Finance Friday with Steven Butala and Justin Sliva (LA 883)
Finance Friday with Steven Butala and Justin Sliva (LA 883)
Transcript:
Steven Butala: Steve an Justin here, welcome to the Land Academy show, Entertaining Land Investment talk. I’m Steven Jack Butala with Justin Sliva. Broadcasting from Southern California in Dallas Fort Worth. Today Justin and I talk about the deals we’ve been working on this week.
So, you just said in the earlier show, Justin, that you were on the phone six hours a day?
Justin Sliva: Yeah, it’s been crazy. People just getting a hold of, trying to look at deals, trying to get ready for the next mailer. What we’re looking for and everything’s been pretty positive, the feedback and everything. We closed on some deals this week where people got paid. Got some funding back out for deals that we partnered on. So, it’s been a busy week. Little overwhelming and my wife’s not used to me being on the phone this much. So it’s been fun. It’s been fun.
Steven Butala: How about your kids?
Justin Sliva: I try to make time for them so I’m trying to schedule it where it’s not when they’re home, ’cause they’re at school till 2/2:30 and then they go to bed at seven. So, I’ve had a couple of guys that have been west coast that can meet me later and so that’s been good. The east coast guys, it makes it tough on them because they’re coming in but it’s crazy to think about east coast, west coast and how many deals we’re getting all over the country right now and been thrown at us. It’s unreal.
Steven Butala: All right, I have like a hundred questions but I’m gonna ask them right before I take a question from one of our members on thelandinvesters.com online community. So, Max Edison asks, remember him from the live event? He’s a young guy. He’s super [crosstalk]
Justin Sliva: Okay.
Steven Butala: He says, Hi everyone, I was wondering what’s some of the techniques people use to price zip codes within a given county are? When searching for comps by zip codes within the county. No results are coming up compared to the results that are populating when searching for the entire county. And help would be appreciated.” What do you think Justin?
Justin Sliva: Yeah, so-
Steven Butala: This is a typical question.
Justin Sliva: Yeah, and I … my first question for … ’cause I’ll go to houses first, ’cause that’s where I went before infill lots on zip code, and so I would actually get zip coded subdivision and comp it to that point. But it depends on the access or what he has, the different tools we’ve done with MLS, we’ve done with things like that where we go in and look at that. We have a little bit more access in some of the areas that we shop. But for the most part it’s a … starting with the spreadsheet that you have in the infill lots and working to the equity planner and go from there and see, drill it down from there.
Steven Butala: So, I think it sounds like he’s having an actual within Real Quest issue where he finds a bunch of infill lots when just sorting for the county and then he kicks in the zip code and he’s getting zero results. Here’s the thing, we all go through this. Every single time I do a mailer it’s 25 years later for me, and I go through this kind of stuff with Real Quest and Data tree or whatever program you’re using because they’re sensitive. It’s a huge database. It’s a 150 000 000 properties plus in these databases so you have to finesse your way through them to get the results that you pretty much should know or are already there or that you’re checking form someplace else, you know?
Justin Sliva: Okay.
Steven Butala: Do you have any-
Justin Sliva: Yeah, no. You took it a different direction than I was thinking of the question. Doing that, that’s when I start pulling back filters of Real Quest and saying, “Okay hey, if I’m looking for this in a zip code they may not be there.” The county may not feed that zip code data in and so you may not see that and so you’re working from there.
Steven Butala: Right.
Justin Sliva: I’ve done radius’s off of address inside of zip codes to help with that too. So they ave so much from this location so I’ll find a center point in that zip code when I look at a zip code map. Do a radius’s from there and then shot from that point as well.
Steven Butala: Right.
Justin Sliva: And Real Quest is real good about the radius.
Steven Butala: Yep. My real point to this is that everybody has to finesse these databases and [inaudible] Land use. They’re very different. What’s in Dallas may be very different than that’s what’s in L.A. County. In fact, I know it is for sure and how assessors populate those databases. So even the most advanced people … we talk about this at the live events a lot. This topic. Even the most advanced people have to run through two or there or four times until it makes sense.
Justin Sliva: Yeah.
Steven Butala: I wish it was A to B to C and that’s it. And that’s how you do it.
Justin Sliva: Well, with so many different assessors they all have first opinions on how it has to be done.
Steven Butala: If it was easy everybody would be doing this.
Justin Sliva: Yep.
Steven Butala: [inaudible] Justin and I talk quite simply about the deals that we’ve been doing this week so give us some highlights bud.
Justin Sliva: And closed on a couple of deals. We’ll start with some sales that we had. Not home runs, just solid singles bought for 8000, sold for 17. Bought for six sold for, it was 14. So decent margin on those properties. I’m getting some feedback from people. They’re saying, “Hey, you’re only wanting to do deals you triple your money.” And I’m saying, “No, that’s what I think you should be buying them at because we’re seeing those every day.” But as you see, those deals, they made solid margin. We all went on our way and made a little bit of money and moved on.we had a few more, I’m trying to look at notes over my shoulder here to see what else we had but we had some people … one of the cool things this week. We had a guy in our group. He called and said, “Hey man, I just bought eight lots and this deal just fell in my lap. I don’t have the money for it, what can you do?” And we looked at it. It was in Georgia. $9000 deal comps at 45 000 bucks. That’s exactly why we’re here. To help that guy scale out of that.
So, he’s already had the title work started. He had everything ready to go. He’s like, “Man, we just got to close the deal. I don’t have the funds. Can you help me?” And I’m like, “Yeah.” He found us on YouTube with one of the … from last weeks show. So that was pretty cool. Bunch of questions and property come in this week with access issues and topo and I wanna hit on a point here. We say no on some deals and we do that because it saves the investor. It’s for us yeah because it’s our money, but we say no a lot of times and we get people they get mad and they try to prove us wrong and say, “Hey, we’re gonna do this.” But we do that in a way that it’s, “Hey, we look at it and it’s got a thin access line. Ti doesn’t really look like it has good access.” And as we start asking that question, start pushing a little bit harder and you see it run through somebody’s front yard and you’re like, “Man, that access to get there. You’re going through their front gate. They probably had a easement when somebody did something down there at one time.”
It’s not real access and they wanna get mad or they priced it a little bit high and they like, “Well, it’s still gonna make money.” Yeah, but let’s work backwards from the sell price that you think it sells from and you work through the commissions on the buy side for the … when you’re selling it for the realtor, the listing, the closing costs on both sides and then you get to where a property looks like it eight or $9000 of margin really only has three or four thousand bugs in margin and you’re kind of going, “do we really wanna tie up this much money that long?” And so we’re having to do a lot of that conversation right now.
Steven Butala: Yeah, my comment to that too is that you don’t do the sales form either. They have to sell it.
Justin Sliva: Yeah.
Steven Butala: So you really are just saving them a huge headache.
Justin Sliva: Yeah, and we’ve had … I think I’ve talked to 45/50 people this week. Various phone calls, emails, messages and it seems that out of that 50 we had one that got a little perturbed because he thought that he was gonna do a crap ton of mail and he you just go, “No, I have automatic funding.” And so when I was talking to my partner this morning, we had a meeting this morning and I was like, “Maybe we should offer putting people on hard money. If they’re so stuck on a deal. We don’t wanna partner on them. Pay a couple of points. We’ll pay a percentage of it and put you one a juice from day one.” You can fund that way. That’s not we’re built for but maybe we do that for a couple of people that are just so dead set on just having this endless pool of money and no partnership. They just want an easy button for money and so that’s-
Steven Butala: Yeah, that’s only gonna end on way.
Justin Sliva: Yeah.
Steven Butala: It’s gonna end with you collecting a bunch of money and then a deal dying.
Justin Sliva: Yeah, yeah. They get on a deal for six months. They pay us a couple of thousand. If it’s a $20 000 deal they’re on a juice for that every month, and it’s not gonna be 10% interest. We’re looking 15. Average rate right now in our area is 14 on hard money, and they want three points at closing. And they’re only funding 80%. I don’t mind that model but does it help somebody actually scale their business or is it a band-aid?
Steven Butala: We founded Land Academy and it’s been in our roots. It’s been in my roots long before we ever designed Land Academy to not do stuff like that, you know? If someone has that attitude and it’s too bad where I’m sure for every one person like this there’s 25 that you’re doing deals with [crosstalk]
Justin Sliva: Oh, super appreciative yeah.
Steven Butala: But for that one person. That’s just no how this works. And I don’t see a future successful real estate investor if they’re bringing that kind of attitude to the table.
Justin Sliva: Yeah, yeah. It’s sad to see when you see the other people on the flip side that you’ve helped so far, and you’re getting them into those deals that they wanted to. Or it’s their first deal to go over $100 an acre and you’re like, “Hey, let’s push it.” And they look at you and they’re like, “Okay, let’s do this one. It’s $200 an acre.”And you’re like, “No, no, no, let’s go.” And then you see that deal get hit and then they sell and they’re looking at you like, “Wow, this really works.” That’s like getting a good IV of stuff. You’re like at painkillers, and that’s the exciting part a couple of people that we’ve helped from picking out their county to mailer pricing to everything through. They’re two and closing and they’ve got a killer deal and they had another one come in, and they’re just like they’re ecstatic. And we’re at escrow with them and they’re just loving life right because it’s worked. It’s worked.
But yeah, we’ve put … greenlit deals all over the country right now so were … Oregon, Washington, Georgia this week. New Mexico got funded, Arizona got funded so Texas …
Steven Butala: I keep meaning to ask you and I keep forgetting, is there … for the people who are Land Academy member that are coming to you. Is there a gap in their education that I could fill somehow in the programs that we have?
Justin Sliva: I think the big thing is the thought process of the pricing on … in the Land Academy you teach to go to the lowest bottom. Go 25% less, so you’re going actually a forth of that. So you’re shopping about 25%. When somebody asks me about pricing I say, “I like between 30 and 35% ’cause I found that is a sweet spot for pricing at this certain price level.” And it goes up a little bit as you go up in price. We talked movie star ranches. Hey, I’ll offer $500 000 for a $700 000 place all day every day, but you really have to know your stuff at that point.
Steven Butala: Yeah.
Justin Sliva: And that’s different for … so everybody wants to go into that same thought process of 25% as their scaling their property size up, and their margin up and it’s a little bit different than that and that’s, from what I’ve seen. And I’m no … I don’t have near the deal flow you have, but from what I’ve seen in my humble couple hundred transactions is that there’s that little piece there they’re wanting to hold onto that 25% and Land Academy says this and that’s what we have to do. Well, hey, if we’re doing it this way you’re gonna get a couple more deals. You’re still making 10, 15, $20 000 a deal. This works still, and it helps you scale and continue to go.
Steven Butala: I couldn’t agree with you more. Pricing is now the number one thing that comes up.
Justin Sliva: Yeah.
Steven Butala: And so I’m gonna do … we’re starting to build … you were asking me before the show what we’re working on right now and in 2019 we’re gonna put together for the advanced users a knowledge, not for the advanced, for Land Academy users.
Justin Sliva: Okay.
Steven Butala: A video knowledge base which I would love to have you participate in if it comes up. Where there’s these topics that just keep coming up over and over. I’ll do a one-hour session in the studio, like a mini program on how I actually go through pricing and why, because it changes.
Justin Sliva: Yep.
Steven Butala: Back when I did Land Academy 1.0 which is where they’re getting that 20% information. That’s how we did it back then, but we don’t do it that way now. So, it needs to be updated.
Justin Sliva: And it’s kind of the conversation. You have a lot of people ask questions about, “I wanna get into other asset classes.” And for me you have different assets in land, you have assets with houses, you have assets with commercial or multi-family. And each one has a different type of letter, different pricing and that’s the big thing. They’re like, well, people get ahead of their self and wanna get to that and say, “let’s figure out this [inaudible] get through the deal flow and we’ll go to the next one.” One of the common things is once you sit down with somebody and you explain, “Hey, when we’re partnering on it …” or they call me and they say, “Hey, Justin, I wanna do this property we comp it and we’re gonna offer $150 a acre.” And I’m like, ‘Okay.” You’re gonna have to self close this so you can save the margin. You’re going to have to sell it for this amount just to cover the mailer.
So let’s go up to this point and let’s work backwards. What do we need to make off this? We wanna make seven grand, 10 grand, 20 grand. Let’s work backwards and Jo Martin said it last week on Jill’s show, he’s live show, you know? What’s your goal? Work backwards and we’ll back into it and then you can work from anywhere in the country with that and just find, “Hey, I like this market, I like this area.” And we work through it and go from there.
Steven Butala: Outstanding.
Justin Sliva: And those are the conversations that are happening when we’re talking finance. It’s a, taking it back to finance Friday topics is it;’s getting that whole process down and just tying it with the money.
Steven Butala: So, when you say work backwards ’cause I’ve been doing this my whole life. Let’s say, I’m gonna give you, so we can be ultra clear.
Justin Sliva: Okay.
Steven Butala: If you’ve got a 20-acre property. No let’s use and infill lot example because infill lots, Land Academy’s 2.o was built on this whole principle of working backwards from what’s [crosstalk] a house for. So you know what? Let’s just do that. Can you, like in the Dallas Fort Worth area, how would you work it backwards on an infill lot?
Justin Sliva: Yeah, so if I know a house is gonna sell for 200 grand. I know the builders gonna be willing to have 50 000 of that be his budget. And so if I know what I want my margin to be in that. If it’s I’m gonna offer 25 000 or less and then try to build my margin and already give him somewhat of a discount. Most builders will say, “Hey, I’m willing to pay this right now.” If they have somebody on tap and they’ll buy everything you can. So, if you know you need to work yourself backwards, again, you start at the top. What it’s gonna be, their budgets gonna be. What they’re willing to pay and that shortcuts that. Sometimes it’s a lot less because they’re investors too. They wanna be aggressive, and then we come down from there and figure what that spread is that we wanna make. And that’s how we work backwards there.
Then you have to take into consideration your cost of doing business. You have mailers, right? That’s a cost. You have your operating costs for Land Academy … Land Academy costs, your Pat Live cost, your VAs cost. Whatever those are in closing cost, and then to make sure you really make your spread you have to price accordingly to all that and take that into consideration. And those are the type of conversations we’re having right now with this 45/50 people the first couple days of this week.
Steven Butala: Yeah.
Justin Sliva: And it’s good to have those because it clarifies and gives them some reassurance to what they already thought.
Steven Butala: So where are these mostly Land Academy members? Or are they all over the, it’s everywhere?
Justin Sliva: The first little bit after the first three shows we did together. When I went to L.A. and met up with you was mostly Land Academy. Now it’s about 50/50 and you can tell the difference because the Land Academy person has a little bit more direct conversation with you. They’re like, “Hey, this it this, this and this, this.” And you’re like, “Yeah, exactly. Boom, boom, boom.” And you work your way through it with them.
Steven Butala: Yeah.
Justin Sliva: The other persons like, “Hey, well, I think I’m supposed to do it this way but so and so on their podcast said this and this person said this. What do you suggest?” And I’m like [inaudible] Land Academy student. That’s just this is how I do it. These are the tweaks that I’ve made and then we work our way back through that, and that’s a neat thing. But you start, they say, “Yeah, I’m gonna use click to mail.” And I’m like, “No. Offers to owners is cheaper, man.” And they’re like, “Well it’s pretty same right.” And I said, “Yeah, but you’re not having the problems. The tools that you’re getting.” And that’s what we’re seeing the difference in the tool quality that the people have to get their deals done. I have been impressed by a few people that weren’t part of Land Academy. Their stuff was pretty solid, what they had. But they’d been doing it for a while and they’ve been following the different shows. Land Academy being one because they found us, and they’re working through and they’re using the best of both worlds.
Steven Butala: Awesome. That’s great to hear. Well, good I mean I hope you have a great next week. It sounds like it’s really picking up for you. You’ve only been at this what? Couple of months? Three months?
Justin Sliva: Yeah, we started private funding by ourself and then we, it was end of September we formed the entity and focused that portion of it. So yeah, so end of September we started earmarking the first bit of money beginning October, and then our goal was two deals a month, two deals a week, I’m sorry. Two deals a week and then continue to roll from there. We’ve put about $500 000 out in play right now with deals averaging around eight to $9000. So, you think about that when people are like, “Jump up in value.” Well, for us we’re still pretty new so we’re spreading the risk out a little bit because we know that compound is there and so what does that turn look like? And then that second turn and that third turn. And the idea for plum is to build that Rolodex of, “Hey, these are the deals we’ve done. This is what the returns are.” Then we take it to a capital fund. And me and you’ve talked about private money and going to, we call it going to New York but when you put this together and you show that an average return over a year or two years. We can sell that to commercial money and then bring that back in and open that up all the way for our guys. That’s the dream.
Steven Butala: And that’s what I’ve … that’s why we’re here.
Justin Sliva: Yeah.
Steven Butala: It’s really institutionally fun people and help them, Jill and I just recorded all the shows for next week and we … this is why we started this.
Justin Sliva: Yeah.
Steven Butala: This is why we started Land Academy. To help people do deals.
Justin Sliva: Yep, and the cool thing is you don’t realize the life-changing thing that people have with that and then when you start to think about, “Where are the downfalls in the courses? Or where do people have the problems?” And you work back from that. For us it was money, and then just to ask those little questions and get that up and going. You know? And people tend to not buy big enough property and they run their self out of business because of that cost of business they don’t think about. If you’re spending 1500 mailers a month. You’re spending a thousand dollars a month on mail. Throw in Land Academy and then throw in your Pat Live. You have to make 1500 profit because you do anything, plus the cost of land. So you can’t be in five-acre properties just doing this. And that’s what we’re here for. It’s to get you over that first hump.
Steven Butala: Yeah, It really is a mindset. You have to … it takes a long time for most people to forget about their bank balance and just focus on getting really good deals and sending them to somebody like you.
Justin Sliva: Yeah, yeah.
Steven Butala: That truly is no money down or doesn’t cost anything to do this model. And it sounds so schlocky and so, it sounds so like, everybody says that constantly. You don’t need any money to start doing this. And the fact is you do need some money, you just don’t need acquisition money.
Justin Sliva: That’s exactly right. ‘Cause and, you know, we heard that last week on a call that no good deal doesn’t go to close because of lack of money. And it’s always something else that happens. Joe that’s the one thing I took away from Joe’s call on Jill’s live show was that right there. It’s like it’s exactly true. When there’s hair on it or there’s something questionable, and that brings up a point that happened a lot this week is, “Hey, I’ve got this really good deal coming up and I want to save my money for that. Will you do this other deal for me?” And you’re like, “What?”
Steven Butala: That’s the worst thing you can say.
Justin Sliva: Yeah, so what’s so wrong ’cause … yeah, so I’m looking at the deal going, “What’s wrong with this deal then if he’s not willing to put his money on it but he’s willing to put my money on it? What’s going on?” And that’s the misconception is that we have this infinite amount of money and I’ve got this private banker. No guys, this is me and a partner. We’ve got our cash in this. We’re in it to ride with you. And so sometimes we hear mark out and then we get funding in and it covers two more deals. But that’s my burden to have the money there for the good deals and I’m helping with that, but there’s that thought process, and I’m like … and then … and I started thinking about that and I was like, “That’s kind of like an option. This guy gets an option using our money.” He closes with the person, he’s got it just sitting there and then he splits it and I’m like, “Dude, maybe we need to look at this put it on the juice thing and see what’s going on.”
Steven Butala: Can’t imagine selling a lender saying that sentence.
Justin Sliva: Yeah.
Steven Butala: You’re picking my own deals, you get all the shitty ones and I get the good ones.
Justin Sliva: Yeah. I was like, “Doh.” That was the highlight of my week for that one. And me and the person we had a good laugh ’cause I caught it when he said it, and then we walked through his deal and there were some issues with the deal. It wasn’t great. It had some topo and some setback stuff with the deed. And that’s kind of, that’s the thing about us. We’re not in it to say yes to everything. We’re in it to make sure you have a solid deal. That anything could possibly wrong we point it out and have that question or have that conversation. This is when the numbers look great and I just happened to look at it at a angle and said, “Wait a second. Something.” Put it on Google 3D and looked at it a little bit and it’s like, “Wait a second.” We measured the setbacks and everybody had a hundred-foot setback off the road. We put this on off it’s gonna be on a really steep topography. And when you cut the pad, the house when I copied every house that was in the neighborhood. Put it on it, it didn’t fit. And you’re like, “Well, how do you build right there?”
Steven Butala: We’ve all seen deals like that. Actually now that you’re mentioning that. We are launching a $500 product on infillreports.com where you can find out if that properties build-able.
Justin Sliva: Awesome.
Steven Butala: Like 24 hours.
Justin Sliva: Awesome.
Steven Butala: [inaudible] Box.
Justin Sliva: That’s awesome. That’s huge. That huge on that because-
Steven Butala: Marketing launched it yet but in that situation it would be perfect just to find out really quickly.
Justin Sliva: Yeah, I probably had four deals this week that could’ve used something like that. That I ran through and looked at it and it was like, “Yeah, this is off on this.” And that would’ve been something that would’ve worked perfectly on it. And it seems like the stuff you see on the west coast is like that. California, we had quite a few that were … there was property been there for a while. Everybody’s built around it. There’s no road or driveway into it, and it makes you question and the comps are all pretty comparable but this one doesn’t have a will like everybody else or it doesn’t have a driveway for that matter and it’s just …
Steven Butala: Right.
Justin Sliva: Questions. It makes you question the things going on with it.
Steven Butala: Well, it sounds like this Finance Friday thing’s working out for you.
Justin Sliva: I can say that ima little bit busier than I thought I was gonna be.
Steven Butala: Awesome. Well, let’s keep doing it if you’re up for it.
Justin Sliva: Yeah, I appreciate it. I appreciate it.
Steven Butala: Well, [inaudible] spend another 20 minutes or so listening to the Land Academy show. Join us next time where we discuss celebrating your 2018s success. No matter what it’s been.
Thanks, Justine, we’ll talk to you next week.
Justin Sliva: All right. See you.
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