Velocity of Money (LA 931)
Steve and Jill here.
Mid yawn, hello.
Welcome to the Land Academy show. Entertaining land investment talk. I’m Steven Jack Butala.
And I’m Jill DeWitt broadcasting from sunny southern California.
When Jill gets done yawning we’ll talk about the velocity of money today.
I’m so sorry. No it has nothing to do with this topic. I want you to know it has nothing to do with you. I didn’t yawn like, “Oh here we go again. We’re gonna talk about some accounting things. I’ll just take a nap.” Sorry.
The velocity of … To your happiness, the velocity of money is very easy to talk about and very easy to explain and I never get tired of talking about it. And even if you know exactly what it is. It’s still just good to refresh it in your mind or if you’ve never heard of it it’s all good.
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.
Could you imagine. That’s kind of funny. I never get tired about talking about the velocity of money. I never get tired about spending the velocity of money.
Yeah you know what we could talk about the outbound velocity of money.
Outbound velocity. I like this. Is this is inbound or outbound? ‘Cause I have a lot to say about that too.
We’ll talk about inbound and then outbound.
Never even thought about that.
Yes. Congratulations. Now this topic is important to me. Now I’m in. Okay Marilyn asks, “I nee help. My processes are all over the place and I’m wasting time retyping and recreating documents and emails for each deal. You could say I’m the copy and past queen. I know there has to be a better way. Most of my documents are in a Google Docs and I’m using Google Sheets to track deal flow. I’ve recently been playing around with a Google Sheet add-on called Document Studio, but it doesn’t work every time. Probably operator error. Here again, I’m taking information from my main deal flow Google Sheet that I copy and paste into another Google Sheet to initiate the document merge letter. What do you use?”
“Do you hire a pro to set it up? A lot of what I learned is from you two so any referrals there would be useful as well. Any suggestions would be much appreciated. Thank you in advance. Marilyn.”
Yes, hello Marilyn. What do you want to say?
You have to strive to be a linear thinker. First time I’m gonna get just slightly philosophical here.
You have to look at every single task that you do and you kind of have to hate it. You have to say, “I really don’t like doing this task. I’d like to remove it somehow.” And not remove doing it today. Re-setup the system so that it’s all together completely removed. I use the analogy like this. How many times you ever gone to a closet, like a hall closet to look for a tennis racket or something like that? And you know it’s back there somewhere and you end up just completely reorganizing the closet and 20 minutes later you have a Goodwill pile and everything’s completely organized and it doesn’t probably make your spouse that happy.
Or depending on your spouse it makes ’em really happy.
Makes me happy.
That’s how I think of everything. Every single thing I do I look at it and I say, “This is completely unnecessary. I need to relook at this.”
That’s a good analogy.
So you have to set up a system, you have to start thinking like this today. I don’t care if you’re brand new at this or you’ve done it a 150000 deals. There’s a whole module in the House Academy program that the gist of it is this. You have to set up a system that’s entirely and completely repeatable and it runs itself with other people without you. Or you will never truly scale this business to where it needs to go. So you can take that a million different ways, but you cannot work in your own business forever.
Does that mean you have to outsource purchase, acquisition decisions? No, but you can do 100 acquisition decisions on Wednesday morning between 9 and 10 and then do whatever else you want for the rest of the week. If you go to the equity planner there’s a version of it in Land Academy 1.0 and Land Academy 2.0 and a really beefed up version in House Academy which we haven’t released yet. It talks about … There’s a flowchart in there. It talks about how to stay organized and what to do. I will tell you this personally and then Jill can kick in here.
I hope so.
I’m waiting patiently.
Google Docs is not the way to do this at all. And I’m not criticizing you at all ’cause we all have to start somewhere. Go ahead.
Well Google Docs is similar to Excel, but I mean just or Microsoft as a way of organizing yourself.
Google Docs is a file storage.
A free file storage system.
If you’re trying to use it for anything else like deal flow management or anything else it’s not what it’s for.
So okay let me back up and see if I can … Well that’s great Steve. I’m gonna bring it down. You’re all up here and I’m like, she’s like, “Well that’s great, but how do I get there?” You told me what I should be striving for and what I shouldn’t use. How about giving me some concrete stuff. Just kidding. But so I’m gonna tie it in to what you said. You need to kind of like start from scratch and spend a little extra time right now. I think it what he’s trying to say.
Yeah you’ve got a closet jammed full of stuff and you have a somewhat of a system where you know the balls are in the corner and you know to grab the balls over here and you grab a racket over there. And then you’re off running, but when you come back you don’t necessarily put ’em in the same place so it may or may not be easy to find the next time. So you have to really start over. So there’s a lot of different things you have to organize. You have to organize not only your mailers. You have to be and stay organized on that. A lot of our members keep one big long sheet and it might end up having 15000 lines in a couple of months here, but it’s a great place to go and get the information that you need or the mailers that you sent and you can organize ’em that way.
Another thing you need to think about is you have to manage the calls that come in. You need to be managing the sellers. The good deals, the deals you’re gonna accept, the deals you’re gonna pass, why you’re gonna pass, why you’re putting ’em off. Manage all those. And then you need to manage the deals as you’re closing the deals. It’s a whole separate peace of the pie, if you will. And then you need to manage you’re posting your properties and marketing your properties and manage maintaining your properties and then selling the properties and then doing the deeds for those.
There’s a lot of different things. What were you gonna say?
If you break the anatomy of a deal down, which by the way, never ever changes.
The anatomy of a deal has been the same since real estate itself. As old as real estate itself. So if you microscopically break down every single little step and put it in the spread sheet, which is how I think some people think in a database, a relational database, but if you take either columns or rows however you see it and take every single tiny little step from beginning of finding a county to do mail in to selling the property to the end-user.
And break down those tiny steps you’re gonna start to … and then let’s say deal one is on the top. Deal two, deal three, deal three the steps are all the same. Here’s what changes and this is good news not bad news. The tools to do each of those steps are always improving. That’s the beauty of the internet. It was a lot harder to buy and sell property in the 70s and 80s because there was no internet.
There was no way to know let’s say deed perfect is the tool to do a deed that we provided.
Once you get the closet will be cleaned out when you have those steps. And I put, they’re in them. Equity planner. If you’re a member-
We also want to make a system-
Marilyn if you’re a member I already did all this for you.
She is. Marilyn, he I think.
Did I say that?
No you’re right, but Marilyn is a member I know. I want to say too don’t bang your head against the wall trying to find the perfect serum ’cause it doesn’t exist, but what you do want to do is try to make yourself easy. Here’s what I see people doing wrong and we seen a lot of time is they’ll sit every day and go through the whole thing to see where they left off and that’s really not what you want to do. ‘Cause you’ll waste four hours figuring out what three phone calls you need to make this morning. You don’t want to do that. So at the very minimum start with a good calendar system.
If you want to invest in a serum there are some out there you have to make it your own and make it work for you. It’s hard to manage a serum that will handle … I haven’t found the right one that will handle property and sellers and buyers. You can have separate, but not together. But my thing is though just you start find a good calendar system at the very minimum and start using that. Free yourself up from having to go through the, dig through your desk in the piles everyday to figure out what you need to do.
So every time that you’re and finish a transaction. When you’re working on something do your best to work it all the way to completion of that task. So let’s just pretend I’m talking about, you had six phone calls that came in today. Three people you passed on so put that in an area. Get yourself organized. Put the deals you passed on in a special area, mark ’em a certain way and call it done. And then you also have to think about, “Okay now these three people I’m gonna review these deals this afternoon.” Put ’em on your calendar. Don’t-
And tag those a certain way.
Or if you’re using a CRM and you can do it in Excel too. It should pop up. It’s called a tickler system and it should pop up and say, “Hey don’t forget to call John Smith.”
So, but that’s the path I’m going down.
She’s got Google Docs and things like that for her specifically. I would actually invest in a CRM at this point. If you’re busy and you got stuff all over the place.
You got to pick.
You’ve inspired me. Next week, I haven’t written the shows for next week yet.
We’re gonna call it organizational week. Organization and inspiration week.
Yeah. Oh I like that. Thank you Steven.
Some people think in CRM. Some people think in spreadsheets. Some people think in relational databases. Fortunately for you between the two of us we have ’em all covered.
Jill and I do things differently, but I will say this all of ’em have to have this in common. There needs to be one source document. You need to be going into one spreadsheet or one CRM or one place where everything that you do is in there and you’re constantly, it’s on your desktop running while you’re on the phone, while you’re, whatever point in the transaction the anatomy of a deal you are it’s up and all the answers that you have to whatever questions the person on the phone has or you might have or do diligence. It’s all right there.
Jill and I went back and forth and I’ll end it on this. [inaudible 00:10:59] this on this. Developing a custom made CRM to make this really easy and we stopped doing it here’s why. Because people don’t see things. How many times have you … Everybody hates learning new software. Well all hate it. Everybody knows how to use Excel. So that was a decision for me. People see data differently. The way I would create a CRM is probably not how somebody else would create a CRM plus it’s gonna cost a quarter of a million bucks. Last one [inaudible 00:11:28] made created that we still use for World vacant last cost was a quarter of a million dollars. Was it worth it? I don’t think so.
It basically does what Excel does.
Yeah. At the end of the day it doesn’t necessarily, you’re right.
Today’s topic the velocity of money. This is the meat of the show. Here’s the layman’s term, the easiest way to describe velocity of money is this let’s say you have $10000 that you’ve allocated as investment money. And you have 12 months to see what the bank balance is gonna be. Or the equity value of that 10000 is. What’s the fastest most efficient way to take that 10000 and make it X? So now you’ve got $10000. Congratulations you bought a piece of property for $10000. Your equity is placed. It’s placed in the investment vehicle that you’ve chosen.
You have two choices. You can sell the piece of property that you purchased for $10000 for 20 really fast. Like two weeks let’s say, but you know it’s worth 50. So you can take that $10000 and you can wait six months and get $50000 out of it. ‘Cause it takes longer. The higher the price that you ask then it takes longer. I hope this is making sense. Is it making sense?
Yes it is. Yes Professor Butala.
Let’s say you do that twice. Takes six months to make 50000 on that $10000 asset and then you spend it again and you’re at 100 for very simple purposes. A year from now you created $100000. ‘Cause you turned that money twice.
Well let’s say it takes you two weeks to generate off that $10000. You sell it for 15, takes two weeks and then you plow it in for another two weeks and another two weeks another two weeks. Trust me on the math you’re gonna have way more money at the end of 12 months because you’re moving it faster.
That’s it. That’s our whole thing.
That’s the velocity of money and that’s why rural vacant land specifically and infill lots in a lot of cases ’cause they move so fast ’cause they’re price so cheap.
And you’re already know the buyers.
That’s why this vehicle is perfect for the velocity of money. We have members that have found us because not because of our methodology for sending out offers just because it’s so conducive to achieving the velocity of money.
Yeah they’ve done like a lot of our members too have come with us had a background testing this with houses. And they’ve sat back and gone, “Wait a minute, wait a minute, wait a minute. I spent 90 days and I killed it. I made $45000.” I’m like, “Let me show you what I can do in 90 days with your budget.” If you’re budget and they’re going in and buying couple $100000 homes to make $45000 and they think that’s good.
It actually is good.
You know it is good.
When you line it up to other stuff.
It really is. You didn’t lose money by the way. Most people who do house things they’ll talk about the time that, “I either almost lost money or yeah I did lose a lot of money on that one, but I got out. I just had to do it.” But what I could do in our world with that money, man is amazing. And just by what you said, just by selling it fast at a reasonable price, get in, get out, get a good profit and the best part is too it’s so much easier on the sell side when I’m not trying to maximize anything. The deal speaks for itself.
Everybody knows it’s under priced even at what you’re selling it for. And so your buyer is running to the bank with your deal that you’re offering to them. And they’re like thrilled. So it’s really when you think about it, you take a step back and go, “Oh it does make sense.” Heck yeah. We are not here to be retail and sell it and mark it up and sit on it for six months and try to maximize price.
No. I am. I am. Could you imagine? No and I’m not gonna have a open house and do this. Heck no.
No. None of that.
I’m not even gonna sweep the floor. I’m gonna celebrate the fact I didn’t sweep the floor. And celebrate the fact that yeah it’s got a hole right there. Isn’t that great. You’re gonna win on that one too. I won when I bought it and now you’re gonna win too ’cause you’re gonna fix the hole not me. This is great.
Jill’s completely right.
Cheaper is better and I’ll tell you you have to undo everything you’ve ever heard about real estate up to this point because we’re all subconsciously conditioned to maximize price on a real estate deal. I think it’s our parents. I’ve always wondered why when you buy an asset does … The whole world seems to celebrate the fact that they’re resetting the high value on the market.
Which is so silly. You never want to be that person.
I don’t want to be that person.
You want to be silent-
Could you imagine?
Marking it up 20 50% in some cases 100% on rural vacant land and just burning through there?
Right. Can you imagine like I was thinking about cars-
Faster is better.
I know we always come back to cars like what if you’re a used car salesman and you don’t want to walk into a dinner party and say, “Boy you’re not gonna believe what I just did. I just sold a car worth $30000 for 45. Yay.”
I wonder why.
Nobody would be like, “You’re a jerk.”
In real estate they love it.
It’s weird. I don’t want to hang out with that guy. So …
Real estate agents specifically love to talk about some house that they sold for the largest price per square foot in the market. They love it.
Right. Like yeah they, you’re right. They want to say we reset-
They pat themselves on the back.
We reset the market. It’s now a $18 million market not a $15 million market ’cause look what I did.
Not in California reality. It’s more like price per square foot.
I mean Jill and I had conversation where both of us were just shaking our heads with a woman one time where she sold a house in Old Town Scottsdale for $500 a foot. And she was the first person and she just had a look in her eye like she just had a baby.
And she was the most proud happy person there ever was and I’m shaking my head going you know we just sold 14 houses-
Not brag about that.
At $110 a foot and placed way more money and the people who we’re selling ’em to are probably gonna seel ’em for 350 a foot. So that’s-
Yeah. That’s where you want to be.
How do you win? You know who wins when you sell a $500 square foot house? The realtor.
Everybody else loses.
That’s true. Yeah you don’t want everyone to have that sinking feeling like, “Oh we overpaid this sucks.”
It’s sad. Thank you Steven. That was good.
Well you’ve done it again. You’ve spent another 15 minutes or so listening to the Land Academy show. Join us next time for the episode called The Power of Scaling Offers to Owners.
And we answer your question posted on our online community LandInvestors.com. It’s free.
You are not alone in your real estate ambition.
This is a long show week. Every day I’m sitting down with you. These are obviously, you know what it is? These are obviously good topics that are really near and dear to your heart and you have a lot to say.
And so that’s a good thing. I’m glad. I’m sure-
Every time we have a show like this or a week like this I get a lot of feedback that says, “You know can you guys just tone it down. Why do you talk about real estate so much. Can you be more funny like you were like two weeks ago?”
Or two years ago when you were happy. Just kidding.
The next week we tone it all down. We have a lot of fun and I get a bunch notes like this. “Can you guys stop screwing around so much?”
“And please really talk about real estate.” So this is real estate week.
Oh okay got it.
And tomorrow we’ll horse around.
I mean next week I mean.
It’s all good. It doesn’t matter. Wherever you are watching or wherever you are listening please rate us there. We are Steve and Jill.
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