Funding Acquisitions (LA 789)
Funding Acquisitions (LA 789)
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 and hungry from Southern California.
Steven Butala: Are you hungry?
Jill DeWit: I am hungry.
Steven Butala: Today, Jill and I talk about funding and acquisitions all week, because it’s acquisition week.
Jill DeWit: Yay.
Steven Butala: It all starts with solving-
Jill DeWit: Yay. Who doesn’t love acquisitions? I love it.
Steven Butala: Funny, all acquisitions starts with why banks suck. Before we get into it, let’s take a question from one of our members on the land investors online community stream.
Jill DeWit: I see it as a great fun thing and you see it as banks suck. How funny. This is why we balance each other out.
Steven Butala: There’s nothing better than acquisitions.
Jill DeWit: Thank you. That’s what I like.
Steven Butala: Land acquisitions are great. House acquisitions are fantastic. Functioning, income producing real estate is awesome.
Jill DeWit: Well, I think of it-
Steven Butala: Acquisition, acquiring companies is fantastic.
Jill DeWit: See, I think of an acquisition like a wedding. It’s all exciting and fun and it’s a big party.
Steven Butala: Yeah, me too.
Jill DeWit: If you plan for it, it’s great. And we’ll just leave it at that.
Steven Butala: I don’t like … nevermind. We’ll get into it in a second.
Jill DeWit: Neal asks, at present, I’m working on a planned [inaudible 00:01:22] campaign where the average days on market are less than 20 days.
Steven Butala: Wow.
Jill DeWit: Yeah. Sadly, the number of [inaudible 00:01:29] lots are few and far between in Sartorius. No kidding. The ones most abundant tend to be on the outskirts of the target area where new development is under way and the lots are already owned by developers/builders. I had planned to mail such companies with a different offer letter that would still make an offer, just in case, but also hopefully open the door to an eventual relationship with them as a buyer.
Steven Butala: That’s a great idea.
Jill DeWit: That said, I thought I’d solicit our humble little community for feedback and advice. So, please share your thoughts. Do you or would you bother mailing development companies when they pop into your data? Do you bother spending the time to research contacts et cetera?
Steven Butala: Yes.
Jill DeWit: Take care everyone. Great, great, great question. Love it.
Steven Butala: Yeah, there’s lots of questions in there and the answer is I think, yes to every single one of them. I don’t … when I know that there’s a developer in a really, really healthy community like that, where there’s some older parts of the community and then there’s newer ones, I don’t send lots to every single APN, letters to every single APN. I will write a different letter to the guy, the developer. It’s XYZ Company usually.
Jill DeWit: Right.
Steven Butala: Or honestly, what we’ve done really recently is, I’ll do the research or I’ll have one of our people find out who owns the LLC and how to contact them. If they have a website, if you’re lucky and just work around it like that and call a person and just make them aware of the fact that you’re sending letters out, your offers out and you’re going to get a bunch of properties-
Jill DeWit: If it’s understood, you obviously own 20, you might want 25.
Steven Butala: Yeah, and they all say yes.
Jill DeWit: Yeah. And here’s how … this is my target pricing and how it works. They’re going to be like, “Hell yes.”
Steven Butala: So don’t not do that. Definitely do it because developers run out of money and all kinds of stuff happens. They love to liquidate stuff. Hopefully, it’s not finance … it’s all cross-collateralized with the financing, so they can sell one off properties. This gets complicated what you’re doing, but you will win.
Jill DeWit: Right.
Steven Butala: Selling offers to [inaudible 00:03:35] lots. Sending offers to [inaudible 00:03:37] lots is a fantastic way to make tons of money with very little effort.
Jill DeWit: This is great.
Steven Butala: If there’s not enough properties in a little … I run into this all the time. If there’s not enough properties in an urban area, don’t say a zip code or a set of zip codes, then in that mailer, not specifically to that pricing for that mailer, but in that mailer or one just to follow it right up, send a bunch out. Expand your area. So I’m going to use Arizona as an example.
If you’re in Chandler, let’s say. Chandler is a development that’s due South of Phoenix itself and it’s much newer. So in super new communities, you don’t typically see that many in-fill lots. You see them though. But because they’re planned communities, you might come up with four or five, six hundred properties in all of Chandler and Chandler is huge. Then lump in South Phoenix. Or West Mesa. So you get 1,500 to 2,000 unit mailer going, you’re going to do it.
Jill DeWit: Yep.
Steven Butala: What you don’t want to do is, and I say this because we don’t do it ever. But I constantly get reports back from people in our group that succeed in sending a very well placed 300 unit mailer.
Jill DeWit: Right. Where I thought you were going with this and which I love is, I get excited when there’s not a lot available property, that’s often a good thing. People who want in that area and it’s almost all built out, for me that’s beautiful.
Steven Butala: Yep.
Jill DeWit: I think it’s a good thing versus do you really want a subdivision where it’s 10% built out and it’s moving slowly? We don’t want that.
Steven Butala: No. No and please bear in mind when you look at this stuff, it’s real easy to forget this, I even forget sometimes. People are going to sell you their property, they’re selling it for family or personal reasons. They’re not selling it because it’s for sale and they’re going through a process and they want to maximize their money.
So don’t let any of this scare you. Just send the mail out. You’re going to find somebody who’s retired, they’re in a different state or they inherited the property and you’re going to buy it for 20% of what it’s worth. It’s not because of the real estate. It’s because of the situation that the seller’s in.
Jill DeWit: Exactly.
Steven Butala: That’s a good question.
Jill DeWit: Thank you.
Steven Butala: Did you know that number? I don’t recognize that name. It doesn’t matter.
Jill DeWit: Thank you.
Steven Butala: This is what hungry Jill is like.
Jill DeWit: This is hungry Jill.
Steven Butala: Today’s topic … no, go ahead.
Jill DeWit: No, my eyes are glossing over. I’m seeing visions of steak fajitas.
Steven Butala: Oh, now I’m hungry.
Jill DeWit: Okay.
Steven Butala: Today’s topic is funding acquisitions, as usual. This is the meat of the shell. I have a lot to say about this. Shall I?
Jill DeWit: I’m sure you do. Steven, I would love one day for you to go, “You know, I really don’t have much to say about this.” What topics do you … I am not giving you a hard time.
Steven Butala: No, it’s okay. I’m happy to answer.
Jill DeWit: You are very well read, number one. So there’s very few topics … actually, I thought of one, that you don’t know much about, golf.
Steven Butala: Yeah.
Jill DeWit: Thank you. I think that’s my only one.
Steven Butala: I don’t know anything about sports. I feel like I know nothing.
Jill DeWit: Professional sports, professional football?
Steven Butala: Nothing. I can’t name one player in the NFL.
Jill DeWit: Okay.
Steven Butala: Can you?
Jill DeWit: I can.
Steven Butala: You can?
Jill DeWit: No. I used to play this game with my friend, this was kind of silly, but he would name a city, like Miami and I have to name off all the teams. Like the Heat and Dolphins. I had to name off what was the NFL, the NHL, baseball, it was a fun game. I used to be really good at that.
Steven Butala: Wow. Here’s a funny Jill story before we get into this.
Jill DeWit: Okay.
Steven Butala: I’ve never met a woman like this in my life. She goes and gets her hair done colored and the whole thing.
Jill DeWit: I did.
Steven Butala: The whole deal.
Jill DeWit: Yesterday.
Steven Butala: Which is a big deal for most women.
Jill DeWit: Yes.
Steven Butala: But she does it on a motorcycle and just throws her helmet back down and comes back to the office.
Jill DeWit: I did. He’s like, “Did you just have your hair done?” Like, yeah.
Steven Butala: Truly amazing.
Jill DeWit: And did you put a helmet on and get back on your motorcycle? I said, yeah I did.
Steven Butala: Here’s like, every man’s dream, trust me.
Jill DeWit: Thank you. Thank you very much.
Steven Butala: What’s the thought behind that? You just don’t care?
Jill DeWit: No. I wanted to ride my motorcycle. It is what it is.
Steven Butala: Oh, that’s great.
Jill DeWit: It’s all right.
Steven Butala: I can’t tell you how great that is.
Jill DeWit: Thank you.
Steven Butala: Do you know it’s great? Or are you just like yeah, whatever?
Jill DeWit: You know, I didn’t think about it until you told me that was great. I didn’t know it was unusual until you said that’s not normal. And I’m like, I guess it probably isn’t.
Steven Butala: It’s what I tell the boys all the time. Try to find a tomboy, like your mother.
Jill DeWit: Thanks. Back to the show. Today’s topic.
Steven Butala: Funding starts.
Jill DeWit: Okay.
Steven Butala: All acquisition funding for real estate starts with the banks, with like Bank of America, big commercial banks. And it works it’s way down from there. So let’s start with property types that are financeable by commercial banks. Houses, they love them. Real estate developments that are finished, they love them. That are income producing where there’s at least six months to two years of traceable, trackable, auditable financial performance. Those are slam dunks. They’re asset based lending for banks and they love to put money into that stuff and the rates are real competitive.
And they’re easy to get, they’re very easy to get. Then it gets worse from there. It gets to be a mess after that. When you start to throw in risk. In their eyes, there’s nothing more risky than a piece of land. They don’t know when anything else is going to happen with it. They don’t know what we know.
Jill DeWit: Right.
Steven Butala: If you walk into a lending department, into a bank and all the youngest. Craziest employees that can’t really function anywhere else are in the lending department. I don’t know why this is. It just is. I swear. And then they taste a little bit of power. They’re a little drunk with power after two weeks in that job.
Jill DeWit: That’s hilarious. Wow.
Steven Butala: There are people all over listening to this, who are in real estate who are laughing-
Jill DeWit: In lending department. Yeah.
Steven Butala: Because it’s true.
Jill DeWit: Okay. Yeah, because they can say, “No, I’m not going to give you the money.” Yeah, I hear you.
Steven Butala: In this day and age, you just click a bunch of stuff on the computer screen and say yes or no. I think that’s what goes on.
Jill DeWit: I can think of another profession that I’m not going to name right now that gets a little bit of power and it makes me a little upset.
Steven Butala: Real estate agents?
Jill DeWit: No.
Steven Butala: You’re killing us. What is it?
Jill DeWit: Law enforcement.
Steven Butala: Oh, yeah, yeah.
Jill DeWit: Sorry.
Steven Butala: Don’t get me started. Anyway, so congratulations. If you have a two year income producing, 27 unit apartment building in a triple A census tracked area, nobody has that. But if you do, congratulations and chances are, you don’t need any money. It’s totally ironic. Land, they won’t … rural, vacant land is unfinanceable by institutions. Construction financing for whatever reason gets easier and easier to get.
Jill DeWit: That’s true.
Steven Butala: But, it’s also secured by assets that … there’s a whole risk formula. My whole point is this, the fact that commercial banks are such a pain to deal with and they’re so limited, creates this massive market of private money equity. And it’s called all kinds of stuff, private money lenders, asset backed financing is my favorite. That’s a new one. Or hard money. They’re all kind of the same thing. They’re all a version of this, and I’ll bring it down to the simplest form.
A bunch of rich people get together, or they’re separate. They’re bored. They want to make money. They’re usually not retirement age, so they do want to do stuff still, but they’re lazy. They don’t want to learn how to send out mailers. They don’t want to build a staff.
Jill DeWit: They’re rich people.
Steven Butala: Yeah. They just want to sit and-
Jill DeWit: They’ve probably already done something.
Steven Butala: Yeah. So they love people like us.
Jill DeWit: Yeah.
Steven Butala: Who can kick butt, understand data, calculate a risk. We don’t want risk either.
Jill DeWit: Right.
Steven Butala: The whole key is to match us with them. That’s how you fund acquisitions. There’s a couple websites out there that are worth looking at. One is called connected investors. I have not personally had luck there, but I get a lot of inquiries.
Jill DeWit: And we have no affiliations with any of these by the way.
Steven Butala: Yeah, [inaudible 00:11:54].
Jill DeWit: It’s stuff Steven knows.
Steven Butala: But private lenders, National Association of Private Lenders is, it’s relatively new and it’s getting huge traction. Jill and I are actually going to go to the convention this month to meet some of these people. And there’s groups like ours. The best place … I saved the best for last, is actually like landinvestors.com. Again, that is our website. We do have an affiliation there.
Jill DeWit: Yeah.
Steven Butala: Or people in our group. People who have joined our group have done a couple of deals themselves, realized what’s involved and just want to make 10, 20, 30% on the deal with other already performing members. Our group is packed with people like that.
Jill DeWit: It’s true.
Steven Butala: This is acquisition week. Yesterday we talked about dream as big as you can.
Jill DeWit: Right.
Steven Butala: That’s what you want to do.
Jill DeWit: Exactly.
Steven Butala: Another great place, maybe the best place, and this has gone on since the beginning of time, to get money to do deals is from a buyer. Where somebody’s got a 27 unit apartment building already across town. And they’ve got it to the point where they want it and they want to buy another one. So I hear constantly people complaining about … this is a huge gripe in our group. I have two many acquisitions and not enough money.
Jill DeWit: Exactly. And that’s the best possible scenario.
Steven Butala: Here’s my final point. If you spend as much time and energy and effort finding a good financial partner as you do on doing mailers and learning how to Excel and how to do a mail merge and actually do the real estate particularly of this, you’re going to do great. For whatever reason and it’s probably because we don’t talk about it enough, people don’t spend enough time, our members don’t spend enough time building relationships with the money people in our group, or other money people outside of our group.
Jill DeWit: That’s true.
Steven Butala: So imagine what you should be shooting for is, I already know how to buy real estate. I already know how to buy it cheap. I could dream it up. I could probably buy half of Wyoming or whatever version of that is for you, but I don’t know where to get the money. Drop what you’re doing and figure that out. What if you could buy everything that you got a letter back on that passed your acquisition criteria and sell it? How much money would you make?
Jill DeWit: Could you imagine? I’d be unstoppable.
Steven Butala: Millions of dollars every month.
Jill DeWit: Exactly. We’d own half of Wyoming.
Steven Butala: It all starts with commercial banks and how awful they are. And it ends with, Joe the rich guy that you met online who absolutely loves your attitude and loves the deal track records that you have and wants to buy property.
Jill DeWit: Exactly.
Steven Butala: And all kinds of stuff in between.
Jill DeWit: Can’t wire the money fast enough because he knows what you’re going to do. He knows what you’re going to do to it.
Steven Butala: Oh, thanks. Another deal. Jill and I have a handful of people like that.
Jill DeWit: Yeah.
Steven Butala: In fact, the only reason that we don’t do more deals is because of this show and because of the other stuff that we do, because of land academy.
Jill DeWit: Exactly.
Steven Butala: How much time it takes.
Jill DeWit: Exactly.
Steven Butala: But we do our share. Trust me.
Jill DeWit: Yeah, we’re doing just great.
Steven Butala: I try to cover for the fact that you’re hungry.
Jill DeWit: Well you know, this was kind of your show.
Steven Butala: All right.
Jill DeWit: Thank you.
Steven Butala: Well, you’ve done it again. You spent another 15 minutes listening to the land academy show. Join us next time where we talk about planning your last acquisition.
Jill DeWit: And we answer your questions posted on our free online community. It is landinvestors.com.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Yeah. So, thank you. This was kind of your thing. I was just kind of-
Steven Butala: No, it’s fine.
Jill DeWit: Okay. I didn’t mean to … I’m not just here thinking about a menu of a restaurant. I apologize though. I really was intently listening and I would have, boy I would have jumped in and shared anything, but I didn’t really have-
Steven Butala: Yeah, funding is my thing.
Jill DeWit: It kind of is your thing. Spending is my thing, funding is your thing.
Steven Butala: No, you’re actually, all truth is you are very good with money.
Jill DeWit: Thank you. I know. Thank you very much. I appreciate you saying that.
Steven Butala: No, but tomorrow, we’re going to talk about planning for that last acquisition, which no one ever thinks about. Like when does it all end? Planning your exit strategy.
Jill DeWit: Does it all end?
Steven Butala: Yeah. That’s hard for people.
Jill DeWit: I’d like to talk about that.
Steven Butala: You want to end it. You don’t want it to end you. That’s what tomorrow is.
Jill DeWit: Oh. Aint that the truth. Yeah. Share the fun by subscribing on Itunes or YouTube or wherever you’re listening or watching. And while you’re at it, please rate us there. We are Steve and Jill.
Steven Butala: We are Steve and Jill. Information.
Jill DeWit: And inspiration.
Steven Butala: To buy undervalued property.
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