Our $25,000 Profit SFR Failure (833)
Our $25,000 Profit SFR Failure (833)
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 our $25,000 profit SFR failure.
Jill DeWit: That’s so funny. It’s hard … Yes, we screwed it all up, let’s just say, and only made 25,000.
Steven Butala: This is the conversation we had right before we hit the record button.
Jill DeWit: Yep.
Steven Butala: This is Jill talking, “How do you expect to have a successful podcast with the word failure in the title?”
Jill DeWit: Yeah. Where are you going with that?
Steven Butala: “Can we just make this positive somehow?”
Jill DeWit: Exactly.
Steven Butala: “What is it with you and the negative stuff?”
Jill DeWit: Fail with Land Academy.
Steven Butala: We just did a show a couple days ago, “Ethics? Why do you want to talk about ethics at all?”
Jill DeWit: Oh, my gosh.
Steven Butala: “Can’t we talk about-”
Jill DeWit: Ethics and failure-
Steven Butala: “… banana splits with a cherry on top?”
Jill DeWit: What? Next we’re going to bring in My Lawyer Can Be Your Lawyer, and Let’s Talk Taxes. Where are you coming up … I want to go … To follow up what you told me the other day, “Oh, yeah? Well, you try coming up with 895 titles.” Okay, well, I won’t pick My Lawyer Is Your Lawyer.
Steven Butala: Join us next tomorrow where we talk about My First Divorce.
Jill DeWit: Yeah. That to be great. It’s not me. That’s awesome.
Steven Butala: Before we get into it, let’s take a question posted by one of our members-
Jill DeWit: Wait, wait, wait, wait … I want to back up here. Let’s think of the three real quick, the three worst titles that we could cover.
Steven Butala: All right.
Jill DeWit: I like to say one is, “Today we talk income tax.” Let’s see …
Steven Butala: Jack’s Journey Through Foot Fungus.
Jill DeWit: My Kid Got Detention Again. Let’s see. Let me see here. And, Who Says Being Bipolar Can’t Work For You?
Steven Butala: Your Marriage and Your Sexual Incompatibility.
Jill DeWit: Yeah. There we go. All right, you got one more. I did three. You do one more.
Steven Butala: No, go ahead. I did a bunch.
Jill DeWit: Okay.
Steven Butala: You just don’t remember them, because you were thinking about your own.
Jill DeWit: No, that’s bad. Oh, my gosh. Okay. I think we’ve covered, though. I just wanted to get a few of those horrible topics out of the way that could be talking about that we’re not.
Steven Butala: Did you ever see Fight Club the movie?
Jill DeWit: I think I did.
Steven Butala: They squat in this house, and he finds all these old journals.
Jill DeWit: Yeah. I think you had me watch that.
Steven Butala: The guy’s name was Jack and he writes in the third person, so he’s like, “Jack’s sense of failure. I am Jack’s sense of hunger this week.” It actually goes into exactly what we’re talking about how there’s … reason that they’re all sitting there in some vacant house never published, because it’s awful.
Jill DeWit: Right.
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. As you’re listening or watching us on YouTube, please drop your questions into the comment slot below.
Jill DeWit: Jordan asks, “I’m currently in the process of closing on my first ever deal and am, of course [inaudible 00:03:33] This is [inaudible 00:03:34] doing so through TitleMind.” This is an older question when we had TitleMind.
Steven Butala: Wow.
Jill DeWit: All right. “I have three questions. How critical is it to have title insurance for a land transaction? Two, when is it too late to buy insurance? I just want to worry about getting this thing closed now. Can I still do so after the fact? Then, anyone know of a company land investors typically go to? I’m pretty anxious to get this whole thing done. Thank you.” So, really were two questions. What was the first question? The first question was … Oh, how critical is it to have title insurance for land? For me? I think it’s price-
Steven Butala: It’s price driven, I agree.
Jill DeWit: It’s really price driven, because if it’s a couple thousand dollar property there you’re selling for a couple thousand dollars, it may not be a big deal. But, say like we talk about infill lots. Someone’s going to put a house there, and you’re buying it for 20,000 and you’re selling it for 50, because it’s worth 80. Oh, goodness, yes. Title insurance is a must.
Steven Butala: Yeah, Jill’s exactly right. There’s two tests for, “Do I need title insurance?” You ask yourself these two questions. Number one, “Is the purchase price more than five grand?” If it is, you generally want to get title insurance. Below that, it doesn’t make sense. Number two, “Will this property ever be built on or lent against?” Then the answer is, “Yes.” It’s as simple as that.
Jill DeWit: Correct.
Steven Butala: More and more these days we don’t close anything, now, without title insurance with very, very few exceptions.
Jill DeWit: Those are bigger deals, and that’s why. When’s it too late to buy title insurance?
Steven Butala: Never.
Jill DeWit: Yeah, you can go back … I understand that, too. Hurry up get … Sometimes, you want to hurry up and get the deal done, and then you could have title insurance added and done later on. That’s maybe not be the most cost effective way/however, but it can be done.
Steven Butala: Jill and I have done deals … I’ll tell you. This might seem ironic to a more seasoned real estate investor, but if we get a great property, we’ll close it right there. We’ll do a close without title insurance, and then … because it’s so good, so profitable … a week after that, we’ll ask the seller to stick around and get title insurance. We’ll do the whole thing.
Jill DeWit: Right. But, we got them their money, so they’re all excited, and it’s ours.
Steven Butala: Here’s why we have the confidence to do that, because a lot of people are listening to this saying, “Well, that defeats the whole purpose, because the title agent, who’s an unrelated third-party, has got to check out to make sure all this stuff is okay.” We’ve been doing this so long, we are basically our own title plant. We can see who owns it, and what’s happening, if there’s liens against it. Inside of five minutes, we can basically do our own title stuff.
Jill DeWit: Right.
Steven Butala: But, you’re new. Do it the right way.
Jill DeWit: Right. Having that title insurance policy on a more expensive property is nothing more than an unrelated third-party signing off that the deal is kosher. We all know it’s kosher, but the bank’s … why they’re so special, it’s a whole nother podcast … but the bank wants to see an official title policy run through somebody well known. That makes them feel better, and I understand. That’s why.
Steven Butala: Right. Today’s topic: Our $25,000 Profit SFR Failure. This is the meat of the show. Yes, we just failed at buying and selling a piece of real estate, actually a house, in an urban area. We only made $25,000. The whole point to this show is not to talk about failure like we joked about in the beginning. My point to it is let’s just say … because, right now, we buy about four houses a month. It ends up being about 50 deals a year in one market. Just in one market, and we’re still testing it before we nationally expand. Let’s say they all fail, and we only make $25,000 per deal. That’s 100,000 bucks a month. It’s $1.2 million gross a year failing at buying and selling houses. Think about that for a second.
Steven Butala: I think we fail when we only make 100,000 grand a month buying and selling real estate. What would we make? Between $40 and $80,000 per wholesale deal. In California, we should be making closer to 150,000.
Jill DeWit: Right.
Steven Butala: You know that old tagline, “You already know fortunes can be made in real estate”?
Jill DeWit: Right.
Steven Butala: We’re doing it. Every once in a while, I miscalculate. This property had some parcel split related issues that I could not foresee. Because the way I price things and how we do business, we had mechanisms in place to make sure we don’t actually lose any money. We just don’t maximize how much money we make.
Jill DeWit: Right.
Steven Butala: That’s what this is all about. This property specifically we thought we were going to split the parcel up into four lots, actually. It ended up, to our credit … I’m going to pat myself on the back. We priced it as if something could go wrong if we just had to resell it. Just mark it up and resell it existing. We’ll be okay.
Jill DeWit: Exactly.
Steven Butala: That’s what ended up happening.
Jill DeWit: Then we did. That’s the way you want to do it. You want to have a plan here and a plan here. You know, we could have still pushed it, but we got to the point where, honestly, it was taking up too much of our time.
Steven Butala: Yeah, too much of Jill’s time.
Jill DeWit: We are still training our team, and it was like, “All right, how much more do we want to hang onto this property to make that much?” You have to have that conversation with yourself. “I could hang onto it for another 30 days and make an extra X. Is my time worth that?” Then it got to the point where, “Nope, it’s actually not.”
Steven Butala: It’s always a bird in the hand. You know that old saying, “A bird in the hand is worth two in the bush”?
Jill DeWit: Right.
Steven Butala: That’s what this ended up being.
Jill DeWit: Exactly.
Steven Butala: Because, we have so many deals coming in. That’s the whole key.
Jill DeWit: Flip them and then move on.
Steven Butala: That’s the whole key. We’re in the driver’s seat on every single one of these, because if somebody looks at you sideways in one of these deals, we can just say, “You know what? I’m going to open the next offer on a stack of offers that I get every day. I just don’t need it.”
Jill DeWit: “I’ll buy that one.”
Steven Butala: Yeah.
Jill DeWit: Exactly. That’s so true. I’m trying to think what else I wanted to share about this particular deal. Do you have you want to think about this deal?
Steven Butala: It’s a great property.
Jill DeWit: It is.
Steven Butala: The property itself is fantastic. It’s huge house. It’s a whole block.
Jill DeWit: It’s like singles. What this is is we chose on this one, it had a single. At the end of the day, that is the safest way. You know, we made $25,000. We probably could have even pushed it for more, but again, hit that single, get out. It’s because you know how to do it. Buy it right. You bought it. We haven’t even owned it weeks.
Steven Butala: Yeah, weeks.
Jill DeWit: The minute we closed, I mean there was equity there, because of the way we bought it. That’s the best way. That’s the whole strategy and plan. That, we never mess up.
Steven Butala: We had a plan A, plan B, and plan C. I always do on every deal. Plan A was split it into four properties and sell off the dirt, because it’s way more than what we paid. That’s was possible. We would have to wait a year. Okay. Not willing to do that.
Steven Butala: Plan B, cut it in half and wait about … I don’t know … 90 days, realistically, from start to finish. Get the separate APN. Now you got two real estate deals instead of one. You have a house on one property, which you will make back your purchase price on. Then this other pile of dirt which ends up being all the profit. We make about $85,000 that way.
Steven Butala: Or, next week you can make 25 grand just selling the whole thing as is.
Jill DeWit: Just walk away.
Steven Butala: Bird in the hand.
Jill DeWit: Thank you.
Steven Butala: That’s what we did.
Jill DeWit: Exactly.
Steven Butala: It would have been a little bit harder to make that decision if we didn’t have four other deals going on right now, where we’re going to net between 40 to 80, and then one of them just came in a $140,000.
Jill DeWit: That’s what happens.
Steven Butala: When you average it out, did we lose 25,000, or did we actually average the best one that month, average the worst one that month. It’s closer to 50,000 per deal.
Jill DeWit: Exactly. It’s going to work out just fine.
Steven Butala: Well, you’ve done it again. You’ve spent another 15 minutes or so listening or watching the Land Academy show. Join us next time where we cover another interesting real estate acquisition topic.
Jill DeWit: And, we answer your questions posted on our online community at LandInvestors.com. It’s free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: That’s good. It’s good to share. It’s good-
Steven Butala: It’s fun to talk about making money.
Jill DeWit: It is. I feel like this often comes up on our weekly member calls of like, “Oh, I screwed it all up. I only made X amount.” We’re like, “Come on.” Any sentence that starts with, “I only made X,” you already won. You did fine.
Steven Butala: The other thing that we did that we probably should have shared in the main show is that what you and I really agreed on probably, hopefully, finally forever is that improving property should not be in our thought process ever again. What we’re good at is-
Jill DeWit: Exactly. We got emotional.
Steven Butala: Yeah. Well, we looked at it too hard.
Jill DeWit: Yes, we did. I still never saw it, but-
Steven Butala: All you should be is, “I’m going to buy it for 100,000 right now, and sell it for 125,000 tomorrow.” That’s it.
Jill DeWit: Exactly. There we go.
Steven Butala: Don’t see something that’s not there. All this advice I constantly give, I went against on that deal. Personally went against it. I don’t know why.
Jill DeWit: Exactly. Thank you. Share the fun by hitting the Subscribe button if you are watching us on YouTube. That way you will stay up to date on our podcast and make sure you’re in the loop on our channel. Like us and please comment on what you would like to see in future shows. If you’re listening on iTunes, please rate us there. We for Steve and Jill.
Steven Butala: We are Steve and Jill. Information-
Jill DeWit: … and inspiration-
Steven Butala: … to buy undervalued property.
If you enjoyed the podcast, please review it in iTunes . Reviews are incredibly important for rankings on iTunes. My staff and I read each and every one.
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
The BuWit Family of Companies include:
I would like to think it’s entertaining and informative and in the end profitable.
And finally, don’t forget to subscribe to the show on iTunes.
