1.25 Acres vs 40 Acres to Build Equity 101 (LA 1058)
1.25 Acres vs 40 Acres to Build Equity 101 (LA 1058)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
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 one and a quarter acres versus 40 acres to build your own equity, 101. What the heck does that mean? Is that even a sentence?
Jill DeWit: More importantly, the question should be saying: Jill, how do you keep up with this guy, and what is he talking about? That’s what goes on. I’m the interpreter today.
Steven Butala: You have a lot of choices about what types of property to buy and sell. You have a tremendous amount of control over your real estate investment career, mailer by mailer. So that’s what this show is intended. It’s intended to inform you, or to encourage you, to look at what different types of property to buy, and specifically land, and how it fits in your equity plan.
Jill DeWit: You know, that’s good point because some people think that they heard about a deal. I’m an investor. I need to make every deal work and try to get this done. I just heard about this job. And there’s $30,000 in it. We’ve got to figure it out. No, you don’t. Pick what you want to work on. You really do have the control. And you’ll get there faster, by the way, if you calm down and focus on something, and do it right and well.
Steven Butala: You should always have, we’ll get into it here in a second, but you should always, always, always have an acquisition criteria. That’s what’s so beautiful about sending these mailers out because that is your acquisition criteria. And someone, theoretically in a perfect world, is going to sign it and send it back, and you’re going to check to see if it fits your acquisition criteria. Opportunism is out there. So when I hear the word opportunistic, that’s a really negative thing for me. What do you think-
Jill DeWit: I was going to say too, that’s a very big word.
Steven Butala: Opportunistic to me is, I’m open for anything, man. I’ll take a look at any deal. Just send it over. I think that’s the worst thing that could happen.
Jill DeWit: That’s wrong.
Steven Butala: And that’s going to end in a fiery ball of tragedy.
Jill DeWit: Could you imagine if you went around that way? I mean, you could maybe research three deals a week trying to figure out that area and that thing and that market because someone threw something to your way, versus we send out mail and review three deals in 15 minutes.
Steven Butala: That’s right.
Jill DeWit: And then we move on. We’re buying it or we’re not. And then we move on, and there you go.
Steven Butala: So I’ll paint the perfect picture of your acre and a quarter operation and your 40 acre operation, and maybe even your like 4,000 acre operation, and why you should never do that. 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 DeWit: Armin says, “Many of the properties I acquire are [inaudible 00:02:59] lots with several homes in the area. There are at least 200 people driving by every day, and I think a sign can make a difference. How do I put up a physical for sale sign on my property? Is there a cheap and easy way for me to create a sign, have someone plant it on my property? Steve talks about using WeGoLook to have someone visit the property to click photos. But isn’t it equally important to have a for sale sign for those that drive by?”.
Jill DeWit: I love those, and that’s the perfect solution, even Craigslist. I’d just say, you can hire-
Steven Butala: That’s what I would do.
Jill DeWit: Wonderful photographers and drone pilots that can do, and you pay them after, so you see the quality of work after, right out of Craigslist. And you sure could say, “Hey, by the way, when we’re done, bill me the $20 for the … And I want you to take a picture of it, of the Home Depot for sale sign.” If you go grab one of those, put it on a stick in the ground for me, that’d be great, with this phone number on it.
Steven Butala: I mean, I’m going to make it easier for you than that. And that’s very viable. Real estate agents themselves never put signs in the ground themselves. They have, air quotes, a sign guy. In every metropolitan area, there’s at least one company where the guy owns a warehouse full of signs. And real estate agents don’t actually own those posts. They just own the flat piece that goes on the post. Mostly, the sign guy owns the post. And he charges, I’ve seen her anywhere from $10 to $50 to to set it up and remove it. And it can be there as long as you want. I would start, I would do that. I would put a quality sign up. I wouldn’t put a silly little bandit. We call them bandit signs in Arizona.
Jill DeWit: We’ve done that on houses though, and I kind of like it.
Steven Butala: Yeah. But you know what, because we only needed it to be there for about a week.
Jill DeWit: That’s true.
Steven Butala: So the first rain, it’s just going to be a mess. I don’t care what anyone says, You’re leaving an impression of yourself. If it’s ratty old sign, it looks like a ratty old deal.
Jill DeWit: I don’t want a ratty old sign.
Steven Butala: It’s going to get ratty after the first rain.
Jill DeWit: Okay.
Steven Butala: We’ve all sat in our car at traffic lights and looked at these bandit signs. We buy houses, and it’s all written in with a magic marker. It’s like, “Come on now.”.
Jill DeWit: That’s true.
Steven Butala: You don’t want a part of that. If you’re going to do it, do it right. That’s what I say.
Jill DeWit: I understand.
Steven Butala: Might cost you 100 bucks to do the whole thing right. But the place to start is that there’s tons and tons of these service companies that help real estate agents. They love to take real estate agents’ money.
Jill DeWit: You’re so funny. I love to take real estate agents’ money.
Steven Butala: So do I. We can start a company that would take real estate agents; money, I would start it today.
Jill DeWit: I have to tell you, that is usually the second line right now with what I’m doing in my current day job, if you’ve been listening all week, has been really going back to 2010 for us and taking calls, even before. And gosh, it was even before 2010. But anyway, taking the calls and talking to the sellers, and getting a signed purchase agreement back saying things … I tell them things like: Does that price work for you? Sign it, send it to me, let’s all do it. And we’re not agents, we’re not brokers. And they love that. That’s one of my typical second sentences. And they’re like, “Oh, I can really talk to you.” Yep. It’s really me. I’m really the buyer. It’s my money. Do you want to sell? That’s it. And they love it. Thank you.
Steven Butala: Today’s topic, acre and a quarter. Sorry. One and a quarter acres, versus 40 acres to build your own equity empire. This is the meat of the show. You have complete control over what you buy and sell, complete control. You don’t have a boss. You’re not going to report to anyone. And if you love acre and a quarter properties more than you love 40 acre properties because they’re cheaper and the margins are higher, the percentage margins are higher, the dollars are probably a little bit less, then go for it.
Steven Butala: We have built since day one, a 40 acre empire. And we’re still doing it. We are purchasing 40 acre properties in multiple states right now. We generally, in the Southwest, buy properties for around the $100 per acre mark in lots of different places, through lots of different methodologies, and sell it for double. So we buy them from maybe four or five, and wholesale them out for between eight and 10, in some cases, 12. and around every third to eight, maybe let’s just say five, every five properties, we know it’s worth 80,000 bucks or 150,000 bucks.
Steven Butala: We just bought one yesterday, actually. It’s worth 140 grand. We’ll list it on the MLS and wait. Then we’ll sell it. We’ll retail it out and just wait. So you can do that methodology to build. You can choose what product type suits you and where your comfort level is, where your equity partner’s comfort level is, and take it from there. But I’ll tell you this, that’s a sweet spot for us. Between five and 40 acres really works for us because we can, for sure, can double our money. And when you start doubling $5,000 every week, it doesn’t take long. It takes less than a year to have a million bucks in your bank.
Jill DeWit: It’s true.
Steven Butala: So my point to this whole show is have an equity plan. Have a goal. I remember, Joe Martin saying, “I need to make a million bucks in a year,” and he did. So if you have a goal, and you keep telling yourself, “I’m going to make a million bucks in a year, and this is how I’m going to do it. I’m going to back and do this many 40 acre transactions.” Back it all out for yourself.
Jill DeWit: Yeah, they need to yield this much. This is how much mail I’m going to send out to make it happen. I already know.
Steven Butala: Or maybe your model is to buy smaller acreage property in Northern Michigan for $5,000, and sell it for $12,000, or $12,000, and sell it for $24,000. I will say this, the larger … Once you pass around $50,000 as a sale price, it’s a whole different animal. You’re really now separating because there’s not a lot of financing in these properties. There are not a lot of banks that will loan you money to purchase it against the actual property. You can do it with home equity and some other creative stuff.
Steven Butala: But after writing a $50,000 check, the higher that amount gets more than 50,000, you’re going to separate yourself, and really kind of, in my opinion, shoot yourself in the foot a little bit on who buys a property. The pool of buyers after 50 grand shrinks dramatically, in my opinion, through my experience.
Jill DeWit: You’re right. I like that.
Steven Butala: So have a plan. We talk in Atlanta Academy 1.0, we talk about equity planner. It’s a spreadsheet. So if you’re a member, dust that off and really work it backwards to see how much money you want and can make. And then it’ll tell you how much mail to send out, and how much it’s going to cost, and the whole thing. It’s all right there. If you’re not a member, you really need to sit down in front of a spreadsheet and plan the rest of your next 36 months out, and try to hit your equity goal because it’s all about that.
Jill DeWit: Do you like this nail color? I’m just about to start on my toes now.
Steven Butala: Oh, my God. I just spent 10 minutes talking just now.
Jill DeWit: You did.
Steven Butala: I just looked at the time. I’m like, “That’s 10 minutes that I just talked.”.
Jill DeWit: You did. Thank you. Thank you, sweetheart. I needed the break. [crosstalk 00:10:41]
Steven Butala: Any flaws in that logic? Do you see any flaws?
Jill DeWit: None. No. It’s just all about knowing you have options. Check. And then, and the reasons why, and some good information about who your buyers are. Just think about it. With these over $50,000 numbers too, it’s like you said, you’re separating yourself, I think in a very good way. Those deals might take longer to close, so be ready for it, slash however, there’s bigger numbers there. So you’re going to buy it for 50 and sell it for 150.
Jill DeWit: And you know what, maybe that took 90 days or something like, that versus all your other ones. You know, that’s okay, just be ready for it. Plan for it. Some people make that their whole business model. We have several members that started doing that, buy for $2000, sell for $5,000. And then they went buy for $5,000, sell for $12,000. And now they’re in that. I just buy six a year, and I buy them for $5,000 or $50,000. and then I sell them for $150,000, and that’s my whole business model. I only have to manage those, that number of deals, and I do just great. And I know they’re going take some time, and that’s all I do, which is great.
Steven Butala: We send a mailer out for $50,000, if you’re going to write a $50,000 check, and you send a mailer out, and you’ve determined that, that amount of work is 50 to 150, you’re going to kill it because imagine how many people are going will be willing to sell their property for 50,000 bucks. There’s a ton.
Jill DeWit: Do you know what else is great?
Steven Butala: If you incrementally increase your price on the same mailer even 10%, it really pretty dramatically increases the number of people you get to sign the thing and send it back.
Jill DeWit: You know what’s nice too is the traditional person, that what’s nice is you’re going to deal with more professional, serious investors when you’re dealing with properties that you’re selling for over $100,000. I personally love it. Another thing that you are very likely doing, is over that price point, it might be worth it to bring in a broker, and just plan on it. Budget for it because they’re going to know those buyers, and then they do a lot of the work for you.
Steven Butala: We have some people in our group that they have established a relationship with a single broker that they, for whatever reason, connect with, and one that’s statewide, and that’s all they do. That’s their whole business model now. As they buy these properties, they turn it straight over to their broker. And then they go buy another one. They’ve removed half of the responsibility of selling a piece of property, and they’re fully accepting the 10% that it takes. Usually costs 10% to list a piece of land with a broker. It’s not the typical house situation.
Jill DeWit: Right.
Steven Butala: And speaking of houses, you can do the same thing with houses. You know by now, we have a House Academy program. The difference is this, you’re going to buy a house for, let’s say $150,000, $200,000. You’re going to mark it up 20 grand, and resell it almost immediately.
Steven Butala: It’s way, way, way less problematic. There’s less brainpower in the mailers that you send out. And it’s a lot faster and a lot … Well, it’s very, very, very predictable. I call it hitting singles. You’re going to hit singles all day. So it costs a little bit more money. You’re going to have to give some money away to get the financing to start it all, but it’s a great way to make 20,000 bucks a week. So with land, it’s a little bit less to get involved, but we do both. And they’re different. Hey, we know your time’s valuable. Thanks for spending some of it with us today. Join us next time for another interesting episode.
Jill DeWit: And we answer your questions posted on our online community, found at landinvestors.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Did you cover what you wanted to cover there?
Steven Butala: Yeah, I hope it was clear.
Jill DeWit: It was good. No, it was, it was informative. I was very happy. Thank you.
Steven Butala: It’s kind of a heavy topic for a Friday.
Jill DeWit: It kind of was. Yeah. Go enjoy your weekend now. Have a beer and relax. You worked. Wherever you’re watching, or wherever you’re listening, please subscribe and rate us there. We are Steve and Jill.
Steven Butala: Information.
Jill DeWit: And inspiration.
Steven Butala: to buy undervalued property.
Jill DeWit: Can I not say beer?
Steven Butala: You can say beer.
Jill DeWit: Okay.
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