Five Minute Land Due Diligence (799)
Five Minute Land Due Diligence (799)
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: I’m Jill DeWit, broadcasting from sunny southern California.
Steven Butala: Today, Jill and I talk about Five-Minute Land Due Diligent. When you buy a piece of property, the greatest moment in all of the anatomy of a transaction when a seller calls you back … You sent all the mail out and the whole thing … and, the seller calls you back, or they send a letter back and they sign it with a dollar amount. You have to go find out if that is actually worth it.
Jill DeWit: Right.
Steven Butala: That’s what we call due diligence. Can you close it? Does the property have access? We provided the tools for that for our members. That’s the euphoric moment for me, where like, “Oh, how can I do this in five minutes and find out and call the seller back? Or, [crosstalk 00:00:55]
Jill DeWit: Even do it on the phone.
Steven Butala: … and close a deal?”
Jill DeWit: Exactly.
Steven Butala: I mean, this is a … People spend too much time on this when they’re brand new, because they think they’re going to find a flaw or something like that. We’re going to dispel all that here in a minute.
Jill DeWit: It’s perfect.
Steven Butala: Before we get into it, though, let’s take a question posted by one of our members on the LandInvestors.com online community. It’s free.
Jill DeWit: Mike asks, “Hi, all. I know this subject has come up before in the forums, but I haven’t seen a definitive answer. What about liability insurance on properties that you temporarily own? I have an LLC, and all property will be purchased inside that LLC. Should I get an umbrella policy in the name of the LLC in case someone is injured while visiting one of the owned properties? Steven and Jill, what are your thoughts? Thanks, Mike.”
Steven Butala: He addressed [inaudible 00:01:42]
Jill DeWit: I like that.
Steven Butala: Here’s what we do. Good short, simple, grassroots question, and I appreciate it.
Jill DeWit: Love it.
Steven Butala: Here’s a good short answer. We have general liability insurance, errors and omissions insurance, that any company would get. Any company would get that has to do with any of it. Do we have it specifically … That’s all in an LLC, actually a set of LLCs that Jill and I own. Jill owns some. I own some. We own some together that actually don’t have anything to do with real estate. They’re up for other stuff. They all have their own standard errors and omissions in liability insurance. Do we have slip and fall insurance on real estate? No. Because, the likelihood of something happening is so tiny. We believe that the insurance policy that we have covers that.
Jill DeWit: Exactly. Good answer.
Steven Butala: Yeah. Today’s topic … Wow, that was fast. That’s awesome. Today’s topic: Five-Minute Land Due Diligence. This is the meat of the show. Like I described right before the question, you have a piece of property, you sent a mailer out, you got the mailer back, you’re staring at it. It says $5,332.21. Your gut tells you the thing’s worth 15 grand, because you know how you priced the mailer. You’ve got to spend the next few minutes figuring out if there’s something tragic in this deal that’s going to not make you run to the bank and get a cashier’s check, or open escrow, or whatever. What do you do?
Jill DeWit: First thing I do is … Well, I have a checklist. We have a … You want to capture all the pertinent information while you have that person on the phone. We have a sheet that I share. I’ve just sent it out to the planet, too, by the way. It’s out there.
Steven Butala: Right, right.
Jill DeWit: If you want a copy of it, email my team at Support@LandAcademy, and we’ll send you on. Because, I’ve done this in email blasts before. I’ve shared my checklist. It has all the pertinent information. My team, literally, we print it out. It’s on the desk. The call comes in, and you fill out all the stuff. Everything in there from who’s calling you, their phone number, their contact information. Then it gets into, number one, are they even the owners? Can they even be making this decision? What’s the relationship? What’s going on there? You’re capturing the information about the property. The size. Did they accept the offer? What do we need to know? All that stuff you’re capturing on the sheet. Do they own more property, too, by the way? That’s one that we throw in there. You always want to ask. Anyway. The first thing is my staff has a list of questions, and this is all the stuff that we need to make decisions.
Say I’m just a one man show, and this is me. I’m getting this call. First thing I would do is have this sheet, and I’m going to make sure I get the important stuff. If the person has time on the phone, and they’re calling you back, and they’re retired. They, “Hey, I got your offer, and I’m ready to accept it.” If you want to look it up right then and there, too, while you’re talking and doing these things, I personally would open up ParcelFact. ParcelFact.com is our site that’s free to our members. There’s other ways that you could look up stuff, like on the county’s sites, too. What were you going to say?
Steven Butala: Jill and I … I don’t want to interrupt you. But, we went through a tremendous amount of time and expense to create a website called ParcelFact, F-A-C-T, .com, where you put in the state, the county, and the APN, the assessor’s parcel number. Because, these rural vacant land properties don’t have a mailing address. Most of the infill lots don’t either. It gives you all the ownership data and a corner points GPS, especially it’s very helpful with rural property. You can see in Google Earth whether there’s access, if the guy on the phone that you’re talking to is actually the person who owns it. We have really made that incredibly simple.
Jill DeWit: It’s awesome.
Steven Butala: It used to take days before we made that.
Jill DeWit: That’s it. Isn’t that great?
Steven Butala: Anyway, that’s the first thing I do is I go to ParcelFact and just see if it looks good.
Jill DeWit: Right.
Steven Butala: Just see if the property’s cool.
Jill DeWit: Yeah. Is the really access? There’s so much in there. Real quick, “Yep, I’m talking to John Smith. It shows right there John Smith.” Done. You can check down and verify, “Oh, 5.02 acres. Great. I was right on that.” You can go down and go, “Oh-”
Steven Butala: “Oh, he paid-”
Jill DeWit: That’s what I was going to say, “He bought it in 1985, and he paid $3,000.” I’m like, “All right. This is good.”
Steven Butala: And, I’m buying it for two.
Jill DeWit: Exactly. Or, “I’m buying it for four and it’s worth 10.”
Steven Butala: Yeah.
Jill DeWit: I look at it that way, too. I like to know that he’s obviously interested in my offer, because the guy’s going to make a little money. That’s okay.
Steven Butala: It’s not a plug for ParcelFact at all. It’s just a useful tool for our members.
Jill DeWit: Right. This is the stuff that you’re doing your due diligence; these are the things that you need to do. I just kind of gave a scenario. Maybe let’s just go back now and talk about when you’re doing your five-minute land due diligence. However you’re doing with the guy on the phone, or you take the information, jot it down, and hang up the phone and go do your due diligence. What are the important things? For number one, who owns it? Are you dealing with the right guy?
Steven Butala: It’s imperative.
Jill DeWit: Because right there, if you’re not dealing with the right person, you just stop right then and there. “Oh, my dad … I think he wants to sell,” or something like that.
Steven Butala: Yeah.
Jill DeWit: Don’t waste your time.
Steven Butala: “I’m calling for my neighbor.”
Jill DeWit: Exactly. Don’t-
Steven Butala: Or, “My parents have been passed away 22 years ago, and I’ve been paying the taxes.”
Jill DeWit: Right.
Steven Butala: That’s a big problem.
Jill DeWit: You need to quickly assess … Get that out of the way first of all, because it doesn’t matter how good the deal is if it’s impossible to convey the property and buy it and put it into your name. Then what’s the point of talking any longer?
Steven Butala: Right.
Jill DeWit: Or, there’s six siblings … this is a common one, too. There’s six siblings, “Four of us want to buy. We’ll figure out the other two.” “When you’re all on board, call me back. Then we’ll talk.”
Steven Butala: I have to say this. These things very rarely happen, these bad things.
Jill DeWit: True.
Steven Butala: 9 times out of 10, maybe 8 1/2 times out of 10, it’s everything you think.
Jill DeWit: Exactly.
Steven Butala: You’re getting a great deal on a great piece of property, and the seller really wants to sell it, and they’re on the deed.
Jill DeWit: Yeah. Yeah. Often, it’s Bob and Sally Smith, and you’re talking to Bob. Sally’s in the background going, “How fast can they send the money?”
Steven Butala: “Yeah, can they close it next week?”
Jill DeWit: Exactly.
Steven Butala: “I’ve never wanted this piece of property.”
Jill DeWit: “I told you it was a bad idea.”
Steven Butala: “You’re a bad person.”
Jill DeWit: Exactly. “I get the money, too, now.” No. Anyway. Your five-minute due diligence is really confirming the ownership. You’re confirming the size. You’re doing the four As. You’re going through all the four As right now, if we’ve not talked [inaudible 00:08:16] those in a while, which is: acreage-
Steven Butala: Larger the better.
Jill DeWit: … access-
Steven Butala: It’s very good and helpful that people can get to the property.
Jill DeWit: … affordability-
Steven Butala: Cheaper is better.
Jill DeWit: … attribute.
Steven Butala: It’s on a lake. It’s close to a lake. It’s close to the Grand Canyon. Plenty of sun for solar power. Water table’s very near. 20 miles from Las Vegas. There’s limitless attributes. Mountain views, 360 degree mountain views. Get away from it all.
Jill DeWit: Beautiful trees, heavy trees, whatever.
Steven Butala: Yeah.
Jill DeWit: Those are the four As. You’re going through that list. What other things do I need to check on? Is there an HOA? Check that stuff out, and make sure … You want to know everything that you’re getting into. Taxes. Where are they in the taxes?
Steven Butala: Are there any back taxes accumulated? That’s easy. That’s a phone call or a look-up on the internet.
Jill DeWit: Right.
Steven Butala: By the way, this all takes five minutes.
Jill DeWit: It’s most often not on rural vacant land, because most lenders won’t lend on rural vacant land and it’s undeveloped. So, you won’t generally find a lien, but please do the extra step and check it, especially on some of the transactions.
Steven Butala: We’re licensed providers for the data providers …
Jill DeWit: We can pull those ourselves.
Steven Butala: We can pull the lien report real quick, for like a $1.50 or some crazy thing.
Jill DeWit: Exactly. Check that. Then, finally, after it passes all those tests for me, then my last check is was my pricing on? Was I right?
Steven Butala: That’s the first thing I check.
Jill DeWit: Oh, you check that first?
Steven Butala: I mean, I didn’t say it on this show here, but I check can we make any money on this thing? How good does it look on the internet on ParcelFact?
Jill DeWit: Right.
Steven Butala: Then, quite honestly, I throw it all to Jill’s team. Jill doesn’t even do it. Her people do it.
Jill DeWit: Close the deal.
Steven Butala: Yeah.
Jill DeWit: Yeah. That’s good. I think we’ve covered it. Those are the important things you need to hit, so there won’t be any surprises.
Steven Butala: Yep.
Jill DeWit: The goal is here not to waste your time. Your time is so valuable. Don’t look at the … Remember, think of the property … it’s just a line item. Don’t think of it like, “Oh, how pretty is that? Oh.”
Steven Butala: What I see a lot of new people doing-
Jill DeWit: Don’t do that.
Steven Butala: People ask me all the time, “What’s the difference between super successful people in your group and people that … not so much?” The not so much people don’t close the deal right then.
Jill DeWit: It’s true. Don’t let too much time pass.
Steven Butala: Well, they think they missed something. They’re afraid of failing, because maybe you did miss something. Maybe it’s 5,000 bucks, and so what? On your first deal … You don’t want to do that on your first, let’s say, 10 deals. You want to be careful, but you don’t want two weeks to pass by.
Jill DeWit: Right. Don’t over-research.
Steven Butala: You really want to get the deal done.
Jill DeWit: Yeah.
Steven Butala: Get the whole thing done fast. If you make a mistake, so what? You move on to the next deal.
Jill DeWit: Yeah. You’ll fix it and find it. We have some of our very seasoned people like, “Oh, my gosh. I can’t believe I missed that one. They owed something over here, and I didn’t catch it.” You know what? By this … It’s funny. The person I’m talking to is so wealthy right now, writing a check is not a big deal, but it’s just still a little bit of a, “Oh, I can’t believe I missed that.” It doesn’t really happen.
Steven Butala: Again, 95% on that stuff, there’s like a .5% less than that.
Jill DeWit: Exactly.
Steven Butala: Almost 16,000 deals we’ve done, afterward, getting stung by something like this … I mean, I don’t think it’s happened five times.
Jill DeWit: Yeah. This is important to check. Even if you’re going to use … I want to make this point. Even if it’s a $10,000 transaction and your intention is going through title where they will also double-check this stuff, I would check it now ahead of time before it gets to that point. Because, you don’t want to open escrow and be that far down the process, and find out, “Oh, gosh. It turns out they that they owe $6,000 to the HOA, and I was buying it for two.”
Steven Butala: Yeah, you want to stop it right there.
Jill DeWit: You don’t want to find that out later, so don’t leave it for them. Do your homework up front. Then, I also convey that stuff. Any homework I’ve done, I give it to my title rep, too, to give them a little bit of a head start and just save some time and some money. They love that.
Steven Butala: Good stuff.
Jill DeWit: Thank you.
Steven Butala: Well, you’ve done it again. You spent another 15 minutes or so listening to The Land Academy Show. Join us next time where we discuss episode 800. Episode 800 tomorrow.
Jill DeWit: Oh, wow. I’m excited.
Steven Butala: What We Have Learned For Our Members. Jill’s going to-
Jill DeWit: I have something special planned for that episode.
Steven Butala: Jill’s going to cry. I know it.
Jill DeWit: No, I’m not. But, I have something great planned. They might cry.
Steven Butala: Oh, good.
Jill DeWit: It’s good, just kidding.
Steven Butala: What a tease.
Jill DeWit: I know. And, we answer your questions. Should you have one, post it on our free online community found at LandInvestors.com.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: I’m excited for show 800.
Steven Butala: Are you going to give stuff away?
Jill DeWit: Probably.
Steven Butala: [inaudible 00:12:58] not going to let us.
Jill DeWit: There’s going to be something good for show 800. I like it.
Steven Butala: Jill’s the kind of person, when she buys you a gift, she’ll sit around and say, “You know, I bought your Christmas present or your birthday present six years early this year.”
Jill DeWit: Well, I do that. That’s true. “I got you such a good gift. You’re going to love it.” Then, you’re like-
Steven Butala: Yeah. Then you’re like, “What good does that do?”
Jill DeWit: I know. I’m so excited. Sorry.
Steven Butala: It’s torture.
Jill DeWit: At least it’s only one day. It’s not like it’s six weeks like your birthday. By the way, you’re going to love your gift this year. Share the fun wherever you are listening or watching. Maybe it’s iTunes. Maybe it’s YouTube. While you’re at it, please rate us there.
Steven Butala: We are Steve and Jill.
Jill DeWit: We are Steve and Jill.
Steven Butala: Information-
Jill DeWit: … and inspiration-
Steven Butala: … to buy undervalued property.
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