The Roll Data Plays in Property Acquisitions and Sales (1025)
The Roll Data Plays in Property Acquisitions and Sales (1025)
Transcript:
Steven Butala: Steve & Jill here.
Jill DeWit: Hi.
Steven Butala: Welcome to the Land Academy show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny Southern California.
Steven Butala: Today, Jill and I talk about the role data plays in property acquisitions and sales.
Jill DeWit: I would like to just point out that we were talking about this topic and what Steven was thinking when he wrote this topic the other day and my comment was, “Why am I here today?”
Steven Butala: Well, why am I here then?
Jill DeWit: Why am I here today?
Steven Butala: Why do you need me?
Jill DeWit: Exactly. I’m just here to… I’m here for moral support.
Steven Butala: Jill, you make this whole thing work, trust me.
Jill DeWit: Thank you.
Steven Butala: Without you, I’m just a guy in front of a camera talking about real estate, and nobody wants that.
Jill DeWit: Okay.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the Land Investors dot com online community. It’s free.
Jill DeWit: All right. Paulani asks, “Has anyone ever sold a note before? Let’s say that you’re having a tough time selling a certain property for cash, but you sell a property under contract for terms. Package up that deal and sell the note to get your cash price. Example: You’re trying to sell a property for $5,000 cash, but you’re only getting people interested at $8,000 on terms. Once the property’s under contract, sell the particular property at the terms price and then sell the contract to an investor to get $5,000 cash price. Has anyone ever done this? If so, what are the pros and cons to doing this?”
Steven Butala: Paulani, you’re a genius.
Jill DeWit: That’s good.
Steven Butala: I’ve done this many times, there’s people in our group…
Jill DeWit: Sure there are.
Steven Butala: …that do this. This is their business model. They pay cash for a piece of property, double the price, sell it on terms really quickly, but here’s… there’s only one thing I have to add to your logic. There are two things that a note buyer looks at when they assess that note. The credit-worthiness of the person who’s making the payments.
Jill DeWit: Right.
Steven Butala: Oh great, everyone loves their credit score. So that can be a big problem, especially with people who are buying rural vacant land on terms. And number two, the age of the note. In my experience… I’ve done this many times. We don’t do it anymore. We’re cash buyers and sellers. What they want to see is a six month flawlessly paid-for, on time, note paying payment schedule at bare minimum.
Steven Butala: If it’s two years, you’re going to get… if you have a two year payment schedule, you’re going to get a much more attractive discount rate to you, meaning if it’s $8,000, you could sell the note for a lot more than five.
Jill DeWit: Right.
Steven Butala: So, just do a little bit more research. Maybe a day’s more of research. But you’ve got a great concept. Selling property on terms is way, way easier than selling it for cash.
Jill DeWit: What I would do is I would look at who my buyer is first and ask them what they want, because most of the times, the reason we’re selling these properties on terms is because they can’t qualify, they couldn’t qualify, they’re just, you know, and we don’t really go into it. I don’t know anybody that really goes into…
Steven Butala: That’s a really good point.
Jill DeWit: …checking their credit scores. For some reason they can’t afford the cash but they really want to put their mobile home on there, or their RV on there and start living there right now. Maybe they don’t have a good credit score or any credit score.
Steven Butala: Exactly.
Jill DeWit: So we make it easy for them, too, because at the end of the day if we have to take back the land, that’s not hard. We don’t have to eject them from a home and get… it’s not like it’s a big, big pro-… it’s not as difficult, if you will. So, your buyer’s going to be a little bit different, and I, like I said, I would find out what they want.
Steven Butala: Yeah, I mean, the note business is huge. Jill and I know people who are bajillionaires that buy notes and manipulate them, and they all have a strategy just like we do in real estate. Actual real estate business. Like we prefer to buy land, in a lot of cases land that nobody wants at all.
Jill DeWit: Right.
Steven Butala: And certain cases we like to buy houses in [inaudible 00:03:51] House Academy and just wholesale them out. So, note buyers are just like that. They want a very specific type of note that might be X amount. And a lot of them buy non-performing notes, so you could approach it that way. They’re going to expect a huge discount rate.
Jill DeWit: Right.
Steven Butala: So.
Jill DeWit: There goes your sellout for eight.
Steven Butala: Yeah, sell it for two.
Jill DeWit: Yeah, exactly.
Steven Butala: But, if you paid one for it, now you doubled your money. So there’s a lot of ways to approach that and I’m glad you wrote the question. Thank you.
Jill DeWit: Yeah.
Steven Butala: Today’s topic, the role data plays in property acquisitions and sales. This is the meat of the show.
Steven Butala: So what I said to Jill right when we started was, how about I interview you about the actual anatomy of a deal, a regular land deal for us, or for anybody in our group?
Jill DeWit: Okay.
Steven Butala: And then as that’s happening, I’ll comment on the actual role that data plays.
Jill DeWit: Okay.
Jill DeWit: Ready.
Steven Butala: So.
Jill DeWit: Step one.
Steven Butala: You get up in the morning and you say, “I want to do a land real estate deal.” What’s the first thing you do?
Jill DeWit: Pick a county.
Steven Butala: Pick a county. How do you pick a county? Using data. You look at completed sales, properties that are for sale in the area, if it’s a supported zip code in the data sources that we use, namely Realtor dot com and Redfin dot com, you take all the zip codes in that county, and you line them up against each other, and you check for days on market and all kinds of other statistics that it’s beyond the scope of this…
Jill DeWit: Show.
Steven Butala: This episode but… oh, thanks for correcting me.
Jill DeWit: I’m helping you.
Steven Butala: This episode.
Steven Butala: No, what you’re doing is moving it forward, which I actually, I really appreciate.
Steven Butala: You check the zip codes against each other and it’s going to be glaringly obvious through the use of data which properties in which zip codes make more sense to send mail out. So, what’s next? Okay good, so I picked a county. I looked at four counties in a state. I decided that one county makes a lot of sense, specifically these two or three or four zip codes in that county make an incredible amount of sense because property seems to be moving there.
Jill DeWit: Now I’ve got to get some… I’ve got to collect the information of who I’m going to make offers to.
Steven Butala: Right, so…
Jill DeWit: Putting the offers together.
Steven Butala: All right. So I pull the assessor data, and I look at every single person that owns land within the parameters that I’m interested in. So let’s say I only want to buy land that’s between two and a half acres and five and a half acres. I only, for whatever reason, want to do it with people who where their mailing address, where the tax bill goes, is the same state as the land is in.
Jill DeWit: Right.
Steven Butala: I’m just dreaming this up. There’s all kinds of… millions of parameters.
Jill DeWit: Right.
Steven Butala: I only want to send it to people who don’t have any debt on it, and on and on and on. So I’m using data based on my acquisition criteria to just send these specific people letters. Offers.
Jill DeWit: Right.
Jill DeWit: How about, what offers are you sending them? The price.
Steven Butala: Yes, so pricing. So you absolutely have to use data for pricing. Otherwise, you’re just guessing. So the data… you pull up what you believe… there’s a lot of different ways to do this and we talk about it all throughout our education program. What properties have sold for in the area, and what properties are listed for sale, and then you price accordingly. You price is so that the end goal here is that you’re not making a mistake at all. If a person signs the offer and sends it back, there’s a darn good chance that you’re going to accept the offer and move forward because it’s so cheap for you. You can’t lose.
Jill DeWit: I’m going to add a little note in there, too, that it is, we know it’s very difficult to find good comps for sold, closed properties in the land market. They’re traditionally not there. So we look really at what is for sale right now. Not what sold a year ago or two years ago because that’s all we could find kind of thing. What they’re posted for right now for sale, and use that as a gauge.
Steven Butala: Exactly.
Jill DeWit: Thank you.
Jill DeWit: Okay, so now the offer’s come back. Now I’ve got to pick which ones I want to buy.
Steven Butala: So you sent all the offers out based on your offer criteria and your pricing. They went out in the mail, and the offers come back. And three of them or four of them or five of them are signed.
Jill DeWit: Right.
Steven Butala: I don’t necessarily want to or should do every single offer that comes back. So I take a look at the properties that are coming back, I’m staring at them on my desk. I get on the computer and I use Parcel Fact dot com, which is a website that we have created and we own, to take a look at whether or not there’s access, is there anything good about the property, is there good mountain views, you know, it’s back to the four A’s.
Steven Butala: Access, gotta have it. Attribute, is it close to the mountains? Affordability, is it cheap? Probably if you did your mailer right. And…
Jill DeWit: Acreage.
Steven Butala: Acreage. Generally if this is rural vacant land, larger is better.
Jill DeWit: Right.
Steven Butala: Does is have those things? Does it look like… you know, test for reason. So now I’m using data. And how do you do that? You look at all the other stuff that’s going on around it.
Jill DeWit: Right.
Steven Butala: And not just Parcel Fact. You use sites like Land and Farm, LandWatch, and Realtor dot com to see what types of properties are priced and where they are.
Jill DeWit: Right.
Steven Butala: So, next step.
Jill DeWit: Now I bought it. I own it. Now I’m selling it.
Steven Butala: So I had five. I chose three based on those things, and I go to buy it. So that’s a pretty traditional acquisition there. You could use data to find a notary to get it closed, but it’s not… it’s pretty standard stuff to get a real estate deal closed.
Jill DeWit: Exactly.
Steven Butala: So now we go to sell it.
Jill DeWit: Exactly.
Steven Butala: I’m going to interview you.
Jill DeWit: Oh.
Steven Butala: We own the property. It’s in our name. We want to sell it for twice what we paid, like Jill and I do every single week. How do you use data to do that?
Jill DeWit: Well, I already used the data when we bought it. We already bought it that way. I already know that. I wouldn’t be pulling the trigger and buying it if I knew what I could get out of it. So that part’s kind of already done. Now my job is to post it everywhere. Maybe I use data to make sure I’m hitting the right people in the right markets. I’d probably do that. We use a lot of social media for figuring that out, and we’ve talked about unique properties for unique people, and it’s reach. You’ve got to reach them. So, you can use data for that.
Steven Butala: That’s right. And then the other thing, too, is that there’s a very, very good chance if you’re buying rural vacant acreage that people in the immediate area…
Jill DeWit: Yep. That’s true.
Steven Butala: …owners in the immediate area, will buy the property from you.
Jill DeWit: The neighbors.
Steven Butala: And so, all that data is packed into Parcel Fact. This is not a Parcel Fact commercial, by the way, it’s just, we know the value of data so we put it all in one place for you.
Jill DeWit: Exactly.
Steven Butala: That’s how you sell property. The other place how we use data to sell property every single Wednesday is we send out an email with smoking, smoking deals, like specials. Wednesday special, I don’t know what it’s called. Hump day specials?
Jill DeWit: Hump day specials, uh huh (affirmative).
Steven Butala: And we’ve accumulated massive lists over the last 20 years of people who buy real estate from us. So, there’s not one step of this that’s not data-centric and data-driven, and it’s with incredible predictable results that this can happen, like we talked about yesterday.
Jill DeWit: Thank you.
Steven Butala: Hey, we know your time’s valuable. Thanks for spending some of it with us today. Join us next time for the episode called Our In-House Title Escrow Company is Coming Soon. Title Mind.
Jill DeWit: I did not know we were sharing that. And we answer your questions posted on our online community in Land Investors dot com. It is free.
Steven Butala: You are not alone in your real estate ambition. Yeah, you’re the one who came up with that title.
Jill DeWit: Oh, did I?
Steven Butala: This isn’t my show. Yeah.
Jill DeWit: Did I? I didn’t know we were going to talk about it.
Steven Butala: Um hmm (affirmative). We had a little Skype frenzy session a couple of days ago.
Jill DeWit: I didn’t know we were going to talk about that, release that, but that’s okay. We can tell them about it now. It’s going to be good. We’ll share what we have, and what we’re going to do.
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