How to Buy Your Next Primary Residence (LA 946)
Steven: Steve and Jill here.
Jill: Guten Tag!
Steven: What? Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill: And I’m Jill DeWitt, broadcasting from not Germany but from Sunny Southern California. Wouldn’t that be funny?
Steven: We should do this where we go, everywhere we go.
Steven: Today, Jill and I talk about how to buy your next primary residence using data.
Steven: We’ve done it. I’m doing it right now.
Jill: Exactly! We do do this on the road but we haven’t been in Germany in a while.
Steven: We should celebrate a little more.
Steven: Before we get into it, let’s a take a question posted by one of our members on the landinvestors.com online community. It’s free.
Jill: Okay. This made me laugh. JeffU asked … I’ve got to say, it’s so funny. Do you remember there was a guy, I wonder if it’s the same guy, there was a guy years ago that was at our group and his name was Jeff and it was back when we first started our member calls every week and we would always title the calls. There was always some funny thing that happened during the call.
Steven: Like these shows. Like this episode.
Jill: Yeah, we’d all crack up about something so at the end of the call, we started to all, we said, “All right, what would you call the show?” And we come up with this funny things and I swear there was this guy that was … I want to say it was Jeff U. We’re like, “Yeah. You know what? Well, Jeff U?” Do you remember that?
Steven: I do.
Jill: So anyway, if it’s you Jeff, I think it’s funny and nice to see you. So, “Sorry for the newbie question. I have heard about Steve and Jill talk about percentages off of retail value. My question is what is retail value?” Is … this is a great questions guy.
Steven: That’s what I think.
Jill: And now I know you’re new so it’s not the same Jeff but welcome anyway. “Is it the top price that you could potential sell it for it? Number two, what others are selling it on Land Watch or other sites? Or Number there, is it what you would be selling it for discounted from Land Watch and other sites? Also, I’m just curious, what is the percentage of that …” wait, “what is the percentage that you discount a property? I understand it’s going to be different from county to county but on average what you end up selling it for and what is the discounted price from the full value? Let’s say you sell it for top dollar and what is a discount percentage from other sites such as Land Watch for similar properties? Thank you for taking the time to answer this newbie question. JeffU.”
Steven: So we answer every single one of those questions and address those topics in a tremendous amount of detail in our of education programs but I choose this question very specifically because it’s a big issue. Like pricing itself is what he’s really asking is, “Yeah, you guys talk about retail value. You talk about wholesale value. You obviously say you have to buy it cheaper. What are the percentages?”
Steven: Retail value is the price that it’s listed for in general. It used to be not so long ago but used to be the price you listed it for and the price you sell it for is very different. Not so much anymore. Basically, the listing price plus or minus 5% with land or houses or anything is about the same. And that’s your retail value and you can very easily with land associate a price per acre or in the case of infill lots, a price per square foot given a marketer, yeah. Can you do it county wide? Some counties.
Steven: Can you do it zip code wide? Some zip codes. The more densely populated it is the more you have to kind of go into different neighborhoods. I’m paraphrasing. Retail value is that top value. Wholesale value is at least 20 to 30% less retail value. That’s what we’re really asking. What are the percentages?
Steven: We buy it, land, rural, vacant land for 30% of retail. We buy infill lots for about 40 to 50% maybe 60% and we buy house for probably 20% off of wholesale which we let those people figure out what retail is because they try to … people that we sell the property to, the renovators, they try to reset the retail. They go for the gold. So but that’s all … we address all of that in House Academy.
Steven: So those are the percentages. So I very directly answered your question and they haven’t changed.
Jill: That’s beautiful. Thank you.
Steven: The only thing that I might add in certain situations like with commercial real estate and with houses, sometimes we just go for a dollar amount like we … like Jill and I try to mark up. There’s certain markets in Phoenix that we try to buy a house for 70 … 50 to 70,000 dollars less than we know we can sell it for. So we don’t care about percentages in that case. But-
Jill: I was just talking about that with somebody else. They were like, “What would you do for houses?” I said that exact thing like, “Figure out what you want to sell it for and just work it backwards. What do you want to get out of it? Don’t get greedy here. Think about selling it fast. Now, that’s what you offer.”
Steven: Sometimes people ask us like, “How do you know it’s a good deal?” We get that questions at least once a week. This is how.
Steven: You work it backwards.
Steven: You know what you can sell it for so then that tells you how much you can buy for. A lot of new people do it the other way.
Jill: And well, how do you know this, Jeff? You did a bit a of research. You actually look in multiple different areas, line up a bunch of stuff, figure out maybe an average, and go from there and Jeff, if you remember, you had the red, yellow, green stuff so you know what to do.
Steven: Land Watch is orchestrated in a list. It’s hard for me to see that for some reason. Sites like Redfin and Realtor.com specifically Realtor.com are really orchestrated from a mapping standpoint. Take a look at realtor.com. I spend a lot of time, every day, on there.
Steven: Today’s topic, how to buy your primary residence, the same way that we buy investment real estate. This is the meat of the show. I choose this topic because I’m in the process of buying a cabin for myself, not for my family, not to spend time with Jill.
Jill: Let’s just be honest here. Get it out there. Go right ahead. I hope it’s pretty. I hope I get to see it someday.
Steven: Grossly undervalued. Grossly undervalued pile of junk that I can go … that’s going to be worth … that is immediately worth a lot more.
Jill: Are you doing that so I won’t want to go there?
Steven: It’s actually not as much a pile of junk as you would think.
Jill: Okay, good. It will have plumbing.
Steven: But we all need … everybody needs alone time.
Steven: We’re fortunate enough to live in an area … yes, it’ll have plumbing.
Steven: We’re fortunate enough to live in an area where it’s only an hour and a half drive, really an hour to hour and half drive into the mountains where there’s snow and everything else like from the beach to the mountains in an hour and a half.
Steven: You know, if there’s no traffic. And the prices are dramatically different in our favor so it’s a … I’m excited. Anyway, what do I do? I jump on Real Quest or Data … in this case, Data Tree. I think Data Tree is a little bit better for housing and commercial real estate than Real Quest is and I do the same thing that we do to buy land. I set up my acquisition criteria. It’s not … it’s all based on price per square foot. I line up all the algorithms that I can find, Zillow, Trulia, Redfin, Realtor, Data Tree, and Reality Track, take an average … you know how you can go on there and see … type in an address and see what they think it’s worth? I line them all up, divide that number, get an average number, and look at what I … then I reduce it from a dollar per square foot and everybody gets a letter.
Steven: And our experience has been, loosely been, between 200 and 350. You need to send out that many blind offers to buy one house. In this case, because I’ve been doing this for so many years, it’ll be less and this is a retirement … it’s not retirement.
Jill: Less mailers to get more yield.
Steven: That’s for primary residence houses.
Steven: When it’s a second home, these are all second homes up there, I expect the rates to be much, much higher.
Jill: It’s going to be really high. I expect that too. You’re right.
Steven: In fact, here’s my goal and I haven’t even told Jill this. To buy and resell as many cabins up there, to just pay cash for the … that’ll generate enough cash to just pay cash out right.
Jill: That good output? That’s … normally, that’s how you do.
Steven: It’s an experiment and I’m filming it all.
Jill: I know.
Steven: And it won’t be part of House Academy. It’ll be Secondary. Buy a cabin.
Jill: Perfect. [crosstalk 00:08:24] I remember talking to a guy a couple years ago about this and we have had several people in our friends circle, not … I mean, that and people that we know that have done this. One guy in particular in Arizona who uses … said, “I learned from you guys but I only did this to buy my new primary residence.” I talked to one guy. He’s like, “Okay, well how would this work with my wife?” What I figure out for her would work. I mean, this was a long time ago. And what she wants … I mean, she wants the drive up experience. I mean, I’m all about the data and the right asset like you were saying. You’ll make the right cabin work because it’s like a home run and you’ll adjust to whatever you need exactly.
Steven: It’s money first. Yeah, money first for me.
Jill: That’s it. So when we talked about you always … we haven’t said this in while you’re near. You’re really only going to win one way. You’re either going to win emotionally or you’re going to win financially. You rarely get both. So what do you when you have you primary resident … you’re looking for a primary residence right? And you’re the man. You want to win financially and I’m the woman and I want to win emotionally. So here’s what I suggested to this guy. I said, “You use your knowledge, your data, go out and find … to ask her what area she wants to live in. Let’s get that right out of the way-”
Steven: That’s right. How many bedrooms you want.
Jill: “Find out what she wants and school district that she wants. It’s like start with that. Then you go out and find … do your mailer and get three to five houses that come back that meet your criteria, your financial criteria. You know they’re in her world. Then let her choose from those three to five which emotionally sing to her. You can’t lose.”
Steven: I agree.
Jill: Isn’t the great?
Steven: By the rest of them and flip them to a wholesaler.
Jill: It’s like you already won. It’s like, you know, having a man and you’re helping him get dressed to go to a fancy dinner and you only lay out two ties that you’ve already pre-approved ’cause you don’t want to pull all 16 out ’cause he’s got some weird ties in there. You give him two choice of two ties that you like either and he gets to pick the tie.
Steven: That’s a perfect example.
Jill: Thank you! I’ve already won ’cause I know they’re going to look good with what he’s wearing. Isn’t that a good example?
Steven: That’s perfect, yeah.
Jill: I just thought of that. So totally just came up with that. Ha. All right.
Steven: And I’m not kidding about buying … choosing one to live in and reselling the other four to probably pay for that. We had a guy in our group for a while, long time. He’s no longer in our group ’cause he made it … he went on … ’cause he made so much money he just left and well, he accomplished his goal. Let’s just say that. He wanted to live on the ocean in Florida and he wanted to an oceanfront and a canal back lot, very specific, and he already identified the geographic points where he wanted to send mail so he joined the group, scheduled a bunch of consulting calls with me, and we did it together.
Jill: I remember.
Steven: And he sent out all the mail and literally within like two and a half months, he had eight properties. He’s flipped seven of them to a builder there and paid cash for it … when he was done, paid cash for the lot that he really wanted.
Steven: And he was … it wasn’t even … he didn’t … wasn’t in for the long run. He had just that one project. He was already retired like a retired program developer from the early days, you know, when you could really write some software and resell it quick.
Jill: I’ve done that with buyers. I’ve had buyers come to me and they were unsure about which parcel they wanted. I had like two parcels next to each other. [inaudible 00:11:52] there were two good size parcels, like five acres each, and I’m like, “Well, here’s a deal. If you want both, I’ll give them to you both for x,” ’cause it’s great for me. One deed. I’m done with it. I’m out. “And you can go out there and live on both of them. Stand there and figure it out which one you love. Keep that one and sell the other one and it’ll probably pay for the first one.” And he’s like, “Ding-ding,” and he did that. It was perfect.
Steven: So here’s the thing about primary residence when you’re doing a mailer. Not even so much a cabin situation but a primary residence. There’s a sort function for you to download data in both Real Quest and Data Tree where you can pick the polygon. So anybody who’s ever really gotten in the car and gone block by block. Well, believe me, the … whoever you’re in a relationship with, the more emotional one has done this. You just don’t know about it and they’ve said, “Oh no. I want to be on the east side of Kensington, not the west side and I certainly am not going to north of Thomas or south of Lincoln. I want … this is what I want.”
Steven: So talk to that person and then you can very simply draw those points right in the data set and download that only and not only that, you can take out all the only two bedroom houses or the … and she only wants … or he wants five bedroom houses, then that’s what they want. And so you can really get … send out-
Steven: Three or 400 mailers and it’s going to work for you.
Jill: Laser focused.
Steven: Here’s the thing. The mailer that we send out to buy house as an investor is not going to work. You need a heartfelt, “we’re a family with two children and the-”
Jill: The school district it’s in.
Steven: “Lasik School District that’s there. We have a timeframe because as you know, school starts on September fourth and we love the teachers at this elementary school.” The more they realize that you are not a realtor and you’re not an investor and you’re not … I wouldn’t recommend scraping the bottom price wise on this either. Just try to get it-
Jill: Good priced.
Steven: In the end, if you avoid just dealing with the real estate agents, then you’re maybe $20,000.00 ahead in most markets and you’re going to win.
Jill: That’s true.
Steven: If you’re trying to buy for half price, that’s probably not going to work.
Jill: That’s an easy savings that people forget right there. You-
Steven: It’s 6%!
Jill: If you take out commissions, you and the seller both walk away with … I mean, or the seller walks away with the same amount of money they would have got with or without a commission, you win. I mean, what’s to think about?
Steven: That’s right.
Jill: It’s brilliant. That’s true.
Steven: 6,000 bucks every $100,000.000.
Jill: I got to tell you.
Steven: 200 grand is 12,000, right?
Jill: I’ll tell you after the show. I have something funny to say in the after show about this.
Steven: Well, you’ve done it again. You spent another 15 minutes or so listening to the Land Academy Show. Join us next time for the episode called, “Where to Get Mobile Home Data?“ ‘Cause it’s not really real estate.
Jill: That’s true. And we answer your questions posted on our online community at landinvestors.com. It is free.
Steven: You are not alone in your real estate ambition.
Steven: All right, what were you going to say?
Jill: Okay, so shoot. I forgot. How did I do that that fast?
Steven: I don’t know.
Jill: Aww! What were we saying?
Jill: Darn it. Aww! I said something really good. I was going to save.
Steven: We’re talking about purchasing houses and not-
Jill: Using an agent?
Steven: The mailer.
Jill: Not using an agent.
Steven: It mailer itself is very different. Our school systems this … [crosstalk 00:15:21] “we’re in the school system. We have little kids.”
Jill: [crosstalk 00:15:24] The money. Money and the agent.
Steven: And not scraping the bottom.
Jill: Oh! Okay, here’s my revelation. Thank you. Well, money and agents-
Steven: I’m not going to cut that out of this.
Jill: My … that’s okay. I fully expect you to leave this. If you don’t know by now, this show is 100% unedited. Zero. It is tape rolling, all the way through, tape ending. Sneezes are there. Scratchy voices are there. Losing what I was going to say is in there and if I don’t hurry up, I’ll forget again. But my point of that was I started to give myself a speech the other day ’cause, as we all know, I’m having a little bit of a trouble when I took my car in to be serviced recently. They screwed up my car. I’m like, “Doggonit.”
Steven: We all know that.
Jill: I … well, you know that. You know that. I’m telling … okay. Now, everybody knows. So I’m like, “Shucks. I’m going to stop ever using a dealer for anything too.”
Steven: Oh yeah. I said that. We’ve been talking about that for years.
Jill: I … it used to be … well, it used to be you want the top quality servicing and you want excellent service, you’re going to pay for it but it’s going to be worth. You go to the dealer. I’m here to tell you, not anymore.
Steven: All that does is raise your expectation to set you up to be more disappointed when it doesn’t work out how it should go.
Jill: Well, the fact is I expected to come out the way I sent it in and I didn’t get it back that way.
Steven: I have a mechanic in Phoenix that I’ve been using since the 90s.
Jill: See, that’s what we should all do.
Steven: That I wait to go to Phoenix to get the car serviced.
Jill: I know that.
Steven: I’ve known this guy forever. That’s how you … and it’s-
Jill: [crosstalk 00:16:52] I know that. I know he does Lexus. I don’t think he does Mercedes though.
Steven: He does everything.
Jill: Okay, cool. Well, there you go. Wherever you’re watching or wherever you are listening, please rate us there. We are Steve and Jill.
Jill: And inspiration-
Steven: To buy undervalued property.
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
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