How Professional Land Investors Weigh Price vs Attributes (LA 1326)
How Professional Land Investors Weigh Price vs Attributes (LA 1326)
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 how professional land investors weigh price versus attributes.
Jill DeWit:
Wait, that’s us.
Steven Butala:
Oh, professional land investors? Yeah.
Jill DeWit:
That’s us.
Steven Butala:
The real question is spoken in just plain English. Deals come in, they have a price and they have attributes. They have a mountain view. They have two sided public paved road access. So how do you weigh that? At what point does a property have no value from a price standpoint where you just say, “You know what? I’m not buying it. I’m not buying it for $100”? Or the other side is at what point do … It’s so expensive, I can’t buy it. And that happens more often. The attributes are great, everything passes my test. It’s absolutely a property I want to buy, but it’s too expensive.
Jill DeWit:
Because they know it and they’re not hurting and are not going to sell.
Steven Butala:
You know that scale, that Wall Street scale-
Jill DeWit:
That’s it.
Steven Butala:
… where it’s like, you put your money on here and the old school, you put a bag of silver or whatever. And then on the other side you put-
Jill DeWit:
Dollars.
Steven Butala:
… like whatever material you were buying, like flour.
Jill DeWit:
There you go.
Steven Butala:
That’s what this is.
Jill DeWit:
Diamonds. Mine would be diamonds.
Steven Butala:
Yeah, diamonds is a good one. 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:
Lucas wrote, “Hi everyone. I’m in talks with a seller, working on getting a purchase agreement signed from my first mailer. They have five contiguous parcels, but I only made offers on three. They are interested in selling all five. At this time, I want to buy all five. Can I simply instruct the seller to add the two of the parcels in handwriting to the purchase agreement they already have?”
Steven Butala:
Yes.
Jill DeWit:
“Or do I need to send them a new agreement for these other two parcels?”
Steven Butala:
May I step in here? This is a topic that comes up all the time, and I thought it was obviously worthy to put in the show. You can hand write anything on these PAs and sign it and have it initialed and just send it in, and it’s going to be fine.
Jill DeWit:
Exactly. Even if you’re going to open escrow, you should be set.
Steven Butala:
Here’s what you never want to do. Redo the purchase agreement. It’s going to take you a day. Send it in the mail. Now they have all kinds of time to think about it. You don’t want to do that. And the people that do this, they aren’t new and unrehearsed. It’s never that. They just have OCD. They have to have stuff all perfect. And, “Oh my God, there can’t be any handwriting on it.” And those people aren’t going to survive in this business anyway. So don’t be one of those people.
Jill DeWit:
Touche. So yeah, we’re covering that. Can you add it on there? Yep. Do we need to do a send one? No. Obviously, no. “I think they can add the new information to the existing offer and send it back to me and be done.” Awesome. Lucas is already on the right path here.
Steven Butala:
Yeah, he answered his own question. Yep.
Jill DeWit:
“So I’m looking for deal funding on this one. If all goes as planned, I’m offering $1,200 an acre while comps in the area are $9,000 an acre. If anyone is interested in more details, I’m hoping to have a package ready to share with you by this time tomorrow. I’ll probably take it to Land Academy first,” as you should, Lucas, “then to Land Tank and then do the rest of the community, unless someone is eager to partner right away. Thanks, all.” Works for me.
Steven Butala:
Everything’s great here. You actually listened and learned well, Lucas. You’re in the minority.
Jill DeWit:
You get a gold star. I’m putting a sticker on your paper right now.
Steven Butala:
Yep. On your through the screen COVID forehead. Today’s topic, how professional land investors weigh price versus attributes. This is the meat of the show. You get a purchase agreement in, Jill.
Jill DeWit:
Correct.
Steven Butala:
It’s not the price that you sent, but it’s a piece of property you know for sure, it fits your acquisition criteria. For some people, that’s a mobile home park, for some people that’s 28 acres in an awesome area that’s super cheap, like us. Whatever your acquisition criteria is, it fits.
Jill DeWit:
All right.
Steven Butala:
At what point do you say … and the seller’s clearly like, “No, I’m not going to pay what you’re asking for. It’s too low.” At what point do you weigh that scale in the general store in a cowboy movie with coins?
Jill DeWit:
They’re not going to accept-
Steven Butala:
Yeah. At what point, how do you say-
Jill DeWit:
I’m good with this?
Steven Butala:
… it’s worth X? How do you say to yourself and then to the seller, I’m only going to pay 35,000 bucks for this or 38 or 42? How do you come up with that number against the attributes?
Jill DeWit:
I look at the property … So here’s how it goes. So the offer comes back. I offered 38. He crossed it off and wrote 138.
Steven Butala:
Okay. This is good. This happens all the time.
Jill DeWit:
This totally happens. They took my $38,000 and added a one in front of it, and then they send it back.
Steven Butala:
By the way, I have an answer-
Jill DeWit:
With like a lipstick kiss. This totally happens.
Steven Butala:
I have an answer to my own question, actually, after you.
Jill DeWit:
So the good news is I am going to take action, dead serious, because I have a signed purchase agreement and it doesn’t say anything nasty on it. It wasn’t like, “Jump in a lake.” It was like, “You want it? Here’s what I’m going to do.” I already really know right off the bat that we’re probably not going to meet in the middle on this one, but I’ll lightly entertain this. So I will, and my team will put it in and I’ll go look at it. First after I’m done laughing, because it’s funny, I go, “All right, let’s just make sure there’s not something that I’m missing,” because every now and then I might’ve missed something.
Steven Butala:
You’re singing my song right now.
Jill DeWit:
So I’m going to entertain his thing because first let me cover that scenario. We have been wrong. We have some things out and things got a little bit goofed or the assessor, usually it’s the assessor had input something wrong. When I dig a little deeper, I’m like, “Oh, it’s bigger than we thought,” or, “I didn’t know it was next to Walmart,” something like that. And I might actually go, “This guy’s not nuts. Thank God he didn’t throw my offer away for 38 and countered at 138 because it’s worth 500.” It might be worth something fantastic. So I will first go down that path. So the point is, and I kind of answered it right there, right there, there was some magical, amazing attribute that qualified that price.
Steven Butala:
This is what this show is about. Go ahead.
Jill DeWit:
So, I have to look at it. And how do I come up with these prices? It’s a variation basically of what you do when you send out the offers. I’m looking at what has sold in the area. What is for sale in the area? What’s moving in the area? What’s going on in similar properties like that? How fast are they moving? All of these things. And in this particular situation, if this was the real world example, it was next to Walmart, I would have talked to two brokers right now because I thought it was residential. Turns out it’s commercial, next to a Walmart. This guy’s not nuts. I’m talking to two brokers. And they’re like, “You know what? Amazon’s coming into town here and so is Sprint. And we know that you can get … It would fly off the shelf right now at $300,000. We might be able to get $400,000 for it. I’d say, let’s list it at 375 and then see how it goes.”
Okay. You know what? Now that $138,000, I’m in. So, I had to do some looking. Do you want to ask some questions or?
Steven Butala:
That’s 98% of what I was going to say.
Jill DeWit:
Cool.
Steven Butala:
The next 2% is this. I’m writing Land Academy 3.0 for our members right now and I’m doing a whole module on something called test ads. I learned this from somebody else’s program, not in land, in commercial real estate. They don’t do anything until they run a bunch of test ads, a whole series of test ads paid for and not paid for on social media and Craigslist and everything. So 38 became 138. The question is, is it worth 250? And I think that you can write a very, very simple … In a lot of cases, like in Craigslist’s case, free ad to see what kind of response. It works incredibly well with renting houses or buying houses. And we’re testing it right now, to a lesser degree, for land. So if you get 40 people that you post a Craigslist ad and 40 people want to know where it is, they want to go look at it at $250,000, you better put that under escrow quick.
Jill DeWit:
Exactly.
Steven Butala:
If it’s just crickets, you either posted the thing incorrectly, the test ad. It wasn’t enough information or it didn’t get to the right people to actually see. And you got to do that in addition to the broker thing. The theory is here, you spend all this time and energy for this deal flow and these deals are coming in, and you can attest to this. We have tens of thousands of properties or potential deal candidates over the years that we’ve accumulated in our CRM that were passed on. So, this will help you better buy, theoretically better buy, make good decisions about some of the properties that comes back that’s being negotiated. There was a time when Jill and I, all we said was, “Never do a deal unless they sign the purchase agreement as you sent it out. And that’s it. Don’t waste your time. Send a ton of mail out. The ones that get signed are the deals that get done.”
So as you climb the ladder in product type, then the higher you go, that gets a little unrealistic. There’s deals in there. You don’t want to let that stuff go to waste.
Jill DeWit:
Exactly, exactly.
Steven Butala:
You also want to sleep good at night, knowing I’m going to spend 138,000 bucks, I want 250. Theoretically, a test ad, you’re going to get somebody who goes and wants to buy it. So you’re going to close it with that person anyway.
Jill DeWit:
That, I think for me, is one of the real big points of what the professionals do. We don’t lose sleep over the dollar amount. It could be 1.2 million. We’re not going to lose sleep over the dollar amount because we know what’s possible. You have to have that much confidence in it, and you’re going to sleep great. I’ve got a deal right now that I just told this broker, it was a buy for, I don’t know, 10 or 15,000. We’re selling it for 60,000. And you know what? This buyer is being a stinker. I’m like, “You know what?” I tell him, “Let him go.” I don’t care. I don’t flipping care.
Steven Butala:
Yeah, that’s what I think.
Jill DeWit:
There’s another guy … I know and you know what this property is worth. I was letting it go at $60,000. So I’m going to wait for the next guy. I don’t care. We haven’t said this on our show in a little while, you win when you buy it. So, that’s how professional investors operate. I know going into it what’s possible. I sleep really well. I’m not going to have to be … There’s no hard selling on the end. It’s just getting it in front of the right eyes when it comes time to sell it.
Steven Butala:
That’s it. That’s right, Jill.
Jill DeWit:
That’s it.
Steven Butala:
That’s great advice.
Jill DeWit:
So, I’m not worried. All of my work, the majority of my work is right now on the acquisition and making sure I get the really good ones.
Steven Butala:
I can’t top that.
Jill DeWit:
Well, this is a short show today.
Steven Butala:
Professional land investors weighing price against attributes. So, I mean, I think we can bring this right back to match.com. You’re going to weigh … This is what I think goes on in the mind of a dating female.
Jill DeWit:
Uh oh.
Steven Butala:
And I think there’s a whole spectrum of women out there. There’s women that will accept anything and then there’s women like Jill that are pretty damn picky at that certain point, as they should be. So you weigh the attributes of the guy against the crap you have to put up with, or the price.
Jill DeWit:
The crap you have to put up with. The man does not own nail clippers. That is crap we have to put up with.
Steven Butala:
You know that men are not hard wired to surface clean anything ever.
Jill DeWit:
Not sure the last time they replaced their toothbrush. Crap we have to put up.
Steven Butala:
You know that men are not hard wired if they’re single to ever change their sheets. Like I mean, for a year.
Jill DeWit:
Yeah, I didn’t know that. I didn’t know that for a long time.
Steven Butala:
The only reason a young single person with a job, a guy, would ever change his sheets is because somebody in his life told him to.
Jill DeWit:
Or because he has a cleaning lady. That’s the smartest thing. If I were a young single man and I knew that about myself, I would have a cleaning lady, period, who just does all those things for me. And she does my grocery shopping, so I make sure that there’s coffee and whatever, eggs, whatever I want and bread and basics in the fridge, so I can make a sandwich or something real quick. And I would have my dry cleaning worked out.
Steven Butala:
Let me help you.
Jill DeWit:
Uh oh.
Steven Butala:
That’s classic. Dry cleaning worked out. Men don’t have dry cleaning. I don’t care who you are. I don’t care if you work for a public accounting firm.
Jill DeWit:
What do you do?
Steven Butala:
You don’t have dry cleaning.
Jill DeWit:
You just buy a new shirt when you need one?
Steven Butala:
No, you just, I don’t know.
Jill DeWit:
What if you get a nice shirt?
Steven Butala:
You just don’t wear it. I mean, I don’t know how it works now. Back then, I guess I had my shirts done, but it was at the dollar cleaner, number one. Number two, you don’t have a cleaning lady because you don’t care.
Jill DeWit:
You do if you want to have a girl over.
Steven Butala:
No, I’m telling you, there’s no cleaning lady. Why would you spend 100 bucks a month or whatever it ends up being. It’s probably $5,000 a month now. It used to be 100. That’s number two. No one cleans anything.
Jill DeWit:
You’re scaring away girls, aren’t you?
Steven Butala:
You just don’t have people back there.
Jill DeWit:
All right.
Steven Butala:
You go out. Number three, there is no food. There’s no eggs or coffee or any of that. You don’t have anything in the refrigerator. All the time that I was single, my refrigerator was literally unplugged for years, and it was some of the happiest times of my life.
Jill DeWit:
I know. You’re very proud of that one. In the book that you write, and there’s a book that you’ve been working on for a while, that crap your dad never told you, that needs to be a total chapter right there.
Steven Butala:
That’s all in there, actually.
Jill DeWit:
Unplug the fridge. It’s okay to unplug the fridge.
Steven Butala:
Men innately gravitate toward efficiency and simple. Not comfort. Women gravitate toward comfort.
Jill DeWit:
I like simple too.
Steven Butala:
And now, everything’s on auto pay now. I mean, I would-
Jill DeWit:
Do you know what I want? Do what I really want?
Steven Butala:
I would love to hear this, on the air like this.
Jill DeWit:
I want fast … I want everything that I have to do to be fast and simple. I want to get it done, but I don’t want to rush through it because I don’t want to come back to it because I made a mess. As fast as I can the best way, so I can go off and have fun. That’s really what I want to do.
Steven Butala:
I really appreciate that about you. You know what I want? Nothing to do and then go off and have fun. Nothing to do. Everything’s on auto pay. There’s no food to buy because you don’t eat at home ever. There’s no dry cleaning to do at all because you don’t have that kind of job because you’re smart. There’s just nothing to do.
Jill DeWit:
This is great if you’re single.
Steven Butala:
I know.
Jill DeWit:
Okay.
Steven Butala:
Yeah, that’s what I’m talking about.
Jill DeWit:
I understand.
Steven Butala:
You weigh the professional-
Jill DeWit:
Well, I’m going to bet right here, you don’t want to be single.
Steven Butala:
I do not want to be single, but I would love for everything to be … This is a reason we don’t have debt at all.
Jill DeWit:
It’s true.
Steven Butala:
And we don’t use a lender when we buy real estate.
Jill DeWit:
It’s true.
Steven Butala:
To take out all the work.
Jill DeWit:
That’s true.
Steven Butala:
We don’t use a real estate agent. It’s a reason that if any of the cars that we buy, we never buy a car from a dealership ever, because all it does is complicate stuff and add fees.
Jill DeWit:
Truth time. We just sold a company, and partially because we couldn’t take all the legal stuff that went around said company. And we did it great and we had a beautiful team. We know what we’re doing, but just every time I turn around, there’s another form. There’s some department has to check something out. There’s just something. Usually it’s government. And I just couldn’t take it.
Steven Butala:
That entire experience, and it was a great tax thing for us. And we went into it knowing that and went out of it knowing it, that entire experience solidified, as if it needed to be solidified, this real estate business model that we have.
Jill DeWit:
It’s true. That’s a good one. That’s a really good idea. If you’re ever not sure about something, check out, try something else. Put on a different hat, whatever it is for you. Cut your hair.
Steven Butala:
Yeah, it was like a high maintenance female, that company. It was never satisfied and constantly consuming stuff. Constantly just eat you up if you let it.
Jill DeWit:
Yeah. Oh my gosh. The price of that company did not, even though it made money, did not outweigh the … There were no attributes. How do I say that? I’m trying to tie it back into the show, but it didn’t work.
Steven Butala:
That company could have been wildly successful and I would have sold it.
Jill DeWit:
I agree.
Steven Butala:
There was liability exposure. Anyway.
Jill DeWit:
Yes. Happy you could join us today. Five days a week you can find us right here on the Land Academy Show.
Steven Butala:
Tomorrow the episode on the Land Academy Show is called the four types of land businesses that you can specialize in. You are not alone in your real estate ambition. I am so glad we are out of that company. I’ll tell you, as a-
Jill DeWit:
It’s just kind of sad. I liked it. It was fun. It was so different. It had nothing at all to do with any of our companies. Now it’s gone.
Steven Butala:
We’re good business partners together, Jill, because I didn’t want to sell it either because it was more of a hobby. But did you ever question our decision … Was it our decision to sell it or was it mine or was it yours?
Jill DeWit:
It was our decision to sell it. I think it was your decision to buy it.
Steven Butala:
Okay. That’s fair. We needed a tax situation for that year and we got it.
Jill DeWit:
Yeah, we got it.
Steven Butala:
So I mean, it was mission accomplished there. If you’re listening to this and you’re young and you want a great deal on something, find people who have a bunch of companies and sit down with them and pour a drink down their throat and ask them which one sucks and that you can buy real cheap or they can just take off their hands. And they’re going to have one or two. Anybody who owns more than like five companies, or back in the day for me, it was like longterm care facilities. There’s always one or two in any portfolio. I don’t care if it’s stock or dirt or whatever, you’re doing multiple deals. They’re going to say, “Oh yeah. I mean you’re young and ambitious and I actually like you. I’m going to cut you a smoking deal on this problem that I have. I’ll take a huge loss on it if necessary so you can cut your teeth.”
Jill DeWit:
That’s brilliant and that’s true.
Steven Butala:
It’s actually in my book too. It’s like people-
Jill DeWit:
Brilliant.
Steven Butala:
… young men always believe that there’s this insurmountable stuff in front of them, like this mountain that they can’t climb, but that’s just not the case. You’ve just got to hang out with the right people.
Jill DeWit:
Thank you. Thank you for tuning in. We hope you find our content valuable and we appreciate your support. If you haven’t already, please check out our YouTube channel and hit the subscribe button.
Steven Butala:
And your comments and suggestions help us to create the type of concept you’re here for. Hitting the like button on your favorite episodes helps us support our channel’s algorithm and gauge your interest for future shows. We are Steve and Jill.
Jill DeWit:
We are Steve and Jill.
Steven Butala:
Information.
Jill DeWit:
And inspiration.
Steven Butala:
To buy undervalued property.
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