Plan for Your Last Acquisition (LA 790)
Plan for Your Last Acquisition (LA 790)
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: And I’m Jill DeWitt, broadcasting from gorgeous southern California.
Steven Butala: Today Jill and I talked about planning for your last acquisition. What the heck does that mean?
Jill DeWit: It sounds kind of sad.
Steven Butala: The gist of it is this: you want to have control over the end of all this, not have it control over you.
Jill DeWit: I like that.
Steven Butala: So it’s something that they teach you in business school, and it’s conventional wisdom for everybody who ever buys a company or buys an apartment building. But it’s something that, it’s worth discussing here. For sure.
Jill DeWit: Thank you.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the LandInvestors.com online community. It’s free.
Jill DeWit: Joe asks, “For those of you who create financial forecasts or annual operating plans … ”
Steven Butala: That would be me.
Jill DeWit: Right? That would not be me. “What time frame do you use for estimated days on market on acquired properties? I realize the logical question I will receive is, ‘How long has it taken you to sell your land in the past?’ While nine days seems reasonable, I’d love to hear the average time it takes other members to sell their land and if they forecast a more conservative time frame. Thanks.”
Steven Butala: I run it, this is a good question.
Jill DeWit: Yeah.
Steven Butala: I run it. Or I can input it.
Jill DeWit: What does that mean?
Steven Butala: So I run all of our forecasts. If you’ve ever watched any of our education or seen a live event, I’m constantly in Excel running if-then scenarios. So I run it at 30, I run it at 60, and I run it at 90. I never, I don’t take it past 90. If you have a property that doesn’t sell and it takes longer than 90 days, and we’ve all had them, I’m just saying if this is the norm for you, there’s something wrong.
Jill DeWit: Something bigger.
Steven Butala: Yeah.
Jill DeWit: Right. Like you’re pricing them too high.
Steven Butala: Or you’re not … The right people aren’t getting …
Jill DeWit: Notified.
Steven Butala: … to know them, or you’re buying really bad property or there’s just some kind of flaw. So for houses it should be cash in, cash out, 30 days.
Jill DeWit: Right.
Steven Butala: In this market. And that will change, but, houses 30 days. Info-lots, 45. Rural vacant land, 60.
Jill DeWit: Depending on how big it is.
Steven Butala: And then I would run a worst-cast at 90 days, but.
Jill DeWit: I mean dollar amount, not … Dollar amount and size.
Steven Butala: Yeah.
Jill DeWit: But yeah.
Steven Butala: If you’re running an eBay operation where you’re just $1 no reserve auctions …
Jill DeWit: 30 max.
Steven Butala: Yeah, 30 max. And then, 30 max with a retention rate of probably 50%. 40-50% don’t pay so you have to run it again. So I would probably run 60 days on that.
Jill DeWit: That’s true.
Steven Butala: But it’s really, the fact that you’re even looking at it tells me a lot.
Jill DeWit: Talk about big picture.
Steven Butala: ‘Cause the vast majority of people, I don’t-
Jill DeWit: This is your business obviously, or about to be your business, and I love hearing that. This is not a hobby.
Steven Butala: Yeah. Yeah. Financial forecasting is imperative. It actually ties into our topic today. I hope that answers it.
Jill DeWit: I think it does.
Steven Butala: Today’s topic is, plan for your last acquisition. This is the meat of the show. So you’re chugging along, the first year you buy 20, 30 properties, 10 properties. The next year you buy, I don’t know, a lot more. Within sometime in the first five years, you find a niche that you just love by, let’s say, solving deceased owners … Bless you. That’s a fantastic on-screen sneeze. I think that’s Jill’s opinion of this topic today.
Jill DeWit: I’m allergic to it.
Steven Butala: I sneeze on this topic.
Jill DeWit: I’m allergic to the last of anything.
Steven Butala: End financial forecasting for sure.
Jill DeWit: Exactly. Totally allergic to that. Okay.
Steven Butala: Just one? One sneeze there?
Jill DeWit: Yeah, that was it. I felt it, if you’re watching me, I don’t know if you watched my gaze shift and like, here it comes, here it comes, please don’t let it … Yeah.
Steven Butala: I don’t think it’s healthy to hold a sneeze in like that.
Jill DeWit: Well I can’t just … I would deafen everyone if I really … I’m not that loud, but.
Steven Butala: I say, let it out.
Jill DeWit: I know, but I don’t want to, you know. For people with their earbuds in, I don’t want to deafen them.
Steven Butala: Oh, I see.
Jill DeWit: Yes.
Steven Butala: Okay. You know we have a hard limiter on this, so that wouldn’t happen.
Jill DeWit: Oh. Okay, thank you. Oh, hard limiter.
Steven Butala: You like hard limiter?
Jill DeWit: Please talk more audio technical terms to me, that’s awesome. What else do you have on this?
Steven Butala: I have a bleep button.
Jill DeWit: It’s good. Okay, good.
Steven Butala: You want to plan. Is this the meat of the show, is that where we are?
Jill DeWit: Yeah, it is, that’s really where we are.
Steven Butala: You’re chugging along and you’ve found your niche, now you’ve got three, four, five lines of revenue. And you’ve institutionalized this thing and you’re saving money and you’re creating equity and the whole thing. You want to, in your head, have this conversation about when it’s going to end or who you’re going to hand it off to. Best case, if you’re going to sell the whole operation. These little entities that we build are not the best sell it online as a business entities, unless you kind of provide some other services. And that’s not bad, that’s not a bad thing. Maybe you want to teach some other people how to do it that are close to you, like kids or people who take an interest in it. But what you really want to do, and this is the whole point here, is plan for some type of exit. And ask yourself when your last acquisition is. Believe it or not, in my head, we are winding down our acquisitions, of only, we’re picking the best type of property and we’re winding down the rest.
Jill DeWit: News to me.
Steven Butala: But this is new to you, isn’t it?
Jill DeWit: Yes, it is.
Steven Butala: Here’s why …
Jill DeWit: We don’t talk much.
Steven Butala: … we’re getting tremendous requests to be a lender. And so while we will not seek out our types of acquisition … Our acquisition criteria is changing, let’s just put it that way. We will absolutely be involved in helping other people in our group, specifically in House Academy when we release it early next year, help them secure financing or actually be the person who finances the deal for them and take a small percentage. So are we stopping acquisitions or efforts? No, not really.
Jill DeWit: Whew. Everybody, my whole staff, is like, “Whew. Just kidding. What am I going to do?”
Steven Butala: But we’re really actively going to take the existing resources that we have and help our members buy property for themselves and charge a percentage for it.
Jill DeWit: So I’m assuming that was the point of the show today is, you will find yourself maybe being done with this piece of the business and moving on to something else. I thought of another one that we’ve explored that again might come back to fruition. It’s being a title company.
Steven Butala: Yeah.
Jill DeWit: We looked at doing title work and escrow closings and things like that for our members and the public.
Steven Butala: Exactly.
Jill DeWit: So there’s a lot of things like that too that, just that’s the first one that came to my mind. So as you transition from what you’re doing to that, that might be your next business step.
Steven Butala: Right.
Jill DeWit: And that’s a good business to be in.
Steven Butala: We’ve got a member who is pretty vocal on the Thursday call. And he tells a story about finding this guy in one of the middle states in the country who’s been accumulating, it’s been his hobby his whole life, he’s in his 90’s, accumulating all this property. And now he’s got a ton of it. And he’s working with this specific member to sell it. So he’s obviously not … He’s done his last acquisition, let’s say, and now he’s selling it all. What you’re going to find throughout your career is that you buy a property and then you sell it. And then you buy like six, and you sell five of them. You accumulate property, right?
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: So this whole time you have a balance of cash and a value of land. And at some point, you just have too much land. Jill and I are constantly in a state of, there’s always these straggling properties.
Jill DeWit: Right.
Steven Butala: And so you want to plan for all that.
Jill DeWit: Exactly.
Steven Butala: You want to really make the push that’s required for the existing property that’s laying around, collecting taxes essentially, property taxes, and get rid of that stuff.
Jill DeWit: Exactly. Yep.
Steven Butala: That’s my whole point, just plan for it. Plan for it. Don’t let it, I don’t know, what’s a good example of not finishing something you start? That we all do. I don’t know what, art projects or child rearing, I don’t know.
Jill DeWit: You know what, don’t let it be that … You know what it is, it’s, there’s always something in the garage under a tarp.
Steven Butala: Yeah.
Jill DeWit: I see people do it all the time. “Oh, he was going to build me this,” or, “I know the fence is half done over here.”
Steven Butala: Yeah, finish this.
Jill DeWit: Exactly.
Steven Butala: It’s worth finishing.
Jill DeWit: It’s worth finishing. So what’s funny, it made me think of this gentlemen, what’s so funny, it made me think of this buyer that I had years ago. This seller, actually, who called me up and it’s so funny ’cause he’s like, “You know, I’ve been in the business you’ve been in.” He told me, he’s like, “I’ve been in this business for 50 years.” He goes, “I keep thinking I’m done.” Isn’t that funny?
Steven Butala: Yeah.
Jill DeWit: And he’s not done. So his efforts that he put out there, his feelers, would still yield property in and so he’s still selling property. It’s so funny, he’s like, “I’m really not trying to do this, but how can I turn down these deals?” So that was my first thought when you said your last acquisition. I’m like, I personally see us like that gentleman.
Steven Butala: Yeah.
Jill DeWit: It’s always going to be hard.
Steven Butala: Some version of it.
Jill DeWit: Right. I don’t see us … I’m a never say never believer ’cause I could see us 10 years from now, something’s going to land in our lap and we’re going to both look at each other and go, “We have to buy this, ’cause there’s no work involved, no one else can do this but us.”
Steven Butala: Yeah. Well, I mean, Jill and I are famous for saying, “We do have to write that book,” when we’re sitting around talking about stuff. So, maybe it’s not acquisitions that will happen so much as much, but the other things that surround the business and all of that.
Jill DeWit: Right.
Steven Butala: The Land Academy is a great example.
Jill DeWit: It’s just funny.
Steven Butala: There’s tons and tons of stuff too. And here’s my last point, you want to have a number, a bank account number, in your head where you start to make these types of decisions. You have to have a mental point in your head where to stop. Maybe it’s $50 million, maybe it’s $100 million. Otherwise, you’ll just burn yourself out chasing your own tail.
Jill DeWit: That’s true. That’s true.
Steven Butala: And the other thing that is real beneficial for that is, you can take that number, the after-tax number by the way, and divide by the number of years you until you want to retire. And so then you’re going to, and we do this in a live event, if you got 30 years to retire, in some cases these really young kids come in.
Jill DeWit: Yeah, they have a long time.
Steven Butala: It’s 60 years to retire, 50 years to retire. That number, the deals you need to do per year, and then break it down per month, are tiny.
Jill DeWit: Exactly.
Steven Butala: So it makes it, what’s that old, that silly saying about eating an elephant? How do you eat an elephant?
Jill DeWit: One bite at a time.
Steven Butala: Yeah, one bite at a time.
Jill DeWit: Right.
Steven Butala: So that’s my whole point here is, have an end point in mind right when you start. Like a marriage.
Jill DeWit: You always have to do that. Why do you have to do that?
Steven Butala: I don’t know. I don’t know why.
Jill DeWit: The people, I wonder if someone who is listening to this show the very first time thinks, “Wow is that a good relationship or not good relationship?” It’s a great relationship.
Steven Butala: I don’t think that. I hope not-
Jill DeWit: You want them to think that?
Steven Butala: Absolutely.
Jill DeWit: Why?
Steven Butala: Because here’s why.
Jill DeWit: Why?
Steven Butala: I’m really going to answer this.
Jill DeWit: I’m going to ask you on the spot. On camera.
Steven Butala: Here’s a great story about why I love this crap.
Jill DeWit: Are you pointing to me, this crap? I’m just kidding.
Steven Butala: Jill and I are sitting at the yacht club about six or eight months ago and I say some crap just like that to Jill. Just like what I just said. And this woman swings her thing around and says, “Well I guess we know where you’re sleeping tonight.”
Jill DeWit: That’s true.
Steven Butala: And I said, “Listen, I know exactly where I’m going to sleep tonight.”
Jill DeWit: I know.
Steven Butala: Jill and I live on one lot with two houses and most of the time we absolutely live in the same house. But there are times in every person’s relationship where maybe taking a little short break like that, on site, is appropriate.
Jill DeWit: But it usually doesn’t happen.
Steven Butala: And I don’t decide that, Jill does. Only like 99% of the time.
Jill DeWit: Well I thought you were going there, ’cause I’m sure whatever it was that might have been inappropriate for her, which I’m very used to at this point.
Steven Butala: Yeah, that’s my point.
Jill DeWit: So it was like, “Eh, no, that’s nothing.”
Steven Butala: So my point is, that’s right. So as a listener to this show, if that kind of stuff offends you, you better make, I wonder what’s going on in your relationship. If you can’t take a little bit of ribbing like that, that’s not good.
Jill DeWit: I know. I know. Thank you.
Steven Butala: Go get your hair done and put your helmet on. That’s why. I have to constantly push the limits and so do you.
Jill DeWit: Oh, thank you. How do I push the limits?
Steven Butala: Oh jeez.
Jill DeWit: Uh-oh. Actually, I’m right now regretting that I asked that question. Can I take it back? Can I retract?
Steven Butala: Yes, yes.
Jill DeWit: Okay. I think that was perfect and I think we covered the topic excellently.
Steven Butala: Well you’ve done it again, you’ve spent another 15 minutes or so listening to the Land Academy Show. Join us next time where we talk about working with your wife.
Jill DeWit: I didn’t know that was coming up. That’s … Oh no. Oh, oh.
Steven Butala: Yeah, it promises to be a good show next week.
Jill DeWit: Oh, no, no, no, no.
Steven Butala: The show after that is working with your husband, so you’ll have a chance.
Jill DeWit: Oh no, no.
Steven Butala: It’ll be equal.
Jill DeWit: Oh this is going to be good. And we answer your questions posted on our free online community, landinvestors.com.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Okay, I have to disclose the truth here, I really don’t often take the time to look ahead at the show so I’m kind of …
Steven Butala: Often?
Jill DeWit: Okay, ever. Rarely.
Steven Butala: Jill sits down with a tube of lipstick before the show and says, “Okay, what’s going on today?” All the production work and stuff is already done, she’s just an actress, you know?
Jill DeWit: I’m not an, I wish I was an actress, thank you.
Steven Butala: I know.
Jill DeWit: No actually I don’t wish I was an actress, I love what I do.
Steven Butala: She’s the talent and that’s it.
Jill DeWit: I know, I know, right?
Steven Butala: I do all the hard work.
Jill DeWit: Thanks. But until this moment, I did not know what Monday’s show is about. I think it’s going to be Monday’s so that’s going to be fun man, I’m actually now looking forward to that myself. I gotta be ready. Oh boy. Share the fun by subscribing on iTunes or wherever you’re listening. And if you’re watching, you probably found us on YouTube. So wherever you are, 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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