Why Land is Overlooked as Investment Opportunity (LA 1037)

Why Land is Overlooked as Investment Opportunity (LA 1037)


Steven Butala:                   Steven and Jill here.

Jill DeWit:                            Hi.

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

Jill DeWit:                            I’m Jill DeWit, broadcasting from sunny Southern California.

Steven Butala:                   Today, Jill and I talk about why land is so overlooked as an investment opportunity. I’ve been wanting to do this show for a long time. Land is so misunderstood even by people that have been in the real estate business as investors, or in some capacity of, very successfully, commercial real estate. Everybody looks at land like, “I don’t know what to do with it.”

Jill DeWit:                            You know what? I think women are also misunderstood. I can’t even say it. I’m not sure what to do with it.

Steven Butala:                   That’s a topic for a whole additional podcast.

Jill DeWit:                            There we go.

Steven Butala:                   Understandingwomen.com.

Jill DeWit:                            That’s right. Why are women … I’m just kidding.

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.

Jill DeWit:                            Okay. Travis shares, “I’m looking to team up with people to tap into those counties with near inaccessible data that, as a result, don’t often or ever get mailed. If you found a county which has quality data, but it’s just not easy to get into a succinct mailer format, I want to know. If the data is solid and online, for example, they have a GIS or a tax record system, but you can’t find it on Teleport or CoreLogic for whatever crazy reason, I can parse it, format it, scrub it, and mail it.” This guy is great. Oh, my gosh, this is so funny. “If the data is not online, but Susan at the county can email it on Tuesday or even snail mail it, let’s partner up to grab it, sort it, clean it, and send it.

Steven Butala:                   Who is this guy?

Jill DeWit:                            I like this. This is great. “I’ve got a knack and the computer skills for making that data pretty and getting it into a mail merge format. Give me your messy data. Macros, scrapers, scripts, formulas, whatever it takes, if there’s a large enough payday potential, we can get that data formatted. In exchange, I’m looking to partner on mailers and deals, since I, too, am in the business of parcels for paper. Reach out to me and let’s head off the competition. You find them, I’ll scrub them, and we’ll split the profits. Don’t let, ‘It’s too hard to get this data,’ get in the way. Let’s charge through it together and we’ll figure it out. Send me a message on Land Investors or shoot me an email at Travis,” and you can go get it online. “I’m looking forward to hearing from you and wish you happy hunting.” How cool is he?

Steven Butala:                   Travis, here’s my email. It’s jack@landacademy.com. That’s the one that you should use. I have a list of counties that I know fit into this criteria perfectly. Jill and I have way too much acquisition money these days, even after all the deals that we’re funding. I’d be happy to finance the whole mailer, if you just orchestrate taking the calls, doing the data, and then popping the properties that come back in into deal funding.

Jill DeWit:                            Yep.

Steven Butala:                   I can list the names of counties right now and where they are in that situation. We don’t have the time. I can do this, too. I have actually the same talent that you do. I’m probably an older version of talent in how I do things, which is good for you and not for me, and I think we could make some magic together, actually, with Jill answering the phone and our staff right now.

Jill DeWit:                            This actually ties into one thing that we said. Now and then, things come up on our weekly member calls where people are like, “This just sounds kind of hard. Is it worth it? Should I do it?” And our answer is, “You got two choices.” One is you move on and circle back around when you’re more comfortable or you have the time and the resources to really dig into that or, B, you could dig into it now and you’re going to be the only one and you’re going to be killing it being the expert of X, fill in the blank.

Steven Butala:                   I mean, I don’t want to give the impression that counties are over mailed. He’s playing the odds, and the odds are correct. If it’s very difficult to get data. There’s about two or 300 counties in the country where it’s very, very difficult to get data, even RealQuest, TitlePro, and in a lot of cases, DataTree, not so much DataTree, they can’t get good datasets. But, they’re mailing the tax bills out every year, so there’s a data set somewhere.

Jill DeWit:                            It’s somewhere.

Steven Butala:                   And, they’re obligated by federal law to disclose it to the public. It would be fun.

Jill DeWit:                            That would be good. I like it. Good job, Travis.

Steven Butala:                   Today’s topic, why land is overlooked as an investment opportunity, this is the meat of the show. Jill’s feverishly scribbling notes on this. Take it away, Jill.

Jill DeWit:                            I have three, that I think, reasons why this is overlooked, and I’d love to hear your comments and then hear what else you think.

Steven Butala:                   I have a lot to say actually to this.

Jill DeWit:                            Okay. Number one, people, I think, don’t understand that the way we buy this land, it’s worth more the day we buy it.

Steven Butala:                   Oh, my gosh, you’re right.

Jill DeWit:                            They can’t wrap their head around that. They think that, “I’m buying a property worth $50,000 for $50,000.” Nope, that’s not what’s happening. I’m buying a property that’s worth $50,000 for $20,000, so right there, that’s one of the reasons, and people, they don’t understand it. They don’t know how to do it, and they don’t know how it’s possible, so that’s one of the reasons, and that’s the whole Land Academy, by the way, but that’s one of the reasons, okay?

Jill DeWit:                            Second reason is, is I think that this is overlooked because everyone thinks that land needs to be improved upon or built upon to be valuable, which is also not true. And I was thinking, I made a little note to myself off to the right, can you imagine if I had like a … I’m going to come up with this new phrase, Land ARV, could you imagine? I am so sick of the ARV thing. Anyway, because ARV is after repair value. We hear that all the time when people are doing houses. Every time I get a Wholesale IT email it says, “It’s a great deal.” It always says, “off-market,” and I get a lot in the Arizona, Phoenix area from other people, and they’re like, “$290,000 off-market, ARV, $450,000.” Well, that’s your number. What if I’m only going to put 10,000 into it? My ARV is not going to be $450,000, everyone, because I’m not going to do that much to it.

Jill DeWit:                            ARV is such a floating nebulous number. So, I thought I’d be funny that’d be funny. I’m going to put it on there, land for sale, $40,000, ARV, $180,000. Like yeah, put a house on it. Isn’t that hilarious?

Steven Butala:                   ARV is a unicorn.

Jill DeWit:                            Exactly. It’s the silliest thing. So that’s my number two. And my number three reason why I think land is overlooked as an investment opportunity is that, people shy away from this property type because the comps are a little bit harder to get, which is true.

Steven Butala:                   Lack of data.

Jill DeWit:                            There’s lack of data there. You really have to dig or know the areas. Sometimes, you just can’t find them. And we don’t necessarily use comps. We don’t use what it sold for, we use what it’s available now, the sales price today. And I think that people have a fear of doing it wrong, and so they just tune out. They don’t want to do this.

Steven Butala:                   All very true.

Jill DeWit:                            Thank you.

Steven Butala:                   The reason that people don’t understand land is because it doesn’t cash flow. It’s very simple. If you talk to any version of a commercial real estate investor, whether they’re new or 60, 70-years-old, they’re all going to say some version of, “Yeah, I don’t like land too much because I just don’t know what to do with it.” But if you say this, “Hey, have you ever done an apartment deal where you buy it on a four cap?” which is top price, or, “Would you buy it on an eight cap?” let’s say, which is spending a lot. You clean it up, raise the rent, and now it’s renting at whatever and sell it at the same eight cap, but for more dollars. What that translates to is, if I buy it for 20 million and I sell it for 22 million after I raised the rent. “Oh, yeah. Oh, that’s exactly what we do, and you got it all figured out, Why don’t you do that?”

Steven Butala:                   Well, that’s exactly what we do without having to go through all the trouble of that stuff. We buy a piece of dirt worth 30 grand and sell it for 60 the next day. So wouldn’t you rather do that for 14 or 15 or 20 times in the time that you can, or both, let’s say? So when you explain it that way, then you get their attention. They also don’t understand data. The reason that this works is because we’re data people. We’re data people first and real estate people second.

Jill DeWit:                            True. That’s perfect.

Steven Butala:                   And, no people in the real estate business are data people. They’re just not. They’re in some other business.

Jill DeWit:                            They’re relationship people.

Steven Butala:                   Unless, they found Land Academy.

Jill DeWit:                            They think it’s all relationship. They’re relationship people. They think that everything you find’s a relationship. “Oh, I heard it through my brother-in-law.” That’s not what we do.

Steven Butala:                   Right. That’s why land is misunderstood. There’s so many clichés out there, Cliché-ish terms like, “Why would I buy a land in the middle of nowhere?” I mean, if you listen to the show, you’ve heard us say it a million times.

Jill DeWit:                            Exactly.

Steven Butala:                   Those clichés have really caught on. You know what I don’t hear too much anymore and I’m glad is, “Oh well, that’s just junk land, junk property.” I mean, really?

Jill DeWit:                            I hate that.

Steven Butala:                   What is that? What’s junk land?

Jill DeWit:                            Exactly.

Steven Butala:                   It must have some value.

Jill DeWit:                            That’s a junk mansion. That’s a junk 4,000 square foot house. All right. Whatever. It’s not junk to me.

Steven Butala:                   And why this is all changed in the last 10 years or so, in my opinion, is because of the availability of things like Google Earth, and finding parcel facts, and all the tools.

Jill DeWit:                            Creating parcel facts.

Steven Butala:                   Yeah. The tools that are available to find this property and manipulate it, and resell it. So it turns out, there’s a huge market for rural vacant land for a bunch of reasons. Huge market, that we tapped into when I started all this back in the ’90s I had no idea.

Jill DeWit:                            Exactly. Yup. I would like to say too that I know there’s a lot of our members that do make these cash flowing properties. It’s our MO right now. We’re cash people at the end of the day, but a lot of our members sell on terms, and they make it a cash flowing property. So you really could do that.

Steven Butala:                   Yeah.

Jill DeWit:                            They buy them so well, we did this, too, in the past. My favorite is, say you buy it for $2,000, and you’re going to sell it on terms for 10, this is not crazy. So what do you do? You take $2,000 down, and then $100 a month or whatever it is, until that person pays off $10,000 note, right?

Steven Butala:                   For 10 years.

Jill DeWit:                            And guess what? The day you sold it to that guy, you just got your original investment back. Now it’s cash flowing.

Steven Butala:                   I mean, our original program is called Cash Flow From Land, literally, CFFL. That’s what we all call it around the office and it proves that.

Jill DeWit:                            It really does. It really does. And it’s great to be cash flowing. The thing is, that it takes a while to build up enough property, and it takes a lot of time and energy to manage them. We have changed gears a little bit, just found that, gosh, we just love to get in and get out. That all works and we all believe in it, and so many of our members still do it. We like to get in and get out, and buildup a bigger capital faster, and do things that way. That’s why we changed our personal strategy a little bit. But, I think I still have a couple of those, by the way. They’re so long paid off, cash flowing, it’s not even funny. I kind of forgot about them. I mean like, oh yeah, that payment, just these magic payments just come in every month.

Steven Butala:                   Magic payments.

Jill DeWit:                            It’s really funny.

Steven Butala:                   That’s the name of a show, Magic Payments.

Jill DeWit:                            Magic Payments.

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, why is there so much unwanted land out there?

Jill DeWit:                            And, we answer your questions. Post them on our online community, founditlandinvestors.com. It is free.

Steven Butala:                   You are not alone in your real estate ambition. I’ve wanted to do that episode for a long time, and this one tomorrow too. I’ve always, you know, you get in the car and you drive to Las Vegas, and it’s like, what is this real estate? There’s so much land out here. What’s going on with this? I swear that’s why people get on their phone and find Land Academy, and you’re like …

Jill DeWit:                            Yup. I completely agree. Wherever you’re watching or 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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