No One Finds New Acquisition Markets like You Do (LA 754)
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 DeWitt, broadcasting from gorgeous South Lake Tahoe.
Steven Butala: Today, Jill and I talk about no one finds new acquisition markets like you do.
This is so important, Jill, because what this show is really about is confidence-building. So, when people are brand-new, it's like, "Oh, I sent this mailer out. It's been out there for two weeks. I wonder if I did it wrong. If I could just ..." or they say something like this. "Oh, great, Steve and Jill have a fantastically-profitable business. Congratulations. I can't do it, because I don't know what a good acquisition market is!"
Well, that's a bunch of malarkey. You absolutely know what a great ... and, if you've made it this far, and you're listening to this show, or even if you're a member, you innately know about real estate, and you already know you can make a fortune doing this. So, I bet you a dollar you know what your house is worth, or you know how much land is worth two counties over. You know a lot more than you think. That's my point.
So, my point is, nobody can find new acquisition markets like you do, because you're coming to it from a unique set of eyes, and a unique concept; and I love this concept, because it's like releasing the stuff inside of you that you didn't even know was there.
Jill DeWit: The releasing the stuff inside of you.
Steven Butala: Oh, my gosh. You're so derogatory!
Jill DeWit: Wow! I sorry! I know! I'm like, "Wow! I could really ... There's a lot I could do with that that I'm not going to."
Steven Butala: Wow, let's cut her off there.
Jill DeWit: Thank you.
Steven Butala: Before we get into this, let's take a question posted by one of our members on thelandacademy.com online community. It's free.
Jill DeWit: Reid asks, "Currently, I'm in the process of evaluating 2.25 acre lots-"
Steven Butala: Quarter-acre lots.
Jill DeWit: "... in a small, downtown, low-income area of town. I have offered to pay their back taxes of $70 and $300, respectively, to acquire their land. As I look at these properties in-depth, comps that have sold are between $11,000 and $26,000 for approximately 800 square foot San Francisco homes." Okay.
Steven Butala: Hold on a second. The houses are selling in San Francisco for 26 grand? I'm confused. Go ahead-
Jill DeWit: Comps? Yeah, I'm curious, too. I wonder what the specific area is. In San Francisco County? I don't even think it's-
Steven Butala: Maybe San Francisco County.
Jill DeWit: Is it San Francisco County? Or is that ... I think it's a different county name.
Steven Butala: Yeah.
Jill DeWit: "My question is as follows. If the cost per square foot for homes-"
Steven Butala: Oh, $11,000 for foot? No, no, no. Go ahead, Jill.
Jill DeWit: That could be.
"If the cost per square foot for homes in this area-"
Steven Butala: Oh, okay.
Jill DeWit: "... is around $20, am I wasting my time acquiring these properties, even if they are as cheap as $70 a parcel? If I resell the property to a builder, I'm assuming it's near impossible to build a home of this size, and make a profit. If anyone has any insight on a similar situation, I would really appreciate it. Thanks."
Steven Butala: Okay, so, first of all ... May I answer?
Jill DeWit: Please.
Steven Butala: First of all, I don't understand the math, and that's fine; but here's my opinion about inner-city property, especially in a rough spot. I'm from Detroit. I can say this stuff. Just don't buy it.
Jill DeWit: Yeah.
Steven Butala: I mean, don't buy property in a rotting neighborhood.
Jill DeWit: Bryant-
Steven Butala: I mean, do you want to buy a rotting car?
Jill DeWit: Nope.
Steven Butala: No.
Jill DeWit: That's worth nothing in the end, because he gave it to you for free?
Steven Butala: Your time's more valuable-
Jill DeWit: That's it.
Steven Butala: ... than this. You want to go ... This actually ties into the topic. Finding that acquisition market ... I can speak for Jill and I very clearly. We do not buy property in class-D, census-track neighborhoods, and that's just for a bunch of reasons. Even if they are building houses there, and stuff, Detroit, specifically, has a city transfer tax. So, yeah, you can buy a house literally, and there's people in our group that do this, for $500. The transfer tax is a tremendous-
Jill DeWit: A couple thousand, or something ridiculous.
Steven Butala: ... and then, it's probably got a water lien on it, and there's all kinds of problems that go along with buying inner-city property.
Jill DeWit: Some that's just-
Steven Butala: I could do a whole-
Jill DeWit: ... too cheap.
Steven Butala: ... week on why not to do that; but the most important thing here, and it ties into this topic, is why wouldn't you buy 40-acre property somewhere in Montana for, I don't know, $25,000, and sell it for 80?
Jill DeWit: Right.
Steven Butala: You have none of these problems, you know?
Jill DeWit: Exactly.
Steven Butala: None of them! And you're going to succeed.
Jill DeWit: Yeah, think about this low-income area of town. I mean, that does bother me, too; and I'm wondering if Reid sought this out, or it just kind of popped up based on what someone called him back with, and said, "Hey, do you want these two" kind of thing? I'm curious, but-
Steven Butala: What he's also talking about is ... Did I cut you off-
Jill DeWit: No, it's okay.
Steven Butala: What he's also talking about is working the sale price of a home, a comparison sale value for homes, down to an info-lot value. So, I'm going to do the math for you real quick. In general, if homes are selling for $100,000 ... and they're selling, right? I'm not talking about all renovated, and spit-shined, and cleaned up. I just mean a regular old house that probably needs some updating sells for 100 grand. In general, the info-lot is generally worth 20 to 25% of what the property's worth. So, let's just say 20 grand. So, you need to be buying it for 10, if you want to sell it for retail; and you don't want that. You want to wholesale it.
So, five, 10, 15,000 bucks for an info-lot is where you want to be. You've got to work it backwards that way. In your situation, somebody's selling a house for $26,000? Now you're talking about info-lots that are $1,000 and 1200 bucks? That's just kooks, in my opinion. It's too low.
Jill DeWit: It is.
Steven Butala: Hey, I'm all for scraping the bottom. I've been called a bottom-fisher several times in my life, and that doesn't bother me.
Jill DeWit: What? Except when it comes to women-
Steven Butala: In fact, I see it kind of like-
Jill DeWit: ... you don't do that! That's for sure! Let's just get that out there.
Steven Butala: Our hotel rooms, jeez! This hotel room-
Jill DeWit: No, our hotel rooms-
Steven Butala: ... you can pick hotel rooms, Jill. Jeez-
Jill DeWit: ... Oh, I won't let you be a bottom-feeder there. Nope. No. Those days are over!
Steven Butala: Did we ever really have those days? No.
Jill DeWit: No.
Steven Butala: So, you're time's worth more. That's all I'm saying.
Jill DeWit: Yeah, I hear you.
Steven Butala: Today's topic: nobody finds new acquisition markets like you do. This is the meat of the show. So, what does that exactly mean? Well, this is how I start off ... I'm in the middle of recording Land Academy 2.0, the second program, and I start the whole thing off by saying this. "You have complete control, right this minute, over your land investment career, and your real estate investment career. You don't need any stinking inner-city property, and you know what? You don't need to buy Manhattan skyscrapers, either! There's no money in either one of those. You might think that there is, but there's not. The skyscraper thing, maybe, if you get lucky; and the inner-city thing, it's going to fail."
Jill DeWit: Yeah.
Steven Butala: So, all that stuff in-between, that leaves just a tremendous amount of opportunity. I actually broke the numbers down by how many houses, and how many land parcels there are, by ZIP code. All 30,000 ZIP codes.
Jill DeWit: Third-
Steven Butala: So-
Jill DeWit: ... wow.
Steven Butala: You have complete control over this. You know, if you're in a real estate business, in your head, even, not at a real estate agent, or an investor, but if you're obsessed with looking at real estate like we are, like I am, every vacation turns into a recon mission for land. Then, it's in your blood. No one is going to find a better acquisition market for you than you are.
Jill DeWit: It's true. That should be your primary focus.
Steven Butala: Yep.
Jill DeWit: And look-
Steven Butala: Because everything else falls into place then.
Jill DeWit: Yep.
Steven Butala: Selling the actual asset falls into place, because you're buying it so cheap; and, eventually, it just happens to all of us. A niche will find you. We have people in our group that all they do is buy property from dead people that's not documented correctly, through adverse possession. Did they start out that way? No! They took my advice, and they bought a bunch of property, and resold it. Low-end stuff, just to practice, and inadvertently came across some property where the owners have passed away, and it was a mess, and they enjoy undoing that; and now, they make a ton of money doing it.
Jill DeWit: And it's such a great ... There's so many different things like that, and they're really, really solving problems for people. This is the beauty of it, stuff like that. These poor people ... no one was going to help them.
Steven Butala: Yeah.
Jill DeWit: And they would have ended up giving them back to the country, and they would've gotten nothing for it, really, and they're happy to get something, and someone fixes, and take it off their plate, and learn how to do it. So, there's a lot of different things like that that you could fall into.
Steven Butala: So, without even thinking about it, [Red 00:09:08], I'm going to ask you a few questions, okay?
Jill DeWit: Yeah.
Steven Butala: If you had to spend $250,000 on land, and you needed to make 500 grand, describe to me the acquisition target area you would have; and then, maybe put together the perfect deal. Go.
Jill DeWit: Large acreage. Colorado, Idaho, Montana, Washington State. I would look for northern California-
Steven Butala: California.
Jill DeWit: ... yeah, because we've done some great deals there, too, by the way; and, boy, those go fast. Okay, let me zero in-
Steven Butala: Wait, so I'm going to add some stuff-
Jill DeWit: ... I'm going to go Northern ... I'll get specific. I'm going to go Northern California. I'm going to go ... definitely ... I'm trying to think of some specific counties that I really like.
Steven Butala: We don't need to go into specific-
Jill DeWit: Oh, don't go into counties?
Steven Butala: No, you're doing a great job.
Jill DeWit: All right. So-
Steven Butala: When you say "large acreage," how much acres do you mean?
Jill DeWit: How much do I have to spend again?
Steven Butala: $250,000-
Jill DeWit: I have-
Steven Butala: ... you've got six months to make it half a million.
Jill DeWit: I'm going to try to find ... and they're out there. I'm just trying to find 160 acres.
Steven Butala: Yeah, that's good.
Jill DeWit: That's how much I-
Steven Butala: You're nailing it.
Jill DeWit: Thank you.
Steven Butala: I would go 40, 80, 160.
Jill DeWit: I'm taking 160. If I ... Maybe a bunch of 40s. Four 40s. You know-
Steven Butala: Yeah, four contiguous 40s would be great-
Jill DeWit: ... that would be awesome. That's my 160 acres. That's a pretty good number, and I can flip those pretty darn fast, and I can do it ... This is what's beautiful, is I could do this to one person, or I could do it to four different people; and, if I do it to four different people, I'm going to make more money.
Steven Butala: You can sell it. You can do it to one person, or four different people. That's what you just said!
Jill DeWit: Did I say that? I'm not going to sell it! Oh, no!
Steven Butala: Wow!
Jill DeWit: Whoops! That is not-
Steven Butala: How does this go south so fast?
Jill DeWit: Steven! Why did you pick up on that?
Steven Butala: I don't know. That's what I mean.
Jill DeWit: Goodness! All right, I could sell it to one person, and I don't mean sell myself. I could sell the property. Let's be specific here, because Steven has his head somewhere else right now. I could sell this imaginary property; this 40-acre, gorgeous, heavily-treed, where there is access next to gorgeous state recreational land ... I'm going to be real picky here. My property to one person. I could sell it to 4 different people, or one person; and, if you sell it to four different transactions, you're going to make more money, period.
Steven Butala: Here's an example of a member-
Jill DeWit: Did I pass?
Steven Butala: Yeah!
Jill DeWit: Okay.
Steven Butala: Actually, you know what? I wouldn't change anything-
Jill DeWit: Thank you.
Steven Butala: I would slightly change the geography, based on where-
Jill DeWit: Where would you do?
Steven Butala: So, first, I would suggest that ... and this falls into the example I'm about to make, that you stay close to home. If you're in Connecticut, there's a bunch of property in Maine, and upstate New York. The acreage that you can do really, really well in. I mean, I'm not saying don't do it; but just spend some time in your own neighborhood first, and then, you can go national, like we have.
But, no, you nailed it.
Jill DeWit: Thank you.
Steven Butala: I bought a bunch of 40-acre properties in Maine one time, and we just absolutely killed it.
Jill DeWit: That's awesome.
Steven Butala: So, it's not so much about the acquisition market, itself. It's about finding those deals.
Jill DeWit: Exactly.
Steven Butala: But you're nailing it with the acreage. 40, 80, 160-acre properties that are ... Here's why; and this ties into this question earlier. Picture yourself as a seller. You're opening the mail on any given day, and you get an offer for a piece of property that you forgot about, for $180,000, or you get it for a property for $800. Believe me, people forget about these huge-acreage properties that they own, because they inherited them; or they bought it, and just forgot about it. $180,000, a lot of people ... is that the number I used?
Jill DeWit: My budget? No, I had-
Steven Butala: No, it's not your budget.
Jill DeWit: Oh.
Steven Butala: My point is this. If you open the mail, and somebody wants to give you $180,000, or they want to give you $1,800, which one's going to get more attention?
Jill DeWit: Exactly.
Steven Butala: So, these higher-value deals, in a lot of ways, are easier to do, I think. Like Jill says, "The bigger the airplane, the easier it is to fly."
Jill DeWit: That's true.
Steven Butala: Yeah.
Jill DeWit: That's very true.
Steven Butala: So, I'm going to give you a real quick example of how somebody in our group did exactly this, and I've never mailed this state that ... This guy lives in a state in the Midwest. I've never considered it a pleasure state, with cabins and stuff, and he is killing it! Absolutely killing it. In fact, he's making so much money, and doing so well in that state, that he hasn't gone national. And so, it's not a state that I was ever even ... I've never mailed it, and never will; but he knows it so well. He found a great acquisition market for himself.
Well, you've done it again. You've spent another 15 mins listening to The Land Academy Show. Join us tomorrow for another interesting episode, where we discuss grow your wealth by buying real estate-related companies. Hm.
Jill DeWit: And answer your questions, posted on landinvestors.com, our free online community.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Did you fully answer that last part? You started to go into an example about someone in Midwest, and you said he's killing it. I thought there was going to be more to the story. So, you left me a little bit hanging. I don't know if you left anybody else hanging-
Steven Butala: Here's what happened with this guy. This guy sent a mailer out two counties over, and it's all because, when he was a kid, they had a farm there, and it was all this thing. It just made sense to him, this whole market, in a way that it would never make sense to me, but it made sense to him, personally.
He gets a call on his second mailer in that county, and the guy's 90 years old, the seller. He's got properties all over the state. This has been his hobby, going to tax sales, his whole life, since he's got no real basis in his properties, and he wants to sell them; and he doesn't necessarily want ... He was a property hoarder, let's say. So, he's not real interested in selling his stuff, but he is really interested in having a relationship with a younger guy who thinks like him.
Jill DeWit: Huh.
Steven Butala: So, now this guy-
Jill DeWit: Oh, I know who you're talking about.
Steven Butala: ... sells his property! But all he does is sell property for this 90-year-old guy.
Jill DeWit: I think that's really cool.
Steven Butala: And that's something I never would have anticipated, especially in that actual area. You're right. I didn't finish it. Does that make it more-
Jill DeWit: That ... Now, we got to the end of the story, and I appreciate that! Share the fun by subscribing on iTunes, or whatever you're listening; and, while you're at it, please rate us there.
Both: We are Steve and Jill.
Steven Butala: Information ...
Jill DeWit: And inspiration ...
Steven Butala: To buy undervalued property.
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