Professional Land Acquisitions Step by Step (LA 759)

Professional Land Acquisitions Step by Step (LA 759)

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 back in beautiful southern California today.
Steven Butala:                   Today Jill and I talk about professional land acquisitions, a step by step approach, and here's what you have to look forward to. The way Jill and I buy and sell land, and the people in our group buy property is the single best way, hands down, to buy real estate for anyone. It is the same way that real estate investment trusts buy property. It's the same way ... I used to work for these kooks, so I learned all of this ... it's hard for me to quantify it. We're exposing the whole industry, quite honestly.
Jill DeWit:                            Well maybe we should just stop right now. 
Steven Butala:                   Stop the show right now? 
Jill DeWit:                            Yeah. 
Steven Butala:                   Why?
Jill DeWit:                            I'm joking.
Steven Butala:                   What does that mean?
Jill DeWit:                            I'm joking. Giving away all our secrets? 
Steven Butala:                   No, no.
Jill DeWit:                            That's what it sounds like you were meaning.
Steven Butala:                   No, I'm just saying, there's no better way to buy real estate. This is how the big guys do it, too. 
                                                Before we get into it, let's take a question, posted by one of our members on the LandAcademy.com online community. It's free. 
Jill DeWit:                            Katrina asks two questions. Question one, "I have a land deal I'm selling via land contract. I have a few questions about the land contract closing process. Number one, do you record land contract? Two, if you don't record the land contract, do you record an affidavit of the land contract so the terms of the deal can be hidden? Three, do you not record anything at all?"
                                                So that's part of question one. Do you want me to answer the whole thing, or do you want to answer that first?
Steven Butala:                   I'll answer these, okay. 
Jill DeWit:                            Okay.
Steven Butala:                   Right now. There's a second part of the question, that's why Jill says that. 
                                                "Number one, do you record the land contract?" That entirely and completely depends on what state it's in. If it's Arizona, no. Her second part of her question is, "If you don't record the land contract, do you record an affidavit?" Again, it depends on where you are, and the answer is no in Arizona and California, and pretty much out west. Colorado's got some strange laws, but you have to really ... my point in all this is you've gotta check-
Jill DeWit:                            Depends on the county.
Steven Butala:                   What the rules are. 
                                                And number three, she says, "Do you record anything at all?" We don't. 
Jill DeWit:                            Yeah.
Steven Butala:                   It all gets recorded when the last payment's made.
Jill DeWit:                            My way of looking at this kind of thing, is I only record things that I absolutely have to, or when I'm completely done with the transaction, and I want to be out, removed from any tax liabilities. Not that it matters, but just have it all up to date, recorded the right way. So anything that I'm ... any special circumstance that I have made available to my buyer, I like to keep it between my buyer and me, until we're all done and everything's cool, because you know what? It's seller financing. I really am allowed to make the rules. 
Steven Butala:                   Right.
Jill DeWit:                            I really can do whatever I want with this person on this property, and then when it's all done, then we'll record it. 
Steven Butala:                   Yep.
Jill DeWit:                            So that's how I look at it.
                                             Okay, now, question 2. "The buyer wants title insurance for the property, even though I'm selling in a land contract, and they will not receive ownership until the property is paid in full. They're willing to pay the closing costs and title insurance costs if it's closed through a title insurance company. My question is, can they actually get title insurance now, even though the deed will not transfer into their name until ten years from now when they finish paying off the property?"
Steven Butala:                   Okay, so what you're getting into is the second type of selling property on terms, which is called a deed of trust. Which is again, this all depends on the state you're in. It sounds to me now like she's probably ... this is out west. A deed of trust is a way you typically buy a house, or a car for that matter. It gets recorded, and the same way a car does, the title gets processed, but there's a lien on it, because you still owe money on it. 
Jill DeWit:                            Right.
Steven Butala:                   Then you can get title insurance just like a house. You don't walk around telling anybody you don't own your house just because there's a lien on it.
Jill DeWit:                            That's true.
Steven Butala:                   And you always get title insurance, right? So, you do that right up front. So now you might want to consider if the deal's big enough, you might want to consider doing a deed of trust.
Jill DeWit:                            Right.
Steven Butala:                   It's real hard to undo, if and when they foreclose. 
Jill DeWit:                            But it's a more value for property, and I'm assuming they really want this. 
Steven Butala:                   And it sounds to me like that too, Jill, from the level of detail and all that, and it's ten years-
Jill DeWit:                            I would feel good with this.
Steven Butala:                   And they're only ... it's a ten year term it sounds like. So I would consider doing deeds of trust. All through my career I've done both, and the reason that I've used a deed of trust is because we've had good relationship with the seller, I mean the buyer, and they really believed that they were going to close.
Jill DeWit:                            Right.
Steven Butala:                   And go through the term, and all that.
Jill DeWit:                            Exactly. 
Steven Butala:                   Work with us, they're not gonna go south, you know. 
Jill DeWit:                            Based on what we're hearing here, Katrina, this is a good one.
Steven Butala:                   Yeah.
Jill DeWit:                            This is a safe one, and I would go through that process too. 
Steven Butala:                   Cool.
                                                Today's topic, professional land acquisitions, step by step. This is the meat of the show. 
                                                Jill and I were out to dinner a couple of nights ago, and we were talking about all the different ... as if we don't have anything better to talk about except real estate when we go out to dinner.
Jill DeWit:                            Imagine that.
Steven Butala:                   But one of the things we were talking about is how we buy property. Because we're doing some really, really large urban land deals right now. Millions of dollars. We're gonna make a ton of money on these properties. And her question is, why are we not making sure that every single deal is like this?
Jill DeWit:                            Right.
Steven Butala:                   And I couldn't answer that.
Jill DeWit:                            Right.
Steven Butala:                   So now it gets me really thinking, we are buying property the same way that publicly traded, huge real estate companies, like Toll Brothers, and Shea Homes, how they buy land and subdivide it, and build new houses. That's what we are teaching and implementing. We are the end. 
Jill DeWit:                            Mm-hmm (affirmative).
Steven Butala:                   This is the single best way-
Jill DeWit:                            Mm-hmm (affirmative).
Steven Butala:                   To buy any type of real estate. What she's really asking me is, we should be making a heck of a lot more money per deal.
Jill DeWit:                            Bingo.
Steven Butala:                   Why aren't you, Steve, making sure you only send letters to potential deals like that?
Jill DeWit:                            That was the truth.
Steven Butala:                   I know. 
Jill DeWit:                            I mean that was really-
Steven Butala:                   And I haven't, I can't stop thinking about it.
Jill DeWit:                            And I've had this conversation with a lot of our members, too. You know, how much money you want to make, how many deals you want to do? You could do less ... it's the same time, especially when you get into these bigger deals, and you're not even having to close them. C'mon. When it's a 50, 100,000, couple 100,000 deal, I'm not closing it myself, heck no. 
Steven Butala:                   Right.
Jill DeWit:                            You know, I'm going through escrow, I'm using title insurance, so they're even easier, they're doing the work.
Steven Butala:                   Right.
Jill DeWit:                            All I'm doing is making sure everybody's happy, and babysitting it, that's really it, what my team does, and just make sure that everybody in it closes quickly, because that's what we all want. And that's it. It's great. 
                                                So my thoughts were, we already have long ago stopped doing really small deals, because it just took the time and energy. And I mean, ones that we would close ourselves. So we just stopped those so long ago. I don't like them at all. We don't do them. So now, we get this next level, and eventually you're where we are, and you're saying, alright, I think I'm ready for the next level.
Steven Butala:                   Yeah.
Jill DeWit:                            You know? It's like, I'm trying to think of a ... you know, here's a good example, learning to fly. I remember when I was first learning to fly, a little Cessna 150 seemed really fast to me. Like, especially when you're coming in to land. It looks like you have a death wish. I mean, you're, c'mon. You're landing, all you're doing is pointing your nose at the ground. Like, what am I doing, this seems so fast, oh my gosh, I'm gonna die. No you're not. 
                                                And I remember someone saying, just wait, at some point this plane is gonna feel too slow for you, you'll move on. I'm like, oh, I don't think that's ever gonna happen. No, and it does.
                                                So you move on, and you move on, and you move on, you know. And you get more comfortable. I was probably the same with cars. You know, we're both car people, too. That's what's so funny, the guy who sold me my car, he made the mistake of saying, oh no, no, no, you don't want that one, that one's way too powerful for you, you're a girl. Oh really?
Steven Butala:                   He really said that.
Jill DeWit:                            He did. 
Steven Butala:                   I can't believe he said that. I know, I'm not questioning it, I was standing there. 
Jill DeWit:                            Man, you're a girl. You don't need that much power. Really? Maybe that was all part of his game. If he did, I bought it hook, line, and sinker. 
Steven Butala:                   You bought a used car, and it was half the price. 
Jill DeWit:                            You're right, but I did buy the biggest, baddest one. But, the point it, I'm sure there's a lot of women that go oh, okay, I don't want that.
Steven Butala:                   I hope not. 
Jill DeWit:                            So now I think there are. I don't know.
Steven Butala:                   I hope not.
Jill DeWit:                            But anyway, the point is, we are upping our game, too. So it was a good discussion for us. Because sometimes you get caught up into what if you're doing $50,000 info lots all day long in, let's just say, southern Florida. We know a lot of people that are doing that. Buying them for 50, selling them for 110. 
Steven Butala:                   Or 80, or 90. 
Jill DeWit:                            Because they're on the golf course, and they're awesome. They may even be buying them for less than that. At some point, you go huh. Maybe I should buy a strip mall, you know, because I know how to buy these, I could buy a strip mall now, and I know that Westfield wants this kind of stuff. 
Steven Butala:                   People sell real estate not because they're, on the vast majority of the time, because of a life circumstance, not because of the actual land itself. They almost always choose to sell their real estate at the wrong time in their life, you know. 
Jill DeWit:                            That's a good point.
Steven Butala:                   Here's a step by step. This is a step by step, condensed version of professional land acquisitions. This is how Toll Brothers does it. I mean this is how the largest developers in real estate investment trusts do it. They define their acquisition criteria, step one. We're a home builder, a medium sized home builder, we want acreage between 40, 40 is our lowest, and 160 is our largest, that's the sweet spot. It's gotta be on one county ... one part of it has to be on a county road. It would be great if two county roads hit it, but one would work. And it needs to be between 1,200 and 1,800 dollars an acre for it to work. And it can't be further west than X. Or further north than this.
                                                So they define their acquisition criteria very, very-
Jill DeWit:                            Detailed. 
Steven Butala:                   Yeah, very much detailed.
                                                Number two. They get a finite list of data, either from Real Quest, or Data Tree, or Title Pro, or license providers of all three, and they send everybody an offer. Or they call them, or they skip trace them. If it's real small area, then they'll get to know and develop relationships with everybody. I've done all these things. That almost never works, because they're just not ready to sell. So you need to send them offers, period, with a closing time frame, and you need to jellify it. You need to become their friend when they call you back, and really get serious about closing the property. 
                                                And that it, that's the step by step approach. If you're a real estate investment trust, you're buying for yourself. That's easy. If you're a group like us, it makes it even easier. You're in a much better situation, because you just don't have one person you're gonna sell it to in their back pocket. You've got 1,500 acquisition criteria like that now. 
                                                So all you need to do is find a good deal. Then you can choose the buyer.
Jill DeWit:                            I've gotta say I think we even have a better advantage too, because the way we come at these, and I use this to my advantage when I'm talking to people. How great is this that you get to negotiate with one of the owners, and I can make whatever deal I want. I don't have to go back and answer to the board, I don't have to do this. So that's number one, is an awesome point that I've noticed and used. 
                                                Number two, how many sellers do you think are gonna change their whole mind about the transaction when they hear Westfield is calling, or Toll Brothers are calling. They're gonna go, ding ding, I'm going to get ... they might hold out, and maybe even shoot themselves in the foot as they move on to the next deal kind of thing. You know, I have to wonder if that doesn't hurt the situation a little bit, too. So just a thought.
Steven Butala:                   We are in the absolute, this isn't by accident, the best situation a real estate investment company can possibly be in. We have private money. Our money, sometimes our members money, sometimes other groups of money, but it's all private. We only choose the best deals, and we only know that it's sold before we buy it. 
Jill DeWit:                            Right.
Steven Butala:                   So there's no, to answer your question from the other night, there's no reason we should be now probably doing any deal where we net less than a quarter of a million bucks. 
Jill DeWit:                            Thank you.
Steven Butala:                   Up from, I think what was our most recent, we agreed on like, 50,000. 
Jill DeWit:                            Exactly.
Steven Butala:                   It's pretty simple stuff.
Jill DeWit:                            It really is. 
Steven Butala:                   And frankly, it's your whole-
Jill DeWit:                            It's even easier.
Steven Butala:                   Airplane analogy is perfect. It's easier.
Jill DeWit:                            Mm-hmm (affirmative). It does. Yeah, the bigger the plane, the easier it is to fly. It flies itself. So the bigger the deal, the easier it is to fly. 
                                                And on that note, it's my birthday. 
Steven Butala:                   Oh, yeah. I was gonna talk about it in the after show, but yeah.
Jill DeWit:                            Okay, well that's fine. I just wanted to get that in there.
Steven Butala:                   Happy birthday, Jill.
Jill DeWit:                            Thank you.
Steven Butala:                   It's been your birthday month, quite honestly.
Jill DeWit:                            Oh, it will be.
Steven Butala:                   Well, you've done it again, you've spent another 15 minutes with us listening to the Land Academy Show. Join us tomorrow for another interesting episode where we discuss land investment diversification. It's step two from what we talked about today.
Jill DeWit:                            And we answer your questions posted on LandInvestors.com, our online community. It's free. 
Steven Butala:                   You are not alone in your real estate ambition.
Jill DeWit:                            Sorry, did I goof you up, were you going to sing to me?
Steven Butala:                   No.
Jill DeWit:                            What?
Steven Butala:                   I wasn't going to sing to you.
Jill DeWit:                            What?
Steven Butala:                   I will do whatever you want. 
Jill DeWit:                            You know-
Steven Butala:                   Off the air.
Jill DeWit:                            I don't think you've ever sung to me.
Steven Butala:                   I have not on the air. I know I have sung to you. 
Jill DeWit:                            You have sung to me though?
Steven Butala:                   Oh my gosh, yes. Like, at the top of my lungs. 
Jill DeWit:                            Oh. Will you do it ... wait, that's not screaming. Screaming doesn't count. Screaming's not singing. So will you sing to me then, later?
Steven Butala:                   I sure will. 
Jill DeWit:                            Okay, I'd like that. 
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Steven Butala:                   We are Steve and Jill.
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Jill DeWit:                            The inspiration.
Steven Butala:                   To buy undervalued property. 
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