we have members that do that. I'll tell you what happens is that they just get jammed up.
Jill DeWit: Is that a bad thing?
Steven Butala: Yeah, I think it's terrible.
Jill DeWit: I think there's a sweet spot. The reason I'm asking-
Steven Butala: I talk about this is Land Academy 2.0 a lot. I do not think you should send out 85,000 letters. Not at all.
Jill DeWit: Really?
Steven Butala: Yeah, what do-
Jill DeWit: Well let me tell you why. Here's why I'm asking this question. I personally think there's a sweet spot. There's a sweet spot between babying yourself, and pushing yourself. You've got to push yourself sometimes a little out of your comfort zone. I'd rather have your phone ringing off the hook, because you have so many deals, and now you have money coming in, and you can't sleep. OMG too bad, your bank balance. You can afford someone now, or you can afford PATLive now. Whatever it is, do you hear me? There's a sweet spot.
Steven Butala: We're over time. I do want to answer this. So I will answer it in next episode, because I have so much to say about it. How much mail you should actually send out, and why. Why it can be damaging, and why it can be the greatest thing there ever was, because-
Jill DeWit: Okay. Going to leave us all hanging. Okay.
Steven Butala: Yep. Sorry.
Join us tomorrow. Well you've done it again, you've spent another, I don't know, more time than we should have. 20 minutes plus, listening to the Land Academy Show. Join us tomorrow for another interesting episode where we discuss the land business legal, and tax, corporate setup. Kind of talked about it today already a little bit.
Jill DeWit: It's true.
And we answer your questions posted on our free online community. You can find it off of LandAcademy.com, or go straight to landinvestors.com.
Steven Butala: You are not alone in your real estate ambition.
I hate to do that. I hate to bait everybody, but it can't be a 40 minute show. I mean it could. You know why-
Jill DeWit: I have a lot to say.
Steven Butala: I know you do too, and I think we should. I know we do.
Jill DeWit: I know, it's okay.
Steven Butala: Tomorrow the topic, we've talked about legal, and tax. Totally talked about legal, and tax today. Tomorrow, even though the title's not going to change, we're going to talk about how much mail is too much?
Jill DeWit: I love that. Let's put that in there. Okay.
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