Do Sellers Really Know the Value of Their Land (LA 1291)

Do Sellers Really Know the Value of Their Land (LA 1291)

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 Dewitt, broadcasting from sunny, Southern California.

Steven Butala:
Today. Jill and I talk about, do sellers really know the value of their land?

Jill DeWit:
Oh boy, do they. In some parts of the country. I’m here to tell you, based on experience.

Steven Butala:
The reason this topic came up is because Jill I are in the middle of doing a 10,000 unit mailer, as you might guess, from the previous shows this week. And it was in two parts of the country. One part was on the West Coast, one part was in the center of the country. And the people on the West Coast really know the value of their land, for whatever reason. The people in the center of the country aren’t making a decision to sell to us or not sell to us based on price alone. They’re doing it because it’s just time or some other circumstance. So that’s what this is all about.
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:
Thomas wrote, I recently ran across the podcast and started digging into the information. My wife and I have been dabbling in almost everything real estate related, since 2017. We own two SFR rental properties, manage others, via our own management company, renovated 10 SFRs. We do home staging, flipping SFR, and most recently flipped a piece of waterfront property, which was $40,000 financed. We put 10,000 down. We held it for five months and then sold it for $60,000.

Steven Butala:
Excellent.

Jill DeWit:
We got worn out on the major reservations and have been looking at land in general. It looks like this is a great place to expedite my knowledge, gain methods rather than stumbling through it all myself. Okay.
True.

Steven Butala:
I can’t say enough positive stuff about this comment.

Jill DeWit:
Kind of been in your shoes too.

Steven Butala:
So here’s the thing. Jill and I, by our professional history and everything about the two of us, would not lend itself to having a show like this, or really being the owners of Land Academy. In my soul, and Jill’s, for sure, we’re all about buying and selling land. And Jill and I, in 2015, sat down and said, “Hey, maybe we should share this with everybody because it’s great.” We had long conversations about it and my gut reaction was… I mean, it’s not that I want to hide it and keep it all to myself. It’s just like, I’m not that kind of person. I don’t want to get in front of the camera.
Well, what I’ve learned is this, since then. It was a great idea and it’s one of the most rewarding things I’ve ever done, professionally in my life, if not the most rewarding. However, the reward comes from people like Thomas here. They come to us with a bunch of experience in real estate, or in some other business ownership and then they sign off, go through the program and dramatically improve what they’ve already created for themselves anyway.
And then there’s other people that just really struggle with it. So, Thomas, congratulations, you absolutely fit the profile of what I’ve learned over the last five years about real successful people in real estate. What do you think, Jill?

Jill DeWit:
I love it. Well, what’s funny is, and of course what you said, everything’s true there. We started doing land… I stepped in, only doing land and it’s funny because through our career together, we’ve done some houses, we’ve done some renovations, I did home staging. We did stuff like that. And at the end of the journey, I was staring at myself again, going, this is stupid. land’s the best. It really is.
I mean, really. I mean, I still look around. I’m still shocked. What you and I can do in 45 days with the planet, the planet would barely do in 45 days. And just looking at what’s going on with the construction around us. Takes four to five months-

Steven Butala:
Years.

Jill DeWit:
If they’re lucky, four to five months, what you and I did in 45 days. So we can do it, but the money just doesn’t pan out too. I just love what we do. Maybe I’m lazy. I think it’s a combination of smart and lazy.

Steven Butala:
I feel qualified to say and confident that you are not lazy.

Jill DeWit:
Oh, thank you. Yeah.

Steven Butala:
You know what it is with renovations and stuff? And we’re kind of getting off topic here. Thomas, you’re totally qualified for this and I really do hope that… You’re the kind of member we want to have. I’m going to leave it at that.
Renovations redefine the word variables. When you knock a wall down or open a wall in a house that’s from the ’50s, you have no idea what’s in there. And this is after you bought the house, by the way. After you did some math in your head about it, I’m going to buy this for 80, put $40,000 into it and sell it for 200. It never works out that way, ever. It never, ever works out that way. There’s always all these variables that go on, including a pandemic with land.
You look at the thing on Google earth. You do some math real quick in your head. You buy it for 30. Everything else has just sold for 120. You’re buying it for 30, you’re going to sell it for 60. There’s a darn good chance that’s all going to work out real well.
So you’re removing the variables, when you buy land. You’re walking in to a myriad of variables, when you renovate a house.

Jill DeWit:
Very true. Thank you.

Steven Butala:
Today’s topic, do sellers really know the value of their land? This is the meat of the show.
Yes. Some of them do. Those aren’t the best sellers. The ones that-

Jill DeWit:
Maybe they are.

Steven Butala:
… For whatever reason, and I’m not going to use adjectives here. For whatever reason, every time we buy and sell land in California in general, it’s a big discussion. There’s a lot of stuff involved. People really are into real estate in California, for some reason.

Jill DeWit:
Well, growing up here, born and raised in Southern California, I would argue because that’s just what we do. Everybody around here is obsessed. Obsessed. I don’t care where you live. I grew up in silly little Garden Grove and even I knew what was going on around me. I knew what was different between Garden Grove and Newport Beach and L.A., as a kid. It’s just everything that everybody knows and talks about and thinks about probably because you’re right, because stuff was going up. Because there was movement.
I bet if you bought a house for, gosh, back in the day, anywhere from 30 to $50,000, in Garden Grove. Now they’re six, seven, $800,00,. But if they stayed between 30 and 50, maybe they went up to 80, it’s not going to be that great after 20 years. We probably wouldn’t be so concerned and talking about it. You’re probably right.
But things were changing too, so much that it was all over the news. I knew that my dad chartered for some of these big developers. It was kind of cool for me because I could see like, wow, this is what real estate gets you?

Steven Butala:
I completely second that and I understand your point. And again, it’s kind of what I said yesterday. People have had real positive experiences out here. Jill and I are in Los Angeles right now, with real estate. I grew up in an environment in Detroit, in an upper middle class neighborhood, where after the second beer, everybody was talking about manufacturing.

Jill DeWit:
Oh, okay.

Steven Butala:
They were obsessed-

Jill DeWit:
Cars. Like cars?

Steven Butala:
… in the car industry. But nobody really owned a car company. They own all the part supplier companies, or in my dad’s case, he was an accountant, so he was supporting those manufacturing companies and providing a service for taxes and all that stuff. So it all tied back into manufacturing.
Even to this day, when you talk about houses and the houses that they live in, everybody just kind of goes like, yeah, I don’t know what it’s worth. I mean, whatever. We paid, two or 300 for it, it’s probably worth 350. I don’t know. I don’t care. It’s so insignificant to them. It’s not why they’re walking around this planet.

Jill DeWit:
Right.

Steven Butala:
I completely agree with you. For some reason, people are just obsessed with their house value and obsessed with real estate in general. And maybe it’s the circles we travel in. I don’t know.

Jill DeWit:
I don’t think so because this came out because of the calls that are coming in. Like you said, the West Coast group, boy, they’re on it. And they even know, down to the zoning. I’m like, what the heck?

Steven Butala:
Wow, really?

Jill DeWit:
No. Yeah, yeah. Little old ladies. “Oh, I know this is zoned for four units, even though there’s only one.” Not kidding. I’ve had those calls-

Steven Butala:
Wow!

Jill DeWit:
… just like that. But now I’m in parts of the country where… Because we’re going for some big acreage, where maybe they’ve been leasing it out for grapes. There’s vineyards and things like that. And there’s things like that you can’t really pick up on, before you send out your offers. So they’re kind of… It’s cute. They think they’re educating me.
I had one guy. It was so darn funny. He wasn’t being a jerk, but he was kind of making sure I knew my stuff. And he thought that wherever I was from, that I didn’t really understand California pricing. So he was very, in a nice way, explaining to me about California pricing. And I very nice explained back. I said, “Yes, sir, I’m very familiar with that. I happen to be sitting in an area right now, south of Los Angeles, where to get a postage stamp you’re looking at five to six million for the dirt.” And he’s like, “All right, we’re on the same page.” I said, “Yes. So $100,000 an acre does not scare me in the slightest.” And that’s what he thought. He thought I didn’t know my stuff. I’m like, “I’m very familiar with that.”
But it’s funny that they are. And I really just think it comes back to… I don’t know if there’s a love of land. I don’t know if there’s a West Coast love of land or just, I really think it’s, we all know what’s possible, because so many millions of millionaires have been made in California, by doing nothing but not selling their house.

Steven Butala:
That’s exactly right. Well, you’re exactly right. It’s because what I said earlier, everybody’s had a really positive experience out here. I can tell you with personal experience and not just personal, but my whole entire background in the Midwest, people buy a house for $700,000 and sell it 10 years later for 710. It doesn’t cover the fees or anything close to the cost of living there. I call it, renting it to yourself. And they’re not upset. They expect that.

Jill DeWit:
That’s amazing to me. [crosstalk 00:11:22].

Steven Butala:
That’s been my personal experience.

Jill DeWit:
Because that’s part-

Steven Butala:
I’ve never made a dollar on a primary residence in Michigan and I’ve had a bunch of them.

Jill DeWit:
Isn’t that funny? So I’ve only lived it, right? I’ve only lived in California or Arizona. And when I sold a house in Arizona, before you, I made money. I thought that’s what you do.

Steven Butala:
Yeah. I know. That’s what everybody [crosstalk 00:11:45] out here.

Jill DeWit:
And so, yeah. And I know you’re right. I know you’re right, that there’s plenty of places in the country where you buy it and you sell it for what you paid. And I-

Steven Butala:
The majority.

Jill DeWit:
… And I think you’re right. Then I would argue like, why am I buying it?

Steven Butala:
I agree with you. I would argue that also.

Jill DeWit:
Just so I can paint the walls whatever color I want?

Steven Butala:
Yes. That’s the answer.

Jill DeWit:
That’s the funniest thing.

Steven Butala:
And because.

Jill DeWit:
Big deal. I’ll unpaint the walls.

Steven Butala:
And because the generation before us, the baby boomers, were fed a lot of messages from the federal government about owning your own house-

Jill DeWit:
Oh.

Steven Butala:
… And the tax benefit was just a joke, by the way.

Jill DeWit:
Oh!

Steven Butala:
It’s topic for a different show. The tax benefits you get from paying mortgage interest. It was all meant to… the mortgage industry is huge.

Jill DeWit:
I know people that have got into-

Steven Butala:
… Freddie Mae and Fannie Mac and on, and on. I don’t want to start ranting here, but you really need to do the math before you buy a house.

Jill DeWit:
I know people that have got into like virtual fist fights because they have the cash to buy a house, but oh no, you should finance it because you write off the interest.

Steven Butala:
Yeah.

Jill DeWit:
Okay. Hold on a moment.

Steven Butala:
That’s a pile of malarkey.

Jill DeWit:
I know.

Steven Butala:
It almost never makes sense. Almost never makes sense to mortgage your primary residence, the way that we’re taught to do it.

Jill DeWit:
Right. That makes sure someone’s making a nice chunk a change on your points and your interest.

Steven Butala:
Everybody makes money except you. Starting with the buy-side real estate agent.

Jill DeWit:
I understand. So for me, when the phone calls are coming in and you’re talking with these sellers, don’t assume what they know or not know. You’re not sure they may be very well educated and they may teach you something too. And I’m not afraid of that. Have an open mind, be cool, stick with your offer and you might learn some stuff.

Steven Butala:
Right. What you want a seller to say, before we end this show here, you want the seller to call you and say, “Hey, I got your offer for $35,000 and I do want to sell. And please let me know what the next steps are. If they call you, and like, Jill, just described and start describing to you how it all works and wherever, they’re not a seller.

Jill DeWit:
I would say there’s still a small chance. I don’t mean to disagree, but I’m going to say, there’s a small chance that I missed something.”Hey, did you know, by the way, I’m actually zoned for this and this is what’s going on. There’s this on the property.” I may not know that and it might actually… What’s the word I’m looking for? Substantiate a different price and I will certainly look at that and I’m doing it right now, today.

Steven Butala:
You are. So you have had recent positive experiences like that?

Jill DeWit:
“Did you know that this is what’s really going on?” “Ah, you know what? That does provide value to me too. I did not know that. Thank you for letting me know. What is the new bottom, bottom number? Now that we know we’re on the same page. I’m not high end retail here, but now I know it’s worth a little more because of X. What’s your new number and I’ll go look at it. And if I can make it work, I’ll let you know.” And they say, “Thank you very much.

Steven Butala:
You’re a stronger, better, more open-minded person than I’ll ever be.

Jill DeWit:
That’s hilarious. Happy you can join us today, every Monday or excuse me, every day now. Five days a week, you can find us here on the Land Academy Show.

Steven Butala:
Tomorrow, the episode on the Land Academy Show is called, When Data Tells You to Pull the Plug on Your Mailer, You Are Not Alone in Your Real Estate Ambition. Sometimes the data just says… Sometimes you get into the process of, you pick the County, it passes all your tests, you download the data. Ah, I just spent $350 on this data, I’m going to make it work. No. The data’s there smacking you in the face saying, just you need to stop right now.

Jill DeWit:
Don’t do it. Don’t do it.

Steven Butala:
I’ll give you some real examples recently, of counties that I’ve pulled the plug on.

Jill DeWit:
The data’s cheaper than the mail.

Steven Butala:
Yes. Well said. Would you rather waste $350 because you made the wrong data or waste 5,000 on the mail.

Jill DeWit:
Ding, ding. The Land Academy Show remains commercial free for you, our loyal listener. So wherever you’re watching, wherever you’re listening, please subscribe and rate us there.

Steven Butala:
We are Steve and Jill, information.

Jill DeWit:
And inspiration.

Steven Butala:
To buy undervalued property. Jill just got a phone call from a seller.

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