How to Save a Ton of Money Running Your Land Business (LA 1261)

How to Save a Ton of Money Running Your Land Business (LA 1261)

Steven Butala:
Steve and Jill here. 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 how to save a ton of money running your land business. Well, I talk about it and Jill dispels it, dispels my theories.

Jill DeWit:
No. I have to say, correct me if I’m wrong, I have become very frugal. I am not the one right now, between the two of us, that is spending money on things, and I’m not saying them, vehicles. So I’m not picking on you. I’m just saying I’ve gotten very frugal and very good, I like to think. You might tell me I’m wrong and I might be wrong, but…

Steven Butala:
I have a long, long history of being penny wise and pound foolish. In fact, that’s kind of what this is about today. I’m going to separate the stuff that you need to spend some money on and stuff that you just can forget about it. And I think when you’re brand new at something, it’s hard to know the difference like, “Wow, should I be spending time or money on this?” No. 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:
Is it Eraldo? Eraldo says, and I guess the title of his posting is, “Success on mailers.” Great. So if you want to search this online, that’s what you could search for.

Steven Butala:
And I have to say, he gives a very, very specific result and financial outcome on how many letters he sent, not so much where he sent him, but how it got sold. It’s very detailed. And I will say this. He did it all wrong. And he did it, and he killed it.

Jill DeWit:
Did it all wrong and it still worked. Okay. This is excessive, just getting a darn mail-out. Okay. “Hi, all. I wanted to chime in after a few months of hiatus from this forum, not a hiatus from real estate. I have sent four mailers so far. So the first one, 407 units to rural vacant land, no properties purchased.”

Steven Butala:
407 unit mailers is…

Jill DeWit:
Small.

Steven Butala:
And I’m not… Eraldo, I’m just using you as an example here, and it’s nothing personal at all. It’s just tiny. So you’re kind of setting yourself up to fail. It’s too small. You need to send out 1500 to 2000.

Jill DeWit:
Okay. “Next one, 502 units to rural vacant land, one purchased and sold, one in process of accepting the amended offer. My initial offer was too high at $15,000 so I changed my offer and purchased for $7,000 and sold for 12.”

Steven Butala:
Excellent.

Jill DeWit:
“Second, one same thing. Offer was too high for that area of the county. From $14,000, I was going to go down to $5,000 cash. But so far, we’re at $10,400 owner financed, zero down, zero interest for five years.”

Steven Butala:
Interesting.

Jill DeWit:
Really interesting.

Steven Butala:
He’s locking the property up with equitable title and then he’s going to go resell it. I think that’s brilliant.

Jill DeWit:
Exactly. There you go. “We’ll see if we have to modify. Another one down the road like this is selling for $45,000. I can probably sell this one for $35,000. I want to finance at 10% interest and cash flow it.” Interesting. He’s going… He’s got some crazy ideas here.

Steven Butala:
He’s very brave. He’s very, very… Thinking out of the box, and it’s very… He’s totally jellified both of these first two properties.

Jill DeWit:
Okay. “So the third mailer, 349 units to infill lots. One out fo contract, in escrow, and also contracted to sell. My offer was too high at 20…” Came in high on all these. It’s cute.

Steven Butala:
That’s okay.

Jill DeWit:
That’s all right. You fix it. This is good for everybody to see too, that think like, “If I come in that high, don’t I have to do that? Aren’t I obligated?” No, you’re not. That’s why we have all those statements that you make in your offer letter, like, “This is subject to A, B, C, and D.” So you can look at it and go, “Oops, I goofed,” and fix it. So he said, “My offer is too high at $21,000. I had to modify it because, according to other investors I spoke to here locally, builders are buying at 10% of new build value. So I offered $10,000 and the seller to pay the closing costs, and I already have a buyer at $20,000 cash. Just waiting on escrow to close, and resell immediately.” Ding, ding.

Steven Butala:
These are on tiny, tiny little mailers.

Jill DeWit:
Mailers. He’s making stuff go.

Steven Butala:
He’s got 400 plus 500 plus 300.

Jill DeWit:
Not even 1500 units.

Steven Butala:
Not 1500.

Jill DeWit:
He’s doing six deals there.

Steven Butala:
And so, he’s choosing his markets really well. And he’s a little bit higher price, but he adapted and overcame.

Jill DeWit:
There we go.

Steven Butala:
If you’re new, this is a very reasonable first round of learning, and what to expect, and how much money to make, in my opinion.

Jill DeWit:
Right. Okay, so here’s mailer number four. “2,249 units to houses. Not sure yet on this one, I sent it on May 25th, so mail should be hitting soon. I’m primarily a house guy and I’ve been really busy with this. I developed my own red, yellow, green spreadsheets since I have MLS access here locally, and I have over 16,000 properties in there, and more added daily by my virtual assistant that helped me track my market and best zip codes for what I’m looking for. We’ll see how this one goes.”

Steven Butala:
How are you going to fail with that kind of organization and the data approach?

Jill DeWit:
Yep. “All in all, just with one I’ve already sold, I made $5,000. Once the infill sells, I’ll be at $15,000 gross profit. If the other rural vacant land closes and I can sell it for what I think I can sell it for, I’ll be higher than that. I believe I’ve spent so far about $1,000 in land, and basically in mailers, and data. And I stand to make $15,000 plus. Also, the about $5,000 I’ll spend on Land Academy initial membership, plus for year long subscription, I’ve already made my money back and then some.”

Steven Butala:
He’s way in the black, and he’s just getting started.

Jill DeWit:
And kind of crazy going too high and not enough, but you’re making it work.

Steven Butala:
He’s taking the basic concepts that we provide in all these venues, whether it’s podcasts, or education, or weekly calls, or all of it, and he’s putting his own twist on it, he’s bringing his experience to the table. I know that was a lengthy… Thank you, Jill.

Jill DeWit:
You’re welcome.

Steven Butala:
But it’s a very good, detailed, real, unedited account of what to expect.

Jill DeWit:
I think too, it’s like he’s kind of baby stepping into it. Like, “I don’t know if I want to spend this much money on this. Let’s see how it goes.” And now he’s successfully tested those four mailers. I hope that he’s going to come back at it with mailer number five going, “All right. Now I know exactly what I want to do, exactly how I’m going to price it, and watch me go.”

Steven Butala:
That’s it. And then, he’s absorbed all his costs already through the profit margin in the first few deals. That’s a very normal experience for our members.

Jill DeWit:
Yeah. Testing it, making your money back, now move on.

Steven Butala:
And he sent maybe 1,500 out total. And the next time, and I’ve seen this happen a million times, now he’s going to send out 15,000, not 1,500, and he’s going to make 10 times the amount of deals. He’s got VA’s involved already.

Jill DeWit:
Yep. Figuring a bunch of stuff out.

Steven Butala:
That’s great. This also parlays into today’s topic. How to save a ton of money running your land business. This is the meat of the show. There’s stuff to spend money on, and there’s stuff not to spend money on as a land investor. And I’m going to break those two things up into fixed costs and variable costs. It’s a simple, basic accounting, economic 101 scenario. In your life, in your personal life, you have fixed costs and variable costs. If you-

Jill DeWit:
What am I?

Steven Butala:
What am I?

Jill DeWit:
I’ve got to ask.

Steven Butala:
You’re a profit center. You’re not a cost at all.

Jill DeWit:
Am I a fixed cost or a variable cost? I wonder what he would say. Thank you.

Steven Butala:
Every guy out there is hitting his head on the table right now because he doesn’t have a profit center for a wife.

Jill DeWit:
Thank you.

Steven Butala:
Trust me on this. You’re the first profit center I’ve ever been involved with.

Jill DeWit:
Oh, thank you, sweetheart. I appreciate that.

Steven Butala:
There’s fixed costs and variable costs. In your personal life, you have rent or mortgage, and it’s the same number every month. And no matter what happens, how much revenue you have coming in, going out, it’s fixed. That sucks. You have variable costs. You have a rough month, you get ramen noodles. Foods are variable costs. You have a great month, eat some steak. It’s a little more expensive. People have, in manufacturing, since Henry Ford or even before that, have been trying to offset risk with fixed costs. So if you think about manufacturing as a business, there’s tons and tons of fixed costs. You have huge machines and massive amounts of real estate that you have to pay for, regardless of if you sell product number one. I built Land Academy, and way before that, my land business, I’m sitting back with a pad of paper and a pen and saying, “How can I build a perfect business? I don’t want any fixed costs. None.” And that’s what this is. You don’t want to spend money on fixed costs. You want to spend money on variable costs. Well, what’s a fixed cost and what’s a variable cost in the land business? Are you bored yet?

Jill DeWit:
Not yet. I’ll let you know.

Steven Butala:
There are no fixed costs in a land business. They’re all variable costs, and they’re all related to transactions. You need to spend money on data, and you need to spend money on mail. As that turns out, we have the resources that are about as effective and cheap as you possibly can get to deal with both of those things very, very specifically. Can you find a cheaper place to send out mail? Yeah. But do they have any idea? Will they do the mail merge for you? Do they have any idea what you’re trying to accomplish, or do they have a contract with the hospital too? And they’re going to send out your 1500 unit mailer. These are all pre-thought. So concentrate on getting great data and getting an effective mailer out. Those two things will yield money, just like what Eraldo said here in the question earlier.

Steven Butala:
Fixed costs, you’re going to have any way. You need a place to work. Well, you do it at your kitchen table, because you’re paying for it anyway. That’s your personal stuff. Every single thing else is set up in this business model to be a variable cost. So please don’t be afraid to spend money on variable costs. Be incredibly afraid to spend money on fixed costs. At some point, you’re going to start hiring some staff. That staff is a fixed cost. Be very careful about that. If you use virtual assistants overseas, and we do tons, and everybody who’s an advanced member does it also, it becomes a variable cost. You only pay for what you’re asking them to work on. And when they’re done with the project, it’s over. They send you an invoice and you pay.

Jill DeWit:
We have the same list.

Steven Butala:
Really?

Jill DeWit:
Yeah. Well, can I jump in here?

Steven Butala:
Yeah, absolutely.

Jill DeWit:
So my number one was stop nitpicking and focus. Your time is valuable. So like, “Do I really want to shop around to save a one penny on a mailer for someone who may or may not understand me and I don’t have a relationship with?” Also, they’re not working on setting up where my data can even flow through to the mailer and save me time, by the way, which is stuff that we’re working on the back end here. Your time is valuable. Don’t bother. And then my number two thing was, to save money, use part-time 1099 labor that’s task specific. We do that for all parts of our companies, not even just our land business. Our podcast, we have contracted people that are 1099, they’re off doing their own music videos, not kidding, who produce our content. And it’s wonderful.

Steven Butala:
And they’re way better at it than anybody we could hire full time, anyway.

Jill DeWit:
Exactly. This is their niche. And they’re doing it for other people, including us. And it’s the best thing on the planet. And I pay for what I need. I don’t have him on my staff for 40 hours sitting around. We’ve done that, and it didn’t work.

Steven Butala:
Which leads me to my just about final point. There’s several people on landinvestors.com who are very active, and I appreciate that, who are not members, for whatever reason they’ve chosen, which is fine. Whatever reason they’ve chosen not to become a member.

Jill DeWit:
Because we give a lot of free information.

Steven Butala:
And again, whatever works for you is fine with me. But I will tell you that they continually ask questions that are covered in the education. So you have to ask yourself this. You’re either going to take this seriously and do it, or you’re not. And if you’re really worried about money and really worried, like, “Wow, should I send this mailer out, or should I pay my rent this month?” This program is not for you. This group is not for you. This group is for people that bring something to this group and in themselves, just like Eraldo here, he’s already got some experience and he’s sitting around to himself saying, “Oh my gosh, this concept of data. And I’ve been in real estate for a long time. This concept of data and mail-in blind offers, it really sings to me and makes sense. I’m happy to join this group, and I’m happy to participate and get involved. And I’m not going to scoff at 5 cents a freaking mailer.”

Jill DeWit:
And I’m contributing.

Steven Butala:
And I’ve heard Jill talk to potential members before in the past, and she says a different version of this. Please save up a bunch of money before you join, because you just don’t want to have to worry about the money for mail or for any of this stuff.

Jill DeWit:
No, I’ve turned away people, that’s true, for a lot of different reasons. And money is one of them. And just their sheer hesitation of anything. They have to be like, is that Eraldo, whoever wrote that question? Yeah. You’ve been in the business, you have some experience, you know what to expect. That’s perfect. Or you’ve been a business owner.

Steven Butala:
Business owner of any kind is really going to set you really far ahead. Even if it’s on… We have some e-commerce, online people who have stores with other products, that love this. For some reason, it just makes so much sense to them. Well, not for some reason. It’s because it’s a real high margin business, and you don’t have to do a lot of sales. It’s not for some reason. It’s very specific.

Jill DeWit:
It’s true.

Steven Butala:
So in summary, here’s the deal. How do you save a ton of money running your land business? Make sure all your costs, all of them, are related to one, education and commingling with people. That’s what this group is. It’s commingling with other people who are really successful so you can learn. It’s like an internship. And number two, focus, focus, focus on variable costs. Don’t let your fixed costs get… We’re 25 years into this and we have a staff and we’re good. But if you’re new or even five years into this, make sure your fixed costs are as low, as close to zero, as possible.

Jill DeWit:
Thank you. Happy you could join us today. Every Monday, Wednesday, and Friday, we are right here on The Land Academy Show. Tuesdays and Thursdays, you can find us over on The House Academy Show.

Steven Butala:
Tomorrow, the episode on The House Academy Show is called The Best Markets to Buy Houses During the COVID Virus. You are not alone in your real estate ambition.

Jill DeWit:
I didn’t know you were going to go there this week on all these titles.

Steven Butala:
Is it too intense?

Jill DeWit:
No. It’s okay. I’m sure people want to know how this is affecting us. For real.

Steven Butala:
What do you think would happen if I just did a show by myself, how intense it would get? And then, if Jill just did a show by herself, how…

Jill DeWit:
Fun, it would be.

Steven Butala:
It would be like a clown show.

Jill DeWit:
Yeah. I’m okay with that. Let’s call my Facebook live things, and I haven’t done it in a while, but you can see. If you’ve watched me do my past Facebook lives. I try to get intense. I try to go there, but I can’t. I’m not going to be that serious, because it’s just not in my nature.

Steven Butala:
Maybe that’s why we have six or seven people who listen to this show, because there’s two of us.

Jill DeWit:
Oh yes.

Steven Butala:
And we can have a different take on it.

Jill DeWit:
Here’s something funny. Never thought I’d write this down. One of the things I wrote down on saving money in the land business, I was racking my brain going, “What else can I contribute here?” And I thought, “Don’t overspend on unnecessary items.” Well, I’m crossing that off. It applies to business, but not to life.

Steven Butala:
Here’s some stuff that… Jill and I obviously look at our financial statements, I don’t know, probably on the 10th of every month for the previous month. And here’s the top list of things that Jill just can’t get her head around, financially.

Jill DeWit:
Uh-oh. Here we go. Bring it.

Steven Butala:
IT expense.

Jill DeWit:
Oh yeah. It hurts. Some of those hurt.

Steven Butala:
She has no value.

Jill DeWit:
I know. No, I know they’re necessary. There’s just a whole lot of them.

Steven Butala:
But she doesn’t get it. And that’s okay, because that’s why we’re partners. And I have to explain it every month.

Jill DeWit:
I don’t have to like it, but I get it. Keep going.

Steven Butala:
And so, our hosting bill, just for all these websites and stuff, is well into the four digits.

Jill DeWit:
It’s stupid. Keep going. What else you got?

Steven Butala:
What else do you hate, every single month that comes up?

Jill DeWit:
Marketing.

Steven Butala:
You know what we never, ever, ever complain about, either one of us, ever? Yeah. Marketing. Realtor fees. Not related fees. Escrow fees, even land realer fees don’t complain about it ever.

Jill DeWit:
Do you know why?

Steven Butala:
Because all of the stuff I just mentioned was fixed costs. That’s what she can’t stand. She doesn’t see it that way, but it’s a variable cost to get deals done. “Oh, no problem.” If that’s associated with this, done.

Jill DeWit:
Well, I nitpick the heck out of them too. I’m like “Really? Are we spending how much on that? We need to fix this.” Yeah.

Steven Butala:
Right. And then, we provide all this data to all of our members. But there’s other data sources that we’re paying for that aren’t as efficient, which by the way is-

Jill DeWit:
And we still pay for them.

Steven Butala:
Because I use it for other stuff. And she sees no value in that. And you’re not wrong. I’m saying it could be cleaned up a little bit. It always could be cleaned up, but it’s a fixed cost, variable cost discussion.

Jill DeWit:
It’s okay. I understand. You have a data… It’s a thing. It’s okay. I have my thing. We all have our things.

Steven Butala:
What is your thing? What do I complain about?

Jill DeWit:
What do you complain about?

Steven Butala:
I complain about a nonfinancial. Jill works too much.

Jill DeWit:
That’s true.

Steven Butala:
That is my biggest complaint right now. And it’s like, man, she’ll just work… If I don’t say anything, she’ll work for like 12 or 14 hours.

Jill DeWit:
You know what it is? I kind of love it. I know sometimes you’re like, “Hurry up.” And I’m like, “I can’t.” I sit and review properties, and I get into it, and I have fun. I like it. It makes me happy. The Land Academy Show remains commercial free for you, our loyal listener. So wherever you’re watching, wherever you are 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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