Days on Market is the Great Equalizer (LA 843)

Days on Market is the Great Equalizer (LA 843)

Transcript:

Steven Butala:                   … 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 from sunny Southern California.

Steven Butala:                   Today, Jill and I talk about days on market, DOM, and how it’s a great equalizer.

Jill DeWit:                            Days on Market. The great equalizer. That is a new cliché invented by …

Steven Butala:                   By me.

Jill DeWit:                            Exactly. I-

Steven Butala:                   Because that market’s so important.

Jill DeWit:                            Love it.

Steven Butala:                   It’s so incredibly important, and we’ll talk about … Man, if there’s one thing that you should really understand about infill lots and eventually wholesaling houses, it’s looking at days on market, but why stop there? That’s what I say.

Jill DeWit:                            Totally agree.

Steven Butala:                   Before we get into it, though, let’s first take a question posted by one of our members on the Landinvestor’s.com online community. It’s free, and as you listen to us, please drop in your questions in the comments section below.

Jill DeWit:                            Walden asks, “Hey, guys, my first year of land investing is coming to a close, and I have no clue about taxes. I have $6,000 in cash and $40,000 in terms so far …” Not bad.

Steven Butala:                   Yeah.

Jill DeWit:                            “No idea how to calculate profit and loss for land contracts, and I have no idea about the tax advantages I can utilize for real estate. Any suggestions would be great.”

Steven Butala:                   Here’s my suggestion and for the rest of your life this applies. Don’t do your own taxes. Do not take this to someplace like H&R Block. Find yourself a good … you should only ever go to an accountant in my opinion, and a lawyer, by the way, on the advice of somebody else who’s already gone through six or seven or ten lawyers or accountants in the market wherever you are. Understands that this person is … they get it. This is not child’s play from a tax standpoint. You don’t want to get behind the eight-ball. You want to make sure you’re doing this stuff right. Because if you do it wrong, you’re going to pay forever, and if you get an overzealous accountant, they’re going to make you overpay. It’s impossible, respectfully, for me to answer in giving two sentences of information on the tax implications and what’s going on with you.

Jill DeWit:                            This person, I already forgot the first name-

Steven Butala:                   Walden.

Jill DeWit:                            Walden? Thank you. Walden, you did exactly the right thing, by the way. Walden put this in the our online community, and I’m willing to bet that right now there’s probably 10 replies in there with 10 people that have good accountants that have already helped them out and already figured all this out, and for the record, that is one of the other real big benefits to being in a community like this. You’re not walking around reinventing the wheel every day. This is a big deal. You have a question like this, where else can you go? Imagine normal business world, there’s nowhere I can turn and say, “Hey, everybody who owns a restaurant …” I don’t think it exists.

Jill DeWit:                            There should be an online restaurant community, but maybe there’s restaurateurs that have these same questions, they don’t have people to turn to. We have people to turn to. It’s our community and our group, and we’re all on the same page, and there’s someone that’s always six months ahead of you that just went through this and they’ll show you the way and they’ll help you out. It doesn’t hurt them in any way to say, “Hey, call my guy.” If anything, it helps them because now they’re going to get a better rate down the road too because they’re referring six people to this guy. Everybody’s going to win.

Steven Butala:                   Exactly.

Jill DeWit:                            Thank you.

Steven Butala:                   Here’s the other thing that doesn’t get discussed about accounting and taxes all the time is that planning for that stuff makes you make good business decisions. Like, you had some cash and term sales. How that all comes out at the end, how much money you actually made on it, you’re going to make decisions about how you buy and sell real estate and where you buy and sell it based on those outcomes.

Jill DeWit:                            Bingo.

Steven Butala:                   So, you’ve got through step one fantastically well, Walden. You really want to now get yourself … I think you were the person who asked about spreadsheets and stuff. I really think you should get everything into a spreadsheet, get it organized, and start making good business decisions based on numbers.

Jill DeWit:                            I love it. To me, that means do I want to keep going with term sales? But see how much taxes I paid. “Huh, look at the cash sales. Look what I made on those, in the taxes. Now, going to start looking at things differently.” You know, you got it.

Steven Butala:                   Today’s topic: days on market is the great equalizer. This is the meat of the show. “Well, what the heck, Steve? I thought days on market applies to houses.” It does. All infill lot property is based on house values, and the person that you sell it to build houses where they subdivide property for builders. Houses, you know how we always say start with the end and then move your way back? That’s what this is. You start with houses. Specifically, houses in a real low days on market. What is days on market? Days on market is I list a property for sale in the MLS because I’m a dingbat, and I have a real life and I don’t care about real estate except for the fact that I need a place to live and I want to move and I have to move because my job changed. So, I list it on a market with a real estate agent and they sell it. How long did it take for them to sell it? How many days? How many days on the market was it on the market did it take to sell?

Steven Butala:                   In Seattle right now, it’s less than seven. There are markets in this country that I’ve never seen in my whole life that are so low. In certain places in Scottsdale and in central Arizona where Jill and I buy and sell a lot of property, days on market are less than 30 days which is … never seen it that low there. And in Southern California, we’re about to buy it’s [inaudible 00:05:44] property. Houses there, they are in the 20-day range. So, lower’s better, so what you want to do is by infill lots in markets where the days on market’s low also. And all this information is free. You can go to realtor.com or redfin.com. There’s all kinds of places on the Internet that you can find real good days on market information.

Steven Butala:                   “Oh, that’s great, Steve. So, we got that figured out. What about rural, vacant land which is what almost all of us look at and buy?” It’s a completely different product, priced completely differently, and in rural, vacant land Jill and I have done 15,000 rural, vacant land deals, and we continue to do rural, vacant land deals all the time. This doesn’t apply to that. Days on market does not apply. What you’re appealing to … you’re appealing to the seller’s sense of, “I just don’t want the property any longer.” So, days on market to apply when you’re buying property for 20% of what it’s actually probably could sell for that day. If you’re buying a property for 20% of its value, you’re going to sell it pretty quick. You don’t have to look at it that way.

Jill DeWit:                            Thank you. You did my job on the show. What the heck, Steve. I can just kind of sit here. I love it.

Steven Butala:                   The take away is this, and during these live events, the two live events that Jill and I just did with our members, I could see everybody’s wheels turning when I said, “Let’s look at the housing market.” Everybody’s looking at me cockeyed like, “I thought I came here to buy land.”

Jill DeWit:                            Yeah, “What are you talking about?”

Steven Butala:                   Housing is tied to urban land like nobody’s business. It’s directly tied. Directly associated. Rural, vacant land and commercial real estate to some extent are more touchy-feely and there’s not as much data, and there’s a lot more risk, but a lot more reward. You can hit huge home runs with the rural, vacant land and ranches and commercial real estate. With infill lots and housing, it’s more of a singles, doubles game, which I prefer.

Jill DeWit:                            But you just said too it’s more consistent, and it’s … what’s the right word I’m looking at? Like you said, it takes the guessing out of it.

Steven Butala:                   Yeah, it’s very scientific.

Jill DeWit:                            That’s it. That’s what I’m looking for. There’s a pattern, and you’ll know what to buy and what not to buy, and it’s pretty darn easy when you sit and look at the data.

Steven Butala:                   Think about this, for every market … let’s just you Scottsdale, Arizona for some … let’s just pick on Scottsdale. Within Scottsdale, I think there’s eight or nine … at least eight, maybe five to eight ZIP Codes. Some of them have very wealthy neighborhoods, some of them don’t, some of them are in the middle. You always want the middle. You take all those five — let’s just say there’s five ZIP Codes — and you pit them against each other. You look at the days on market for each one, and one of them along with some other statistics that we’ve … if you went to the live event you know all about this.

Steven Butala:                   This is all in Land Academy 2.0. You line them up against each other, drop in the spreadsheet that we provide, and you look at them and see which one’s best. That’s where you send the mail because there’s always people, always people, who want to sell their land no matter what market you’re in for less than it’s worth because they just want the money, so why not make it easy on yourself and go to the lowest days on market area coupled with the least amount of property available, the highest turn rate. It’s all a statistic you’re in there, but it all centers around days on market. You can very easily, in just seconds, look on a website like realtor.com and see which days on market areas … what is selling fastest? That’s where you want to be. It’s all in the name of turning this property as fast as possible.

Jill DeWit:                            I have one more.

Steven Butala:                   Yeah?

Jill DeWit:                            You have like 50 … well, a couple hundred right now, thank you. My one word? Predictable.

Steven Butala:                   Yeah.

Jill DeWit:                            That’s what I was trying to put my finger on that one word. What is it that I can say that ties all this? It’s predictable.

Steven Butala:                   Yep.

Jill DeWit:                            If you know … like, you just explained what’s going to happen when I buy a house at this percentage and this time frame and this ZIP Code with this criteria, it’s predictable. It’s going to sell in X amount of days because all the data is right there.

Steven Butala:                   You got it.

Jill DeWit:                            It’s awesome.

Steven Butala:                   Well, you done it again. You spent another 10 minutes or so listening to the Land Academy Show. Happy Friday, by the way. Short but sweet show today. Join us next time where we discuss priced to sell, when what that actually means is you’re just too late.

Jill DeWit:                            And we answer your questions. Post to our online community Landinvestors.com. It’s free.

Steven Butala:                   You are not alone in your real estate ambitions.

Jill DeWit:                            Hey, can we talk about clichés little bit?

Steven Butala:                   Yeah, priced to sell, here. Yes, go ahead. Yes, yes.

Jill DeWit:                            I was going to lighten it up and not talk serious for a few minutes.

Steven Butala:                   Sounds good. Yeah.

Jill DeWit:                            All right. I was thinking, think of some of those dumb clichés that you’ve heard in your life. It’s usually our parents telling us like … or somebody else, one of my favorites is, “It’s not what you know; it’s who you know.” What’s one of your favorite stupid ones?

Steven Butala:                   “Cross that bridge when we come to it.”

Jill DeWit:                            Yep. Thank you.

Steven Butala:                   “Penny for your thoughts.”

Jill DeWit:                            Oh, that’s a good one.

Steven Butala:                   That one kills me.

Jill DeWit:                            Oh my gosh.

Steven Butala:                   All men hate that.

Jill DeWit:                            I’m trying to think. I don’t know if it’s a cliché, but it kind of is, “Oh, I had to walk uphill in snow both ways.” Where’d that come from?

Steven Butala:                   I don’t know. [crosstalk 00:11:34] or something.

Jill DeWit:                            Is that a Michigan thing?

Steven Butala:                   I don’t know.

Jill DeWit:                            Oh, I don’t know, but I was just thinking about clichés in general. Why do we use them? Why do we say them? They’re stupid.

Steven Butala:                   Because you don’t have to think. It’s real easy to not be creative and not have to … you can just say something and everybody knows what you mean, and they can all, “Okay. Let’s open another beer.”

Jill DeWit:                            Speaking of beer, “He’s one can shy of a six-pack.” Whatever … you know, that’s-

Steven Butala:                   “Not the brightest bulb in the box.”

Jill DeWit:                            That’s it. This is good. Be sure to hit the subscribe button to stay up-to-date on our podcast, and like us in comment, and what like you to see in future shows. If you’re listening on iTunes, 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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