Finance Friday with Steven Butala and Justin Sliva (LA 878)
Finance Friday with Steven Butala and Justin Sliva (LA 878)
Transcript:
Steven: Steven Justin here. Welcome to the Land Academy show. Entertaining land and investment talk. I’m Steven Jakiela. With Justin Sliva broadcasting from Southern California. And Justin’s in Dallas Ft. Worth.
Justin: Hey, hey. How’s it going today?
Steven: Justin and I introduce Finance Friday and we did it last Friday. We really actually messed it up or I messed it up. Cause it was the first episode and that’s just what happens. But today I think it’s for real. Justin was just telling me before the show, he’s got a bunch of deals he’s looking at from Land Academy members and other land investors out there. Before we get into it let’s take a question Justin posted by one of the members at landinvestors.com, online community. It’s free and I’ll read the question and I’d love to hear your thoughts on this.
Justin: Okay.
Steven: Steven Kish asks, looking to do the latest acquisitions or my latest acquisitions with a funding partner. Let me know if you’re a funder or you’re looking to do deals with somebody. I don’t have an agreement for this. Does anyone have one that they can share, send directly to me. Also, when doing a purchase using funding partner, do you allow the funder to take title? Any answer would be appreciated. Go ahead and run with that.
Justin: Wow, I think that’s a great question. Actually, I have spoken to Steven Kish this week on a couple of properties. Yeah. So we actually looked at four his properties that he had. Some great properties. We sent him some emails back and we’re still kind of figuring out the last bit of it. So normally what we do from our side is that we do take title of it because we’re putting the money up. You have an investor agreement with us. It’s a one page document that kind of lays out the expectations of both sides and how the splits going to be. What we’re going to do with it and it’s signed online. It’s pretty simple, pretty easy. What property? What our expectations are and what our splits look like. Our split is fifty fifty of the prophet on the back end. We do fund all of it. We fund the closing cost and those come back out on the front side.
Steven: So, can you give us a numbers example of like oversimplification number of what a split would look like cause those are the questions I’m getting at.
Justin: Yeah. We just had a property that was actually ten thousand dollars on a dot with closing costs that are going to be ten eight. We’re expecting that property to sale for about thirty two thousand to thirty five thousand. So, to keep it simple, it would be ten thousand sales for thirty thousand. We pull the ten thousand back on the front and then we split what’s left over from HUD to HUD. And that will be ten thousand each way. Yeah, it’s a cool little thing we have there. Some people are like, “Ah, ten thousand bucks I paid you to borrow your money” and I’m like, well, we’re not a bank. If you only made five hundred bucks, we’re only splitting two hundred and fifty dollars. We’re kind of riding it out with you.
Steven: Boy, my answer to that is that you are welcome to go to your bank and get funding on these deals.
Justin: Yeah. I tried that. They laughed at me. And that’s kind of where this came from. You know. We had some guys do some private funding. I did it outside our entity. My land is missing. It worked out pretty well and I was like, man, there’s a lot of people that need that. Then we turned on it. Then we after the podcast last week, two weeks ago. Just coming out. They were getting ten to twelve requests a day on just information or properties being thrown at us. We’ve had forty properties this week sent to us. We’ve actually looked at seventeen of them really closely and agreed with four.
Steven: Wow. Well let’s get into it. Today’s topic is Finance Friday with Justin and me. This is the meat of the show.
Justin: Yeah.
Steven: I’d love to today and just probably every other day. This is kind of taking on its own template form. If you can describe your week. You kind of already started there and tell us. You looked at seventeen and agreed at four?
Justin: Yeah. A little bit more than we kind of talked about. And out of those four you know something will come up. The person will either say, “Hey, I want to fund myself”. We won’t make it to close for some reason. But I see that two or three will make it into closing and actually put back to market. What we saw that kind of took us out of a couple of these deals were access. We talked about access. The two track.
Justin: The question is, is it easement? Can you prove it’s a deeded easement? What that looks like? Lot of times people can’t. And so we ask the question of, “Well, would you want to buy it if you can’t get to it legally?” You have legal deeded easement. You have physical access. Legal access. The different webs we’re going to go with. Ability is another big one this week. A lot of stuff that’s in the mountains that has an easement to get to it but when you look at it in 3D, you can’t really do anything with it. And you’re like well, it’s beautiful. Yeah, it’s got great views. But where are you going to sit? The lawn chair won’t even sit up there because it’s so steep.
Steven: It’s so slopy.
Justin: Yeah, too slopy. So, we’ve actually had a couple of people that had, and this is kind of crazy. It’s fun part for me. Is had multiple clients send me the same property.
Steven: What?
Justin: So, yeah. So, you’re like “Oh, I’ve already looked at this one”. You give them the same feedback. “Hey, if you can get it for x, it will be a good deal.” Wouldn’t go over that. This is the reasons. This one’s pretty slopy. I’d give the same feedback to both parties and kind of leave it at that. Don’t try to get too involved. But couple of multiple hundred plus acre properties in California brought in. California was pretty heavy. Pacific Northwest was really heavy this week, as well. Your Oregons, your Washingtons. People are real active up there in that area. That’s awesome, beautiful country up there. Texas, seeing that. We’ve had fire property in three different states, too. That’s interesting. The sellers are disclosing and saying, “Hey, these were in fires”. So, the question becomes like, “Hey, have you looked at the property and what state is it in today?”.
Justin: And one of them, the road that we turned on had great access. Beautiful property. You could look back in 2013 on Google Maps and see what it looked like. Beautiful, beautiful. You look at 2016 picture and it’s pretty charred up. Okay so, let’s spend fifty bucks and get somebody with a cell phone and take some pictures and let us know what it looks like. And someone looked at me like I was crazy when I said it. But, I think that’s fifty dollars well spent. Ya know. Even if we have to cover it.
Steven: Are you getting any sense that you have some people submitting properties that are under contract and they’re just dumping them on you to see what you say? And you’re making the acquisition decision for them.
Justin: You know. You see that a little bit. I’m a glass half full kind of guy, so I’d like to believe that that’s not happening more. But you do have some people that asks questions and say, “Hey”. They send me a list of properties. I look at them and say, “Yes”, “No”, “Yes”, “No”. These are my feedback on it and then I don’t hear from them ever again. And so that’s kind of a tough deal. But I want to believe that they got busy.
Justin: Or B, they’re not going to pull the trigger or they didn’t have it under contract and it was just, “We had this offer”. They people called me back and before I call them back I want to know what I should say.” A good thing for that is that we hired a transaction coordinator this week. So, we’re looking at getting her up to speed, where we can have her in place to say, “Hey, someone gets a purchase agreement back or a phone call back. She can take it from that point and run it til you can sale the property. And she just takes a piece of the deal. That’s a great thing for scalability for a lot of our clients and we’re going to have that offer in house.
Steven: That’s great. Man, that’s a huge benefit. So, not only are you going to fund it but you’re going to help close it for a fee. That’s a natural progression.
Justin: Yeah, it’s all turn key right there for you. And you have one person to talk to. We actually just got off the phone with my commercial guy here locally and he’s looking for commercial space to fit what I need. A. To have a podcast studio so we can continue to do these Finance Fridays and our other endeavors. And then, B have enough space to have two and three of those people ready to go at drop of a hat. And then keep everything. It’ll kind be like a land think tank in Burleson, Texas. It would be pretty neat. So, we’re looking at that right now. He’s going through his different spaces he has available. We’re looking probably at the end of the first quarter or January, February. Rolling into it.
Steven: That’s awesome, man. Well, I’m happy we’re involved with each other, because it’s like you’re almost finishing a sentence that we start and vice-versa.
Justin: Yeah, it’s great to work with that. I read something earlier. Surround yourself with people that keep pushing you forward, you like being around and that’s what we’ve tried to do. Eighteen’s been a pivotal year. I remember on podcast that you said last week, you start to lose friends but you start to make new ones and those relationships you start to build. And so, I almost came in my bathing suit today. But it’s a good thing to have like minded people around each other pushing you forward. And putting those “pie in the sky” ideas into fruition and seeing what you can do with them.
Steven: That’s awesome, man. You know, we have schedules released for House Academy and then after that we’re kicking around whether it’s going to be Mobile Academy or there’s a couple of other programs that we’re kicking around. They’re in the writing stages. I just think that’s going to expand your business. Do you see buying and selling houses as profitable? Are you interested in moving that kind of real estate as much as you guys are with land?
Justin: My partner is. He loves the idea of houses. This year between the guys I’ve worked with and myself we’ve wholesaled or flipped twenty one houses this year. Right now I’ve got two currently going that are flips. One is a little bit more in depth than I’ve normally gotten. Beam goes in tomorrow. New cabinets. The bathroom last week. It’s a full remodel but the numbers were there for us. What I see, you have a lot of cash outlay in a house that you flip that way. And the amount of cash that you have wrapped up in houses right now. I could be doing twelve land deals that are going to make x amount back and this house is going to make this back.
Justin: But at the same time, I want that feeling of experience and hands on because my personality is that I want to go touch something every now and again. I don’t want to do everything. But, I go out there. I put blinds up yesterday in one of the houses, the flip houses that we have listed. I just didn’t think it felt right. So, I went and put blinds up. It gave me something to do. I wouldn’t do it at my own house. But I go and do it here because I feel like I’m doing something. But to answer your question, yes and no. It’s a natural progression. I think the hard money side there. There’s some pieces there. Some of the capital guys we work with there, they love houses and that’s just a tangible asset. They love the commercial side. They love producing properties. Land. They look at me like I’m crazy.
Justin: When I bring up land. They call it the alligator. It’s just going to chomp away at you. But, with a house, for instance. Carry cost on a land, you have taxes once a year. Maybe HOA once a year. On house, you’re working on it, so you have electric, water. If you have hard money you on a juice for it, you have that. And then you have insurance, because of it burns down you want to protect your investment. So, you do have recurring cost every month. But whole selling houses is a totally different world. So, there’s some benefit to that if you can put that in place like ya’ll do. You have no cash outlay. You just shuffling paperwork to get it to close or you find transactional funding to get it to close and get it to list on MLS. So, there’s a lot of benefit in that and it’s a great opportunity for a lot of people.
Steven: I’ve not looked at our 2018 numbers yet. But, I’m going to guess and say I bet we made more money on houses than we did cash money. The percentages on houses over land. The way we have it set up where’s there’s just no real work for Jill and I. The bank account for house and land are separate. I’m watching what’s going on and they’re pretty close to each other but land started with a lot more. We literally had a bank account that started with a zero for houses.
Justin: Okay, yeah and that’s what we did last year when we started whole selling houses. We fell into the first one, rolled into the second and then ended up doing eight or nine and more. I actually lived off that money and the land money just went back into the business. It was easier this year. The complete year was funded by a commercial deal. I say commercial. It was a eight commercial complex. So, my whole year was made off of that and land just went back into land. And then houses on top of houses. I hate houses and love houses. This is a love hate relationship. It’s oh yeah it’s great. If I do this again, punch me. That’s what I told one of my partners yesterday. He decided to ride with me to pick up blinds and we were talking podcast that we’re kind of putting together. I told him as we’re walking in to get the blinds, if I do this again just punch me as hard as you can.
Steven: Like renovating, yeah. We painted and carpeted interior of a house this year, that we’re just about to ready to close on from a south side. We’re going to clear eighty grand on it. We didn’t do anything. They boots on the ground did one hundred percent of it and even then it took like two weeks to get paint and carpet and realistically, so maybe not. In the end the money goes into the account and we’re like, ah, maybe it was worth it.
Justin: Yeah and that’s the way I’ve been. Our apartment complex we put five thousand of reno work into it. We did carpet on stairs. I put in two appliance package in kitchens. Put floors in our living room and a bathroom in one of the units. And adjusted all the contracts that were in place. Now that was easy. But when you start putting in some beams and moving islands and new cabinets and gutting bathrooms. That’s a pain in the butt.
Steven: Yeah, that’s not the business model we teach and it’s not the business model at all. It all starts with that thought. You know, where you’re looking at the asset, where you’re looking at the deal and you’re saying, “You know what? We can make a clean twenty five thousand bucks in the single”, real quickly. Or we can do this. We can put this in. We can do this. We can do this and make a hundred. I avoid that thought altogether anymore. I don’t even let myself go there anymore.
Justin: It’s nice to make twenty five grand and not do much work. Other than sign paper. Answer the call, sign the paper, move it to escrow and have them take care of it for you.
Steven: Exactly. Hey, I know you said it last week. What’s the perfect deal for you? People are obviously catching onto this. It’s working for you and them. In the interest of not having your time wasted or anybody else’s, what’s a great land deal for you?
Justin: So, first thing I’m going to look at is it has access. So, make sure it has a road to it. If it’s a desert two track and it’s out in the middle of nowhere and you can see the easement pretty quickly, I start digging a bit deeper, at that point. But seeing a purchase price of anything between five and fifteen thousand bucks. That we know it’s going to list for twenty five to forty five thousand dollars. And everybody’s like, well that sounds like home runs. Well, yeah. That’s what we’re here. We want to make sure you can land your home runs. But, we see those quite a bit. Like, this week. For instance, eleven thousand dollar purchase price sold for thirty two. Seven thousand dollar purchase price sold for twenty thousand.
Steven: Those are normal deals.
Justin: I think if you’re doing one or two of those a week as an investor or you’re doing two a month and you’re making ten to twenty grand a deal, you have a pretty good life. That’s a quarter million dollars a year life for somebody that’s doing it part time. Then you decide to scale up your business and how do it do it once a week? How do I do it three times a week? Those are the type deals that we want to see. And I think that that’s how we help our investor’s grow. Because we’re allowed an opportunity to do that.
Steven: Joe Martin just cleared a hundred and thirty thousand on a deal and quit his job. Jill’s actually going to have him. I don’t know if you’ve heard about this, cause Joe’s in our group. Joe knows Justin. Jill’s going to have him on her show next Wednesday on the live Facebook show. He’s going to tell the whole story.
Justin: Nice.
Steven: I think that’s a home run.
Justin: No, I agree. I agree. On a transactional deal for us. Do you say, “Okay, hey. We have a deal on our table that’s three hundred and fifty grand, comps at a million”. That’s a life changing deal for somebody. Is that a home run? Why, yes. But realistically, when somebody goes out to mail and they’re wanting to understand exactly what we look for. To me in that transactional piece, if we’re putting up ten and you’re going to get thirty back and you get ten back on your side. You can do that deal the next one yourself. Not you’ve scaled out of us. You decide to use us, you can do two deals now. You scaled out. To me, the home run’s to scale out is my whole goal. It’s not to say, “Hey I’m going to clear two hundred thousand dollars on every deal”. Yeah, we could do that but at that point how do we help the regular investor scale and can you do that more than once? Or what does that look like? Solid doubles. I guess you could call them versus a home run.
Steven: That’s what I would say. Buy for ten. Sell for thirty. That’s a real stand up tall.
Justin: Yep. But you do that once a month you’re making a quarter million dollars a year. My math right? Twenty? Yeah.
Steven: It’s just like real batting. Maybe you hit one or two out a year. [inaudible 00:17:17]and half a million to approaching a million dollars a year.
Justin: I can speak for what we’ve done this year. The first quarter this year or first half this year we had five deals that all made it over sixty thousand. We had one that made it over a hundred. And so, those put you in a different bracket going into the second half of the year. It’s like okay work on a passion project or I can focus on growing those things up. And the idea of I’ve got to make a million dollars today or tomorrow is not necessarily the mindset for a thirty six year old guy that’s just trying to get started. But what is the plan to get there and how do I snowball it up where I can consistently make those type of returns?
Steven: Without question, that’s exactly the attitude that you have to come into this with. Putting a system in place, where month over month you’re making a little bit more money and learning a little bit more and using the tools that you’re providing or wherever you find tools to just get better and better and better at it. And spend less time on the stuff that’s just dragging you down.
Justin: No, exactly. Exactly. And that’s the transaction coordinator that you talk about and 2.0. Getting that time out of there and getting those people in place. You know, they just make sure that they’re checking on title. They’re checking on the photographer. They’re checking on that and they put the boiler plate out and they list it out. Those type deals, you freed up your time. You have them do one deal a month with you or one deal a week. They’re not overworked. You’re not overworked and you’re still making, you know, you can make a million dollars a year. At that same ten to twenty thousand dollars. So, make twenty grand a week. You do it every week. You’re making a million and that’s actual cash.
Steven: That’s not a lot of work.
Justin: No. It’s one deal a week.
Steven: Guarantee, it’s less work than a full time job.
Justin: Agreed. I think you and me. People like us, we get in trouble with that. If we don’t have a full time job, we find something else to do. So we’re going to add something else to our plate.
Steven: I was just going to ask you. Cause last time I saw you, you were like, I didn’t quit my job to spend a lot of time doing stuff. I bet you’re working fifty, sixty hours a week. Right?
Justin: The last couple of weeks, I’ve been up pretty late going through deals and doing some calls late at night cause I try to see the kids before they go to bed. But, at the same time, I’m like okay, West Coast is two hours behind me. It’s six o’clock there, so I can still work a little bit later with those clients and so that’s what we’ve been doing.
Steven: That’s awesome, man.
Justin: It’s definitely a neat turn of events. It’s been a crazy couple of weeks.
Steven: Awesome. Hey, you’re going to join us later for the Land Academy advance member. Right?
Justin: Yep. I wouldn’t miss it.
Steven: Well, you’ve done it again. You’ve spent another fifteen, maybe thirty minutes listening to Jus and I’s version of the Land Academy Show. Join us next time for another interesting episode. [inaudible 00:20:07] show and we answer your questions and post it online at the online community, landinvesters.com. It’s free. Hey, as always. You are not alone in your real estate ambition. Thanks a lot, Justin. Talk to you soon.
Justin: Hey, no problem.
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