Planning for Your Family Legacy Like Saras Farm (LA 1035)

Planning for Your Family Legacy Like Saras Farm (LA 1035)

Transcript:

Steve:                   Steve and Jill here.

Jill:                          Good day.

Steve:                   Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.

Steve:                   and I’m Jill DeWit, broadcasting from sunny southern California.

Jill:                          Today. Jill and I talk about planning for your family legacy, like Sarah’s farm.

Steve:                   Who The heck is Sarah?

Jill:                          Sarah is our niece and this is because of a story that I heard, and I was talking to your sister yesterday and she was sharing with me Sarah’s farm, one of their properties that they purchased, and I thought this was really, really cool and I want to talk about it more.

Steve:                   If you’re a regular listener, you know this, but my middle sister is… It lives in Trevor City, Michigan, and she’s extremely successful residential real estate agent. She’s actually the single only residential real estate agent that I enjoy spending time with.

Jill:                          That is true, well hey wait, there’s two.

Steve:                   Oh yeah.

Jill:                          Well we have two, we have one more local.

Steve:                   Yeah, and so she’s been accumulating property. She pours a lot of her money, the commission money that she earns ,into buying properties, and I think she’s up to what, 20 or 30 or something?

Jill:                          20 doors.

Steve:                   And so one of them is Sarah’s farm, which I think… Tell the story. Oh no, okay wait…

Jill:                          We’ll save it for the show.

Steve:                   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.

Jill:                          Mike L. asks, “Hi Steve and Jill, I recently sent out a mailer and have been getting calls back. It’s exciting, but everyone wants more than we are offering. I’m okay with that, but I’m having trouble properly assessing the true market value against the land flippers on LandWatch who are properly following your advice and to price less than the cheapest listed seller to move land fast. We have no seller lists yet and we have priced well enough it seems, but we can’t move much higher if I’m basing the sales price off the lowest seller. I can find… The lowest one I can find on LandWatch. Have you or others had any experience with this? Is it worth acquiring with the expectation that the sales price will fall more towards the average low?

Steve:                   Yes.

Jill:                          Usually other flippers or the one or two that are viciously low. Please help. I’ve got an example below if my question didn’t make sense.

Steve:                   It makes complete sense.

Jill:                          I’m sorry. I’m going to say what he put in here too? This is so cute. Oh, this is a good… hey, good way to do this. This is how you get on this show. He put hashtag podcast question, hashtag love the show hashtag. I’ll put whatever I have to put here to get on this show, hashtag you just told us to do something like this to get your question on the show. Mike. Hashtag Mike, you did great.

Steve:                   That was hilarious, Actually.

Jill:                          Perfect.

Steve:                   I didn’t even realize that when I put this question in here.

Jill:                          That was so good. Alright. Do you want me to read the example?

Steve:                   He says, “For example, we listed a property for $750 and they made an offer for $750 and the guy wants four grants. So the cheapest on LandWatch is 2,500 everybody else falls into the four to $5,000 range for the same property that’s in a planned urban development. That’s east coast, east coast speak for mash plan community.

Jill:                          Right.

Steve:                   So there’s two questions here. He’s questioning whether he priced the mailer correctly and then on his deals that are coming back, he’s asking us, “What should I do? What’s an acceptable number? Is 2000 acceptable? If I can sell it for 4,000 is 750 better or not and I’m not.”

Steve:                   So, number one, I think you went in probably scraping the bottom a little too much, which I understand because Jill and I kind of do that too. Pricing wise, it probably would’ve been a little bit better if everything’s selling between four and five thousand, for a 2000. Purchasing between one and two instead of 750, but that’s okay because they’re still calling you back.

Steve:                   You can turn some deals out out of this thing. Number two, LandWatch and Landed Farm or landed.com as it’s called now, are great places to price mailers, but just kind of take it with a grain of salt. More and more. I’m recommending that you really check the MLS out and some stuff on Craigslist and get a little bit more creative about what these properties are really selling for and adjust your pricing that way.

Steve:                   If you’ve got lots of examples for property selling between four and five grand, I wouldn’t have a problem spending two grand on a property at all.

Jill:                          Right.

Steve:                   Especially in the very beginning of your career.

Jill:                          Exactly. So I hear it as too as, “Am I expected to be half of the cheapest one that I find, which is one of us?” No, that’s nuts.

Steve:                   Yeah.

Jill:                          Don’t worry about it.

Steve:                   It’s the cheapest in the lowest range.

Jill:                          Exactly. And when you do this, like Steven’s saying, check a bunch of different areas. I tell people to get a get a variety of comps throw out the crazy high one, throw out the crazy low one and then take that range in there and you’re like, “All right, where you want to price to sell is on the lower end of that number.”

Steve:                   Yeah.

Jill:                          And that should really help you. So, they have 750 obviously, yeah, you’re not going to buy it for 4,000, but somebody else might call you back and say, “You know what? I don’t like 750 but I like 1500′, and you’re going to go, “Done.” Because I know I can buy it for 1500 and then I’m going to sell it for 3,200 and I’m still going to be below the majority of everybody out there with like kind property. That makes sense

Steve:                   Good Advice Jill.

Jill:                          Thanks.

Steve:                   That’s exactly what I would say. Exactly. Today’s topic, Planning Your family legacy, like Sarah’s farm. This is the meat of the show. Tell us the story, Jill.

Jill:                          So, I had an awesome conversation with Stevens, sister, little sister yesterday. Her name is Ann and we love her. She’s awesome. And, her son’s gonna actually come out and visit us and he hasn’t been out here. I don’t know if he’s ever been to California.

Steve:                   No, he hasn’t.

Jill:                          Oh, in for a treat by the way. The kid is 20 Oh, the kid’s 20, he’s bringing his girlfriend and I’m going to say this now on the air I’ve already, I already prefaced this so I have to say it. She said, “Be warned, he has a fake ID.”

Jill:                          I said, “They all do.” At 20 they all do and they’re good. So anyway, it’s so funny.

Steve:                   Aren’t you the cool, mom?

Jill:                          Thank you. Thank you very much. So anyway, so we’re talking about, I’m like, “So tell me about your business. What do you have going on?”

Jill:                          She was like, “Well, we’re at 20 doors and we’re really happy with that.” And one of the properties that she talked about, she calls it Sarah’s farm. And actually, we were at Sarah’s farm yesterday. I’m like, “What’s Sarah’s farm?” She says, “Well, one of the properties that we bought is for Sarah, our daughter, who is 18, just graduated high school and she has a bunch of animals.”

Jill:                          And so it’s like, they have this property, they lease it out, and the person on the property cares for the animals as well as the property. She said, we were just out there yesterday because the person who takes care of it for us was gone. So we had to go out and check on the animals. So it was really making me think, I’m like, “You know, we have a bunch of property”, I’m going to ask you about this in a minute, but I know we have earmarked and plans that we have earmarked, but it was fun hearing from somebody else and, and what she is planning for her family, these 20 doors. I don’t know who’s going to go to Owen, I don’t know who’s going to…

Jill:                          I obviously know that one Sarah’s farm and Sarah knows right now that that farm mom and dad had bought will be hers someday. It may be in her name right now. It’s Sarah’s farm.

Steve:                   I’m sure it is.

Jill:                          Yeah. And it’s so good. And we should all be thinking of this, thinking of not just right now today, but planning for the future and planning for our family and what a great way to do that is say, “Well that’s Sarah’s farm and Sarah knows it and Sarah’s got at gonna have that someday.” So I’d like to know your thoughts and then I wanted like to know some of our plans, whatever you want to share.

Steve:                   Well here’s the thing about legacy property. In general property generally goes up in value in this country anyway. My sister got this idea because when my mom passed away she’d willed or, we inherited two houses in Michigan, in a small town in Michigan where we grew up, where we both went to high school and she… then both of them were leased and they were at leased at just about zero, it netted zero just about every month.

Steve:                   And one of the tenants specifically was, I mean they paid my mom’s mortgage off while she was alive. So, we got this properties and then we owned it for years and years and years. My sister kind of managed them. The thing about that town is that it never really increased in value. So the property, we almost sold the properties, both of them for about what my mom had paid for them.

Steve:                   And so because the way that the rent situation is, because generally in Michigan it’s just tough. I it’s not like the west coast where property values… there’s no ceiling. So we want to make sure that if you’re going to leave legacy property, and I’m sure my sister’s figured this out on this farm, that it’s somehow cash flowing or paying for itself. And if I know my sister, she just paid cash for it. So, that leaves property taxes and some other probably maintenance type stuff. So she’s probably letting the guy live there. Maybe it’s five, $600 he’s paying a month, or some version of that just to make sure that the whole thing’s whole. And property values in Traverse City are going always going up. So, Traverse City, Michigan.

Steve:                   So I think she’s got to figure it out. But you don’t want, what you don’t want to do is buy a piece of property, a piece of vacant land and pay the taxes on it for 25 years, and then the kids get it because unless it’s a very extraordinary piece of property that is in some type of growth area that you have inside information on.

Steve:                   And if that’s the case that’s fine, but you really need to figure out how to not pay the taxes on it because generally the more valuable the property is, the higher the taxes are going to be. That’s not always true, but it’s generally true. So figure out a way to cash flow it. People are looking for land leases all the time or all kinds of things. I think legacy property, my sister figured this all out, legacy property is real specific use and it’s what? Property that can cash flow. So you can turn a 30 unit portfolio over to your kids that’s paid for and cash flowing reasonably well, not setting in the world on fire. I think that that’s extraordinary.

Jill:                          I agree.

Steve:                   And that’s actually our plan.

Jill:                          Yeah. And all her 20 doors, I mean, they really are 20 doors. They are homes that people are paying for. You’re right.

Steve:                   She’s purchasing… I know exactly what she’s doing. She’s buying very inexpensive properties in a town called Cadillac, Michigan, where you can buy a house that’s tenantable for 20 or $30,000, maybe $40,000, and then it commands a lease rate of almost a thousand a month. So, you know, in Traverse City, it’s not uncommon for her to get a commission on one deal that’s 30 grand and just go buy a house and rent it out. And she’s lucky enough to her husband, he’s managing the whole thing full time. So, that’s a team situation like we have.

Jill:                          It really is, exactly.

Steve:                   So she just comes up with a seed capital and he spends it and make sure that the tenants pay.

Jill:                          Exactly. It’s a great thing. Yeah. Just like us. We talked a little bit about that. She’s like, “He handles it all. 100%. She does her part. He does his part. It’s perfect. It’s a beautiful thing.

Steve:                   So, that little company they have probably generates 15 maybe 20,000 bucks a month, free and clear before tax. And then a beautiful thing about that is that the properties themselves are probably going up three or four, 5% a year in value. So hopefully, I don’t know.

Jill:                          Exactly. Hey, so what’s our plan if you…

Steve:                   That.

Jill:                          Oh. I know you have stuff…I don’t know if how much you want to share. Okay, got it.

Steve:                   No, Jill and I are cooking up a private syndication company where we’ll ask our members, [inaudible 00:12:00] members, House Academy members. We’re waiting for the groups to get a little bit bigger for House Academy to really kick in. We have lots of money partners now, but we can pretty easily show a 10% return on money for investors in a closed group. We’re not going to go get SEC filings or anything. You have to be a Land Academy member or House Academy member for more than six months. There’s all kinds of rules that where you plan on following to the letter.

Steve:                   And so, we’re going to buy some properties together with financial partners and, and that’s how it’s going to go. Probably in Arizona cause we’re so familiar with it and it’s… my sister and her husband chose Cadillac Michigan for a reason. And Arizona, Jill, I know really, really well.

Steve:                   Maricopa county in Phoenix, we can buy properties for 150 to 200,000, four bedrooms, three bath built 1970’s or eighties and newer and it’ll command 1800 bucks in rent. So it’s just a tick up from what my sister’s doing. But yeah, the numbers work.

Jill:                          Exactly.

Steve:                   Taxes are real cheap. It’s hard to do in California.

Jill:                          Yeah, that’s true.

Steve:                   So that’s legacy property in a nutshell. I mean, what do you think? Are there other creative product types that you think would be good legacy property? Like apartment buildings and stuff?

Jill:                          That could be…

Steve:                   That requires management. If you can get big enough property class, and Class A apartment buildings where it justifies very easily, a professional property manager. That’s not so bad either. I have a buddy who inherited a…

Jill:                          Mobile home park.

Steve:                   Yeah, mobile home park and…

Jill:                          That would be a good one.

Steve:                   … with two of his siblings and that was great. They live off that. With his personality type that’s very dangerous for him not to have a job.

Jill:                          That’s true.

Steve:                   Hey, we know your time is valuable. Thanks for spending some of it with us today, anyway. Join us next time for the episode called ,ember Kevin Ferrell shares his successful Land Academy stories.

Jill:                          And we answer your questions, post them on our online committee found at landinvestors.com. It is free.

Steve:                   You are not alone in your real estate ambition. You know, it’s pretty funny that we just had a little estate planning meeting on the air here.

Jill:                          I know, I agree. I think that’s good.

Steve:                   I didn’t like blindsided you did I?

Jill:                          No, no, not at all. Wherever you’re watching, wherever you’re listening, please subscribe and rate us there we are, Steve and Jill.

Steve:                   Information.

Jill:                          and inspiration

Steve:                   to buy undervalued property.

 

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