Commercial Land (LA 1186)
Commercial Land (LA 1186)
Transcript: Steven Butala:
Steve 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:
And I’m Jill DeWit, broadcasting from sunny Southern California.
Steven Butala:
Today, Jill and I talk about commercial land. “That’s great, Steve. What about it?”
Jill DeWit:
That sounds so boring. “Today, boys and girls, we’re talking about commercial land.”
Steven Butala:
Today we’re talking about the crayon color yellow.
Jill DeWit:
Oh my gosh. Today we’re going to talk about the verb.
Steven Butala:
What’s the verb?
Jill DeWit:
I don’t know … Run.
Steven Butala:
Attempt. The verb fail, as in, “Johnny, you continue to fail.” I don’t think that’s a verb. I think continue is the verb.
Jill DeWit:
Exactly, that’s awesome.
Steven Butala:
I think fail is-
Jill DeWit:
Their fail is a noun.
Steven Butala:
I think it’s the adverb. I’m not sure. Wow, I haven’t been in school in a long time. Steve, you continue to fail.
Jill DeWit:
Yep-
Steven Butala:
At English.
Jill DeWit:
And this show.
Steven Butala:
Commercial land, before we get into it-
Jill DeWit:
Oh, yay, it sounds so boring, but you know what, it’s our favorite. Really, this is good.
Steven Butala:
Commercial land is the single best way to hit a home run in your land business. In the right counties they really dramatically identify and sub-categorize it out, so that you have a real good clean data set and a real logical, easy way to send everybody in an area in an MSA, a metropolitan service area … sorry, a metropolitan statistic area, an offer of let’s say everybody who owns rural vacant … I’m sorry, vacant land, that is zoned for apartment buildings that are 60 units or more.
Jill DeWit:
Or car wash.
Steven Butala:
Car wash, great example. Parking lot.
Jill DeWit:
Thank you.
Steven Butala:
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:
Leonard asked … this says Leonard asked last week and we answered, so I’m going to read the question and the answer.
Steven Butala:
The first part of the question is his question that he asked last week and then a little bit of a celebrational update.
Jill DeWit:
Okay. “Hey, land investors. I recently bought 30 lots from a tax sale from the Commissioner of State Lands in Arkansas. I had the intention of selling each lot on eBay. I got a lot of hits on each auction and listed five properties in eBay in total. How do you find buyers for these cheaper properties? I have listed them on Facebook Marketplace and I’ve had a lot of interests of potential buyers, which seem to be tire kickers. How do you sell these? Any advice is greatly appreciated.”
Jill DeWit:
Then we have a week later, Leonard put an update. Oh boy. It says, “Thank you for addressing my question on the show. I sold my first lot on Facebook the day the show aired. Got 30% percent of my investment back on one deal. Thanks for all the advice.” So 30% I guess to buy all 30 lots got back. So 10 of the 30 were paid for on the first deal. “Thanks for the advice.” Not too shabby.
Steven Butala:
It’s staggering, actually. That’s a staggering statistic-
Jill DeWit:
I love it-
Steven Butala:
And nowhere else in real estate can you do that.
Jill DeWit:
It’s amazing. I love it.
Steven Butala:
All over the country, there are places you can go more and more with more prevalence of the internet, places you can go to buy back tax property online. And so it’s a full time job keeping up with it. Jill and I do it probably once or twice, maybe three times a year, and it’s very, very profitable and we buy them in pretty big tronches and then just resell them throughout the year. Bought a mobile home property, I would never just do that one thing. I use it only to compliment our mail campaigns, but I think it’s a good way to get your feet wet and a good way to make some bucks on the side. It’s very time consuming, I’ll tell you that.
Steven Butala:
You do it in the reverse. Our way is we send all these letters out that people who actually are real sellers sign them or call us. They choose themselves as real sellers. The back tax situation is you’re staring at a list of 500 properties that are a back tax property, and you have to analyze every single one and decide if you’re going to buy it. It’s very, very time consuming and tedious, and stuff comes up. There are flawed properties. Back tax property are flawed.
Jill DeWit:
There’s a reason why they went back.
Steven Butala:
So am I saying it’s bad? No, it’s more time consuming, a little less profitable in the end and a lot less-
Jill DeWit:
More headaches.
Steven Butala:
A lot less systematic, that’s what I don’t like about it. It’s like, “Oh, what’s on the list today?”
Jill DeWit:
Right.
Steven Butala:
Instead of, “Yep, I know how many offers I sent out two weeks ago, I know how many properties I’m going to buy this week.”
Jill DeWit:
Exactly.
Steven Butala:
Today’s topic, commercial land. This is the meat of the show.
Jill DeWit:
I love commercial land.
Steven Butala:
Tell us why, Jill.
Jill DeWit:
Well, you know what? It’s a different customer. There’s a lot of reasons. I love commercial land because I love the product type. There’s so much more you can do with it. We haven’t talked about this in a while, but commercial land is a step up from residential, vacant land, has different uses, it’s different zoning. And to go from residential land to commercial, it’s really hard. But to go the other way around, if you really want to buy a big piece of commercial land and make it something kind of residential, vacant property, that kind of a use, it’s a lot easier to zone down, number one.
Jill DeWit:
Number two, a lot of commercial land you can do because right, you can do more with it. It’s zoned differently. That opens up mobiles. It opens up maybe RV parking. It has a lot of things that the house next door won’t allow, but a business next door, they don’t care. They will allow maybe the parking lot that you talked about, maybe a motel and then within just commercial land, then there’s subcategories often where it might be already spelled out, the use, and so you know what you’re doing. You know what you’re getting.
Jill DeWit:
My other thing is the customers and the brokers. Should you ever get a broker involved? This is one of the things we have done in the past very successfully. We have bought large pieces of expensive commercial land that’s worth a whole lot more. When I say a whole lot, I mean a whole lot, hundreds of thousands of dollars more than what we paid for it-
Steven Butala:
Ten times in some cases.
Jill DeWit:
And it was worthy of bringing in a broker because they know the area, they know the sellers, they drive them around, they’re talking to these … or they know the buyers, excuse me, all day long. And it’s a different customer. It’s not the same person that’s going to go, “Oh, I need to bring my wife out and stand and make sure the sunset’s as pretty as I think it is.” Really? No. These commercial guys know what they want.
Jill DeWit:
They know Amazon’s down the street and they know Dairy Queen’s next door. They’re looking for this property and it just makes it fast. Well, not always faster, I’ll say that, because sometimes there’s more due diligence involved, especially if they’re taking out construction loans and they’re going to start building their Starbucks right now, kind of thing. But they’re so much more profitable and easier and I just love them.
Steven Butala:
I mean, Jill covered a lot of the pros. Another pro is that there’s really no emotion in a commercial real estate deal, and it’s mostly guys who just have a job to do. In a lot of cases, my favorite commercial real estate land transaction is selling land that will be turned into a subdivision. Phoenix or Las Vegas are great markets for that because they’re just ever expanding into the desert. So you take would-be property that’s being completely unused or in some cases farmland, and farmland’s generally worth way less and certainly vacant land is worth way less than when you price it at what it’s going to be worth after you put a bunch of houses up on it, and it resets the price. Those are the pros.
Steven Butala:
It’s very easy to calculate all this stuff. It’s very easy to know what’s going to happen just like buying houses. The con is that the vast majority of people who own commercial real estate or farm land or whatever commercial land, know what they have. So you have to, and it goes against a little bit of what we kind of teach with all these other product types, what we teach with these other product types is buy it and resell it for more. Don’t do anything to it, don’t paint it, don’t breathe on it. You’re going to have to, somebody-
Jill DeWit:
It’s true actually. Don’t go see it, that’s for sure.
Steven Butala:
You’re going to have to see what that end use is going to be. It might be a subdivision and then you’re going to have to know how many properties are going to be in that subdivision, or if a hotel is going to go up on it or is a longterm care facility going to go in there and if so, what type of facility? So it’s more of a career thing that happens. But if you understand this stuff and you understand these businesses and can spreadsheet it out like everything else we do, it’s very, very, very lucrative.
Steven Butala:
And I’ll tell you what, if you want customers and clients for life, you send out a commercial mailer that’s very intelligently written, answer the phone like we always do, and the Vice Presidents of Acquisition and the owners that are going to call you back that get these letters are going to say some version of this: “I got your letter and I’m not interested in selling you this piece of land at all. But I’ll tell you what, we need to build 482 units next month to hit our quota. So I’m very, very interested in meeting with you or at least finding out, we’d like to hire you to help us buy property.” So you’re going to have this immediate database of people, very specific …
Jill DeWit:
Buyers.
Steven Butala:
Buyers that are serious, they’re already funded, they’re not emotional, they want to see every single deal. I made a career out of this between 1989 and in 1998 with longterm care facilities. They just couldn’t wait to take my calls. They stopped what they were doing every time I called them and said, “I got a deal, you might want to look at it.” And I was a broker, I wasn’t an owner, and I got out of that because I couldn’t take it anymore. But it’s a terrific way to really specialize. And the biggest con, or biggest pro that … Jill, I don’t think you mentioned it, was just how much money you make.
Jill DeWit:
Right.
Steven Butala:
I mean, you’re just dealing now with a lot, it’s just a lot more money.
Jill DeWit:
Right, they have bigger budgets.
Steven Butala:
And if you could present yourself-
Jill DeWit:
They’re expecting it-
Steven Butala:
And talk to a customer and talk to somebody who’s intelligent on the other phone, like Jill can, and I’d like to think I can, you just have customers for life. And it’s not a big, huge, massive group. It’s not like dealing with a woman who’s done that Jill described earlier, it’s not like dealing with a person, or maybe it was yesterday, who just wants to move.
Jill DeWit:
Right.
Steven Butala:
You’re taking the consumer piece out of this and replacing it with business. I would not recommend at all starting off with commercial land. I think you should start off with different land types, real vacant land or houses to understand the transaction process and things like that, but you can parlay this into convenience stores if you want to. It’s not hard. The data’s all there. It all comes in the data sets that we have.
Jill DeWit:
Right. Would you recommend someone sending out a mailer only zoned commercial or do you recommend someone mixing it in?
Steven Butala:
That’s a great question. The direct answer is that this product type requires a lot more research upfront on the quality of the data where you’re sending this stuff out. Here’s an example, I’ve never seen better quality data than Los Angeles County, and for whatever reason I think is because computers kind of started out here. Things got computerized earlier. The Assessor in LA County and really in all of California, they have a much more heightened responsibility to collect taxes, assess property correctly and on and on and on.
Steven Butala:
So the result of that is the quality of the assessor data and all the data that we have is assessor based, is really high quality. So they have subsections of zoning and stuff that make it real easy to, let’s say send everybody a letter who owns a piece of property that has been pre-zoned for longterm care or is conducive to very easily changing its longterm care from, let’s say, I just know this for a fact out here, from agriculture. Or it’s an unincorporated area of LA County, it’s not Los Angeles city or any of the beach communities. It’s just there’s pockets of these. So there’s these little caveats that you can figure out by talking to people and really have an unfair advantage against anybody.
Jill DeWit:
Love it.
Steven Butala:
And then the final issue is that you’d need to expect to send out a lot of mail. For houses what is it, between 1800 and 3000, we buy a house and we sell it successfully. For rural vacant land it’s way less than that, three or 400 units in some cases. With commercial property, it’s a lot. You’re going to send a lot out. I’ve done nationwide campaigns for longterm care.
Jill DeWit:
That’s why you got to have cheap mail.
Steven Butala:
That’s right.
Jill DeWit:
And we do.
Steven Butala:
But you will hit a home run eventually. This like everything rolls into our other companies. So would I just sit down and say, “All right, Jill. We’re going to turn everything off. We’re not going to send out any rural vacant land mailers. We’re going to turn the phone off for the millions of letters that we’ve already sent out. We’re never going to buy any houses again. We’re only going to buy longterm care land.” And I would expect you to knock me in the head with something.
Jill DeWit:
I’d get bored because it would take a while. It would be like, “All right.” It would-
Steven Butala:
The point to this in talking about this in the show is to add it to your already existing stuff.
Jill DeWit:
Exactly. And don’t be afraid of it, know what it is and know how wonderful it is. Happy you could join us today. Every Monday, Wednesday and Friday you can find us right here on the Land Academy Show. And every Tuesday and Thursday we are right over on the House Academy Show.
Steven Butala:
Tomorrow the episode on the House Academy Show is called How to Structure Partnerships So That Everybody Wins. You are not alone in your real estate ambition.
Steven Butala:
Number one topic discussed.
Jill DeWit:
Really?
Steven Butala:
Mm-hmm (affirmative). Number one, customer service inquiry. I think a lot of it has to do with the stuff that we talk about in our Thursday calls.
Jill DeWit:
The structure partnership [inaudible 00:00:15:06]?
Steven Butala:
Yep.
Jill DeWit:
Oh, because of deal funding, because now we’re funding deals. We’ll talk about it. That’s cool. The Land Academy Show remains commercial free for you, our loyal listener … and the House Academy Show. Which one are we on right now? We are on the Land Academy Show, thank you. Wherever you’re watching or wherever you’re listening, please subscribe and rate us there.
Both:
We are Steve and Jill.
Steven Butala:
Information-
Jill DeWit:
And inspiration-
Steven Butala:
To buy undervalued property.
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