Flip Houses or Land? (LA 965)

Flip Houses or Land? (LA 965)

Transcript:

Steven Butala:                   Steve and Jill, here.

Jill DeWit:                            Hello.

Steven Butala:                   Welcome to the Land Academy show, entertaining land investment talk. Get me back in the frame.

Jill DeWit:                            Yeah.

Steven Butala:                   I’m Steven Jack Butala.

Jill DeWit:                            And I’m Jill DeWit, pulling Steven closer to me today because we just look so good in blue. What am I saying? Jill DeWit, broadcasting from sunny Southern California. I got all goofed up there. That’s really funny.

Steven Butala:                   Today, Jill and I talk about flipping land, or flipping houses.

Jill DeWit:                            Okay.

Steven Butala:                   It’s a very basic, short topic.

Jill DeWit:                            And it’s not a … You don’t … Go ahead. I’m sorry.

Jill DeWit:                            It’s not an either/or.

Steven Butala:                   Here’s a spoiler alert. You should do both, and we’ll tell you why. Because, it’s the same thing.

Jill DeWit:                            Exactly.

Steven Butala:                   The whole thing … Hey, if you don’t want to listen to the whole show, I can summarize it for you right there. We’re data people. We’re expert data people in our group. That’s what we strive at. The fact that we sell land, or buy land through using and manipulating data is almost, not incidental, but it’s not as significant. Why not just roll it into houses. It’s the same thing.

Jill DeWit:                            Exactly.

Steven Butala:                   There’s a couple more steps on the due diligence side, and the sell side that we’ll cover, but in a lot of ways, I think it’s easier.

Jill DeWit:                            Thank you.

Steven Butala:                   We’ll get into the details-

Jill DeWit:                            You don’t need me now, do you? I’ll see ya.

Steven Butala:                   Hey, before we get into it though, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free. Before Jill starts, I have to warn you, this is a very long question. It’s very technical about RealQuest, and Kevin, our longtime moderator … Thank you, thank you, thank you, Kevin. We all thank you. Answers it perfectly at the end. Go ahead, Jill.

Jill DeWit:                            Okay. I’m getting ready for it here. Matt asks, “Hey, everyone. I have a market where I looked at all the for sale properties, and determined that they’re all very consistently between 4.4 to 5 acres, to five acre lots, i.e., $20,000 to $30,000.”

Steven Butala:                   The acquisition price, $4000 to $5000 per acre.

Jill DeWit:                            Okay, thank you.

Steven Butala:                   For five acre lots.

Jill DeWit:                            Okay, thank you.

Steven Butala:                   You know what, I’ll … You want me to read it?

Jill DeWit:                            Yeah, would you please?

Steven Butala:                   It’s really-

Jill DeWit:                            I don’t know the-

Steven Butala:                   I know what he’s getting at here.

Jill DeWit:                            Okay, cool.

Steven Butala:                   Consistently between four and a half to five thousand dollars per acre, for five acre properties, i.e., $25,000 to $30,000 sale value. So he’s purchasing for four to five, selling for 25 to 30. However, most of all have been on a market for more than a year, and a bunch, two to three years. I was able to speak with one of the agents, definitely not a land person, who said the owner has been pretty firm on the price. When I inquired if they thought it had been overpriced or why it hasn’t sold, all these lots seem to be fine. Not landlocked, not in flood areas, nothing really prohibiting the lack of sale. There’s no silliness. So, I try to pull sold comps, but most of them were multi-sales, which means the sale prices were inaccurate, which is the reason why say, “get for sale comps,” like you’ve done.

Jill DeWit:                            Right.

Steven Butala:                   When I get for RealQuest, the total sales price and multiple properties, so I’ve got five good comps from that in my acreage range, and they went 2.8, 2.88, 3.47, and 4 and a half thousand dollars per acre. See how bright these people are in our group?

Jill DeWit:                            Exactly.

Steven Butala:                   My gut says to price this mailer at half of the sold average, which I think is around 2.8 thousand dollars per acre, which is 50% off market value. But those market values aren’t selling.

Jill DeWit:                            Yeah.

Steven Butala:                   I’d then be buying properties around 28% of market value.

Jill DeWit:                            Right.

Steven Butala:                   Is this sounding familiar?

Jill DeWit:                            Yeah, it’s good.

Steven Butala:                   That’s what we teach.

Jill DeWit:                            I love it.

Steven Butala:                   My property at 30%-

Jill DeWit:                            He backed into it, backed into it the right way, 25 to 30.

Steven Butala:                   There’s a reason I’m putting you listener, or viewer, through all of this. Through deductive reasoning, and through writing it all out, I just happened to … and us reading it now on the show, he came to his own conclusion.

Jill DeWit:                            Right. The same conclusion that we would tell.

Steven Butala:                   That’s why I’m putting you through this pain.

Jill DeWit:                            I love it.

Steven Butala:                   So my bottom line question is, do you think this pricing works?

Jill DeWit:                            Oh, that’s good.

Steven Butala:                   Now listen to this. After typing it, I think that buying at 28%, and selling it %56 sounds great, but I just don’t feel like I have good data enough to back these numbers. Has anyone dealt for this type of market, and checked the geography … He’s checked geography. Everything works. I’m not gonna read on, but he goes on, and he says, “In my opinion, they need to sell their lots for those prices a lot less than they have listed, and move on.”

Jill DeWit:                            Exactly.

Steven Butala:                   So, I don’t know if I trust their opinion over mine. And what does Kevin say, Jill?

Jill DeWit:                            Kevin says, “Matt, the market price is the 2.8 thousand dollars an acre that you came up with. Base your offers on that number.”

Steven Butala:                   That’s what I love about Kevin is that-

Jill DeWit:                            That’s hilarious.

Steven Butala:                   He’s basically saying, “Dude, you’ve got it.”

Jill DeWit:                            Yeah.

Steven Butala:                   You figured it out.

Jill DeWit:                            Yep. That’s good.

Steven Butala:                   I had to read … I really [inaudible 00:05:16] read it. That was for my humor.

Jill DeWit:                            That’s good.

Steven Butala:                   Honestly, that thought process, that’s how I think.

Jill DeWit:                            Right.

Steven Butala:                   I have to write it all down, and put it in spreadsheets, and come up and make it all complicated because I have an accounting background, and everything’s complicated. So come up with the stuff that everybody already knows anyway.

Jill DeWit:                            It’s like you did that. It’s like you did all of that. You came to me and said, “So, Jill. So here’s what I determined. Is this right?” “Yep, that’s right.” You’re like, I spent two hours on that.

Steven Butala:                   It happens to me all the time.

Jill DeWit:                            Exactly. That’s what just happened here. I spent two hours on this? Probably two days on getting all that done, by the way.

Steven Butala:                   Right.

Jill DeWit:                            And now we’re gonna go, “Congratulations. You could’ve bought the program.” Or, just be around here-

Steven Butala:                   So he’s got all these for sale properties that are too expensive.

Jill DeWit:                            Right.

Steven Butala:                   It’s been on the market for years. He determines that the price per acre is $2000, or 2.8.

Jill DeWit:                            Right.

Steven Butala:                   Let’s say he sends a mailer out. I’m just playing devil’s advocate.

Jill DeWit:                            Right.

Steven Butala:                   This has happened to us. And, he doesn’t buy any property. Let’s say that happens. It’s very unlikely, crazy unlikely by the way, because those are properties that are for sale, and expensive. There’s lots of people that don’t even have for sale property that want to get rid of-

Jill DeWit:                            You define, “don’t buy a property,” because there will be some response.

Steven Butala:                   Yeah. It’s doesn’t come out … The price that he sends out on this mailer doesn’t manifest they way that it should. It doesn’t materialize.

Jill DeWit:                            Can you be more specific?

Steven Butala:                   Yeah. He sends a huge mailer out in this market that he’s identified. Everything’s $3000 an acre, acquisition price, sell for six-

Jill DeWit:                            And he gets 20 calls, and they’re all mad. Is that what you’re saying?

Steven Butala:                   Yes.

Jill DeWit:                            Okay.

Steven Butala:                   Or, 40 calls and three of them possibly work, but they don’t have access. But, go ahead.

Jill DeWit:                            That was my question, as well.

Steven Butala:                   So, what do you do?

Jill DeWit:                            Yeah, okay.

Steven Butala:                   You do nothing, and that’s the answer, because there is already, in my opinion, red flags going on with this market. When there’s property that’s overpriced, and somebody got there 10 years ago and oversold property, or some kind of thing. In the program, we talk about, it’s just got to fit this criteria.

Jill DeWit:                            Exactly.

Steven Butala:                   This doesn’t give me a good feeling, and I’m not a big fan of feelings, in general. But, it doesn’t give me a good feeling about just re-mailing it.

Jill DeWit:                            Well also too, maybe you’re talking about … You talk about test for reason. So Matt, if you’re trying to jam a square peg in a round hole here-

Steven Butala:                   You said it.

Jill DeWit:                            Because you really like this county. You think it’s gorgeous, but now the days on market are kind of high. You’re not liking the numbers. There are 3143 other counties and parishes you could look at.

Steven Butala:                   Well said.

Jill DeWit:                            Thank you. That’s a lot of, I think, what we’re gonna talk about here on the show, as a matter of fact, is the data, and the things that we look at. You know, you want a good place. You want a hot market, not too hot. You want good prices, not too expensive.

Steven Butala:                   We go through it in huge amount of detail on our Thursday calls with our members, and all of our educational products, but I wanted to really go through this It’s a great question, and I love your thought process.

Jill DeWit:                            That’s correct.

Steven Butala:                   I would’ve done the same thing because I’m older and more experienced, probably a little bit faster. Same thought process. Got down to the $3000 per acre acquisition, and then I would’ve looked around. Step back. Test for reason, like Jill said. And said, “You know what? There’s a bunch of for sale property that’s been sitting on the market for three years, and it seems like there’s a bunch of real estate agents that don’t understand land, not that that matters too much. Maybe I’ll check the county on the other side.”

Jill DeWit:                            Yep.

Steven Butala:                   Or, “Maybe I’ll check even another part of the county.”

Jill DeWit:                            Yep. Thank you.

Steven Butala:                   Today’s topic: Flip houses, or flip land. This is the meat of the show.

Steven Butala:                   Like all topics, Jill and I spent, I don’t know, 45 seconds talking about it before … Talking about the topic and how it’s gonna go when we turn the mics on, and we came to the exact same conclusion that we come to on every single show. “Oh, Steve. That’s not what I thought this was about at all.” And then she scribbles it all out. Look, it gets all scribbled out, and she says, “You just talk about it then.”

Jill DeWit:                            That’s what’s great. Sometimes he lets me go for a while. This is the reality. I have all these notes, and I’ll have A, B, C, D. I’ll have different examples because he’s getting equipment ready, and lighting some things, and then we’ll sit down, and I’ll go, “Okay, here’s what I think.” And then he’ll go, “Yeah, that’s not what the show’s about at all.” I’m like, “Oh, fine.” So, here we are.

Jill DeWit:                            I crossed all my notes off, and I’m here to be entertained as well.

Steven Butala:                   You know what? You can interview me if you want.

Jill DeWit:                            I think I might. So what is this show about, Steven?

Steven Butala:                   If you read the title, you would logically say, “Should I flip land, or should I flip houses? I only have one choice.” No, you have all kinds of choices. You can do anything you want, by the way.

Jill DeWit:                            That’s true.

Steven Butala:                   You can do anything you want today. Think about that for a second.

Jill DeWit:                            That’s true.

Steven Butala:                   Anything you want.

Jill DeWit:                            Isn’t that great? You could not go to work.

Steven Butala:                   That’s a topic for another show.

Jill DeWit:                            Oh, that’s a good one. You could play hooky. You could call in sick.

Steven Butala:                   You could make a million dollars.

Jill DeWit:                            You can go buy a car.

Steven Butala:                   You could fire yourself from your job-

Jill DeWit:                            You can go fishing.

Steven Butala:                   Or you could find another soulmate, assuming you have the wrong one. You could go fishing.

Jill DeWit:                            You could go fishing. Yeah.

Steven Butala:                   To answer the question, we are data people here. We are masters at data, or masters wanna-be.

Jill DeWit:                            Yeah.

Steven Butala:                   If you’re a part of this group, even the free version, or it doesn’t matter, you have access to huge resources of people that understand data, love data like me, and constantly are trying to improve how we reach, through direct mail at the moment, that could change at any minute. The post office could stop running. I’ve got plans for that, by the way. We are mastering reaching potential real estate sellers to see if they want to sell their property at a cheaper price than it’s actually worth today.

Jill DeWit:                            Right.

Steven Butala:                   That’s what we do. At the moment, we have a company called Land Academy, that teaches people how to do it with land. Rural vacant land, infill lots, huge agricultural acreage property, ranches and stuff like that. We’re about to release House Academy, and I would tell you, because I’m almost done filming it. The way that we do a mailer, and the way that we manipulate data, is basically the same. It’s a little more sophisticated with houses, only because there’s so much more market data available with houses. But that’s it.

Jill DeWit:                            Yeah.

Steven Butala:                   After it gets purchased, in lands’ case, 20%, 30%, or 40%, just like the question said, of its current value. In the house case, 75% to 80%, that’s it. It’s the same thing, and it gets solved. So flip land, flip houses, flip apartment buildings, it’s all a version of … Here’s the takeaway. Here’s one sentence that you need to retain from this. You are in control of buying undervalued real estate. That’s so powerful. That’s what this is about. It’s not the actual real estate type.

Jill DeWit:                            I’m gonna ask some interview questions, please. Do you think people are better fit for one or the other?

Steven Butala:                   I think, they think they are.

Jill DeWit:                            I like this. Do you think anybody that’s successfully buying and selling land can do houses?

Steven Butala:                   I think if you can buy and sell land, rural vacant land specifically, and you’ve gotten your operation to a point where you’re accountable, your yield on a mailer is accountable to a specific number. For us, it’s for every 300 letters we send out, we buy a piece of property, a piece of rural vacant land. If … I can just … Can you go turn that off, and I’ll just … Sorry. If you’ve gotten yourself to an accountability point for that number, then you are absolutely 100% set up to purchase and sell houses, or anything else for that matter, as long as you understand and buy into the fact that there’s an accountability number for mailer yield, and just hone your business on getting to that point, and then constantly making it better. So the answer is, yes. Accountability is key here.

Jill DeWit:                            Okay. What do I need to know? If I understand data, I can do both. Tell me about the flipping houses, and how far do I take it? Do I take it … Say I’m a general contractor. Can I lend this?

Steven Butala:                   No.

Jill DeWit:                            Okay.

Steven Butala:                   Never. You know what? There is a general contractor in our advanced group.

Jill DeWit:                            We have several. That’s the best thing ever. Oh my God. I hate to tell you this-

Steven Butala:                   If you’re a general contractor-

Jill DeWit:                            We have quite a few that are doing this really well. It’s so funny. You apparently are not the norm.

Steven Butala:                   The general contractor-

Jill DeWit:                            I can’t believe you just said that.

Steven Butala:                   I did it to make you laugh. The vast majority of the general contractors I’ve ever known have a different-

Jill DeWit:                            Skill set?

Steven Butala:                   Skill set, yeah.

Jill DeWit:                            Yeah, that’s why.

Steven Butala:                   We have a couple of general contractors in our advanced group that-

Jill DeWit:                            You know what it is?

Steven Butala:                   They’re data people.

Jill DeWit:                            They’re data people first, and they’re general contractors later. That’s probably why they’re better at that business. They’re good at all these businesses because they understand data.

Steven Butala:                   Right.

Jill DeWit:                            That’s the difference. They’re known to swing a hammer, and that’s all they know how to do, and hire people.

Steven Butala:                   If you are a general contractor, of course you can do this, but you need to understand and respect data.

Jill DeWit:                            Sorry. That was so good. All right, tell me about … If I’m a house flipper … Say I come in, and I understand the house thing, can I understand the land thing?

Steven Butala:                   Well, there’s a million different types of … You know, whatever. There’s five, or six, or seven types of house flippers. We’re wholesalers. We buy $100,000 house, for sake of argument, for $60,000, sell it for $80,000. And a home flipper, that’s one that would be listed on the NLS real estate agent for $100,000. So if you’re a house renovator, let’s say, can you do this? Yeah, but I’m not sure we have any in our group. I don’t think we do. Not yet. Because again, you have to understand data and respect it, and understand spreadsheets, which you should be doing because you’re renovating a house. So, you should have a spreadsheet, and costs, and budgets, and really be able to stick to it, and be honest and straight with yourself about it.

Jill DeWit:                            Exactly.

Steven Butala:                   I have yet to see that personality type, that one who is a decorator and can move walls around successfully, and still be a data person.

Jill DeWit:                            Ahem.

Steven Butala:                   Jill, you’re one of the best decorators I’ve ever seen, but as a core data person, I respect your approach and all that, I just … you know, I don’t think you can sit around and enjoy it. That’s my point. I know you’re good at it. I just don’t think it’s in your soul like it’s in mine.

Jill DeWit:                            I’m a deal junkie. I’m good at that.

Steven Butala:                   Exactly. I watch you complete these transactions for us, and you love it.

Jill DeWit:                            Thank you.

Steven Butala:                   You love every minute of it.

Jill DeWit:                            Exactly.

Steven Butala:                   That’s not why I’m here.

Jill DeWit:                            Exactly. Thank you.

Steven Butala:                   Are you done with the interview?

Jill DeWit:                            I am.

Steven Butala:                   Well, you’ve done it again. You’ve spent another 15 minutes. You’re still listening to the Land Academy show. Join us next time where Jill and I talk about … Or, we talk with how to buy …

Jill DeWit:                            We talk with our member, Mike Marcel, who happens to work with L.A. County, and talks about L.A. County builder insight. How about that?

Steven Butala:                   Right. And I learn how to type.

Jill DeWit:                            Exactly.

Steven Butala:                   And we answer your questions online, posted by our online community, landinvestors.com. It’s free.

Jill DeWit:                            You are not alone in your real estate ambition.

Jill DeWit:                            We are all goofed up today.

Steven Butala:                   Yeah.

Jill DeWit:                            It’s kind of funny.

Steven Butala:                   It’s me. It’s not you.

Jill DeWit:                            It’s the blue. Just kidding. Wherever you’re watching, wherever you’re listening, please subscribe and 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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