Land Business 501: Planning for Exit (LA 1333)
Land Business 501: Planning for Exit (LA 1333)
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 land business 501, planning for your exit.
Jill DeWit:
Yes. This is the best part, right?
Steven Butala:
Does it mean it’s over? Heck no.
Jill DeWit:
Right. Will we ever retire?
Steven Butala:
No.
Jill DeWit:
Let’s be honest. I know. I was talking to somebody about that the other day. I’m like, “It’s never going to end,” like end, end. I might not be as involved. I might be working a lot less time a week, a month, but it’ll never end.
Steven Butala:
There’s three or four ways companies exit or owners of companies exit the company. Almost in all cases, all good cases, the company goes on just without you, or you’re compensated in some way for your expertise, but we’ll cover the four … There are some people in life, this is all they do is they exit companies, like private equity groups. So we’ll compare what we do. I get this question at the live event every single year. What’s the exit on this, man, because it doesn’t make any sense? If I start buying and selling land, then the company just dies.
Jill DeWit:
Yep.
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:
Thebon, hope I said that okay, wrote, “Hi there. I’m new and recently went through all of the Land Academy materials, 1.0, 2.0 and the cast-off from the land program. And I was wondering if someone could provide more detail on how to choose a county to invest in. There’s quite a bit in there.” I’m a little confused. “I feel there was a gap which kept that topic at a very high level. Curious if you all followed a particular method in choosing your county, especially since it seems that once you choose a county, you’re pretty much committed to it for several months, if not longer. Thanks.” I don’t have any missing pieces there. What do you think this is about? Or what do the comments say?
Steven Butala:
You know, I didn’t see the comments.
Jill DeWit:
Oh.
Steven Butala:
Well I know that our two moderators jumped on this really quickly.
Jill DeWit:
And they said go back to chapter two?
Steven Butala:
Number one … Probably.
Jill DeWit:
Okay.
Steven Butala:
But I mean, I’ll clarify very easy. This is a huge leap. How to choose a county and how to price a mailer are the number one and two questions that we get. That’s why I included it in here, Jill, because … and then we just did this Tuesday webinar. This is a big topic for everyone.
Jill DeWit:
Right. It’s like it’s not that there’s not enough information in there, but for some reason I think it’s confidence.
Steven Butala:
It’s confidence, and they need confidence.
Jill DeWit:
They want a little bit of a, am I doing it right? That’s it. It’s like, I give you 10 steps and you go through the 10 steps and you still want to know, am I doing it right? You probably are. Did the cookies come out? Well, it’s true.
Steven Butala:
Did the cookies come out?
Jill DeWit:
Well, I gave you a recipe. You know what it is? I gave you a recipe and you bake them. This is a good example. I think this is what we’re doing. We gave you a recipe. You bake the cookies and you’re asking me, does it taste right? How’s that?
Steven Butala:
I think that’s perfect.
Jill DeWit:
Thank you. And my answer is, do you like them then? Then yes.
Steven Butala:
Like every single thing in buying and selling land and Land Academy and House Academy, like everything, there’s no guessing. And that’s where the disconnect is. We have this thing called the red, green, yellow test that we are extremely loud and clear about on buying houses and buying infill lots. And the disconnect is that it’s not getting used to buy rural vacant land or recreation land. It’s not. That tool, there’s some loss in translation there. What you do is you line up the four or five counties in the red, green, yellow test, pull the county data either from Redfin or realtor.com and you pit the counties against each other to see which ones come out crazy green, which ones days on market is really low, which county or two counties or three counties have the least amount of property for sale as a percentage of the universe of property that’s in that county and a few other things.
And at the end of that, you line up 10 counties against each other. Two or three of those counties, it’s going to pass the data test. Then you put the data away, and this is true for all investing. I don’t care what. If it’s stock market investing, it’s the same thing. There’s a point where you put the data away, close your eyes for a second and then go test it for reason. You go out to Google Earth or wherever it is that you go out to on the internet, take a look at it and say, “This county has this type of property. Is that what I want to buy?” I’ll give you an example. We were talking about it a couple of days ago. Maybe it was … No. Yeah. A couple of days ago. There’s a ton of property in Florida that passes the test. I don’t like Florida, so we don’t buy property there. I don’t even know why.
Jill DeWit:
I was going to add to your test, your reasoning’s perfect. So I love what you just said. Then you put your data away. Now test it for reason. See if it makes sense to you. A couple other things too is how responsive is the county? Do they have a good … Can you easily pull up all the ownership information in NeighborScoop and maybe on the County GIS, check the back taxes, whatever it is.
Steven Butala:
Are they working right now-
Jill DeWit:
Yeah. Are they open?
Steven Butala:
… during the COVID?
Jill DeWit:
Yeah. Can they report stuff for you?
Steven Butala:
Do they have a GIS site?
Jill DeWit:
Exactly. Do a couple things like that too, to go through your own list of, yeah, this is a good county. So if I send out offers and get them back, I can do what I need to do.
Steven Butala:
So I’m going to speak personally now. And I’m not-
Jill DeWit:
Truth time.
Steven Butala:
Yeah, truth time. And I’m not criticizing. This is a very good question, by the way. I’m not criticizing the person who’s asking this question at all. It’s a very valid question. The internet growth and improvement travels at the speed of sound. So it would be impossible for us as instructors to keep up with the available tools and resources that you have. So I intentionally avoid, I can’t avoid it altogether, but I intentionally avoid putting all these tools into the core education programs because two weeks after we record it, it’s going to be different. There’s no way I can keep up with it.
Jill DeWit:
It’s true.
Steven Butala:
No matter how I teach picking a county, in a few months, six months, eight months, it’s going to be different.
Jill DeWit:
Very true.
Steven Butala:
So what I want to communicate very, very clearly is we’re here to give you the basics and show you how to do this stuff, but we can’t hold your hand to the point where there’s just an ironclad way to pick a county and you are going to make money.
Jill DeWit:
And I’m not going to call everyone every time something changes and go, “Make sure you’re using this now, you’re using this now, you’re using this now.” You need to understand how to-
Steven Butala:
Think for yourself.
Jill DeWit:
Exactly.
Steven Butala:
The vast majority in this group, I’m talking about 95%, maybe 98% of the people that are regularly sending out mail-
Jill DeWit:
That’s good.
Steven Butala:
… don’t have these questions. Again, I’m not knocking it. They know how to pick a county, and probably one out of eight or nine counties that they pick or 10, it didn’t work. But they don’t, we never hear about it.
Jill DeWit:
That’s really good. Whatever we’re using right now for having your calls forwarded, whatever you’re doing, that’s going to change in six months. I’m not going to tell everybody, “Go get this phone and have this kind of a burner phone and this kind of a plan,” because there’s going to be something better and someone might show me something better too, by the way.
Steven Butala:
Right, exactly. So yes, that’s how I currently pick a county. I can guarantee how I pick a county and how I price a mailer in six months will be different. And that’s what we have the Thursday calls for.
Jill DeWit:
That’s true.
Steven Butala:
So if you’re in our group, you want to keep up to date on all this stuff, please attend our Thursday calls.
Jill DeWit:
Right.
Steven Butala:
Today’s topic, land business 501, planning for an exit. This is the meat of the show.
Jill DeWit:
This is my favorite.
Steven Butala:
Is it?
Jill DeWit:
Why not?
Steven Butala:
Number three’s my favorite.
Jill DeWit:
Oh, gosh. Number, well, no number five.
Steven Butala:
Tell us why. Tell us why.
Jill DeWit:
Because you know why? Here’s why.
Steven Butala:
This is really interesting for me.
Jill DeWit:
Okay. Because at this point in your career, you can go, “I’m going to show up. I can voluntarily show up, number one. And number two, I have the option to only work on things that I want to when I want to.” Does that make sense? It’s kind of like our acquisitions, where we’re at right now, myself and my team, even my team more than me, they’re doing a lot of the heavy lifting. I’m going in now more than you and doing the picking the deals, approving the deals, writing the checks, that kind of a thing. You get to pop in and out whenever you want or zero if you want. You could be here an hour a week. You can be here five hours a week. You can be here no hours a week for the stuff that I got going on, the projects I’m working on. And I think that’s the most fun. Right?
You get to just do whatever you want. And the best thing is too, everything is running very smoothly under your direction, based on how you, when I say you, I mean, Steven. I’m talking to Steven here. How Steven laid it out, what the criteria is and all of that.
Steven Butala:
Number five is your favorite.
Jill DeWit:
Yep.
Steven Butala:
I guess that makes sense.
Jill DeWit:
Yep.
Steven Butala:
So number 501 is not titled exit as a verb. It’s titled planning for your exit. So planning for your exit could take 20 years, but you have to have an exit. And that’s really what this episode for me is about, because I think too many people, when they start a company, they think about the $10,000 a month that it’s going to make or the 100,000 or the millions of dollars. And then they just think it’s going to go on forever. And you’re going to die one day and it’s just going to go on.
Jill DeWit:
Right, and the kids are going to jump in and know exactly what to do. And they don’t.
Steven Butala:
That’s almost never the case. So here’s a few ways that you can exit a company. And this is what private equity groups do, or companies like Coca-Cola. What’s Coca-Cola’s exit? It just goes on forever.
Jill DeWit:
It’s true.
Steven Butala:
You can exit a company by … I’ve done this before, where you have … Let’s say you want 22 million bucks. For whatever reason, that number is what you decided. $22 million in the bank. You’re going to buy and sell land until you hit $22 million in the bank and you’re going to turn off the website and turn it all off, and you’re going to go live in that property that we talked about that’s got legal access. I think it was yesterday. It’s got legal access, no physical access, because you don’t want to talk to anybody ever again. That’s a way to exit a company.
Jill DeWit:
Yeah, that’s true. I hope that’s not what you want, baby.
Steven Butala:
No.
Jill DeWit:
Okay, good.
Steven Butala:
You could sell it. Sell the company. It’s obvious. That works for a lot of product company types. Like a convenience store, you sell it, you’re done or whatever. That’s obvious.
Jill DeWit:
I never even thought about that.
Steven Butala:
You can hand-off-
Jill DeWit:
Could you imagine. I’ve just got to pause for just a second. I’m surprised we don’t have more offers to do that.
Steven Butala:
You have an I Dream of Jeannie hair things going on right now.
Jill DeWit:
Is it bad? I’m sorry.
Steven Butala:
No, I love it. Don’t touch it.
Jill DeWit:
Okay, okay.
Steven Butala:
For a lot of reasons. I really like it. Let’s do a whole show on your hair.
Jill DeWit:
Thanks. What’s an I Dream of Jeannie hairdo? Like the way it’s kind of flaw … I don’t know. Okay.
Steven Butala:
It’s up here.
Jill DeWit:
Okay. It just kind of landed that way.
Steven Butala:
My personal favorite, you can hand it off, and it’s under a partnership agreement to a mentee, you’re the mentor, or to a relative. So your kids do it. And by the way, you don’t have to have one company. Jill and I have like nine companies. We have ParcelFact. We have NeighborScoop. We have O2O. We have Land Academy. We have our core real estate businesses companies for land and houses. So you can let your favorite kid, everybody’s got a favorite kid, run one of them.
Jill DeWit:
Yep, it’s true.
Steven Butala:
See if they screw it up.
Jill DeWit:
Yeah. See how bad they screw it up.
Steven Butala:
You can take one of those companies and creatively finance it. So the guy that started Uber took it public almost immediately, raised a bunch of capital. He did all the tech piece. The thing never made a dollar. On its 10th anniversary, because this is what the SEC allows, 10 years and one day, sold his entire fortune back out into the stock market and walked away laughing. So you can creatively start a company, have it have some revenue, in his case, not even any net income at all whatsoever, not even approached profitability. And just did a bunch of acquisitions and press releases and micromanaged the stock price. And because Uber is such a daily name and the kids love it. The stock market buyers right now are little kids, they’re 22 year olds. They just propped it up. Falsely propped it up in my opinion. And the guy walked out with hoards of money for really just smoke and mirrors.
So you can create that. But you know what? Is our business type conducive for that kind of exit? Not really. But there’s ways … You just need to know about it as a business person. You can play the corporate lifecycle, like Coca-Cola. They have to grow and they have to manage your stock market. Or like Ford. You have to manage competition, keep your market share and lifecycle grow through acquisitions or new markets. In Coke’s example, they expand into new markets internationally, and so does Ford.
So there’s a lot of different ways to exit. You have to decide which one’s best for you. What you don’t want to do is just stop. And that’s the whole point of this episode. You don’t want some factor in your business situation, you don’t want to run out of money and run out of customers and run … And I see this happen all the time and that’s why I’m bringing it up. And everybody when it happens, they look around and say, “I don’t know what happened.” Well, what happened is you weren’t planning for your exit and you weren’t thinking about this stuff and micro watching it.
Jill DeWit:
It’s funny. I have talked to people that have sold off … We’ve bought chunks of property from people that were exiting this, but it was because they had another something that was offsetting their retirement.
Steven Butala:
Perfect.
Jill DeWit:
So, we have come along and bought a couple hundred pieces of property. The guy just said, “You know what? I’m out. It’s going to take too long, the way we’re going to sell these properties. Here, Jill.” And we work out a great price and I just clean out his inventory kind of thing. Because he really is out. He’s done. But again, it’s because there’s something else going on.
Steven Butala:
Maybe his pension kicked in or he had another company or something like that.
Jill DeWit:
Exactly. That’s it. It’s usually something like that. This was kind of a hobby on the side. It’s fun talking to those guys because they’ve been in it for so long.
Steven Butala:
Because you like stage five. Yeah.
Jill DeWit:
I love it. They’re like, “Yeah.” And it’s fun because it’s probably like me. It’s a little bittersweet. It’s so easy. They love it. You know what I mean? Who doesn’t love getting a phone call to buy a piece of property that you sent in an offer on 10 years ago? And they just want to dump it and you know it’s not going to take me much work because I’ve been doing this for so long, to dress it up, get it out there and make a lot of money off it. It’s addicting. It’s hard to stop that.
Steven Butala:
Totally agree.
Jill DeWit:
So, I don’t see it that I could ever lose that. I think I’m going to be 80, I’m not kidding. I’m going to probably be 80, answering the phone, closing deals. And by then my number one title agent’s going to be 120 and she’s still doing deals the same way that they did back in 1949 or whatever it was.
Steven Butala:
You may want to plan your exit on these companies that you start the same way you plan your estate. You don’t want to be blindsided one day. You just don’t want to be blindsided one day by illness, or anything that can go on in life and not have to pay too much taxes. All I’m saying is plan for it.
Jill DeWit:
Do you have any tips for that?
Steven Butala:
Yeah, have a plan.
Jill DeWit:
Oh, okay.
Steven Butala:
And make sure that, just the same way that you might put assets in a trust like real estate or all of it, just make sure you have a plan. It’s too far … All this stuff, we can talk about it, but it’s way beyond the scope of this episode.
Jill DeWit:
Okay. Thank you for tuning in. Excuse me. And happy you could join us today. Five days a week, you can find us right here on the Land Academy Show.
Steven Butala:
On Monday, join us for another interesting episode because you are not alone in your real estate ambition.
Jill DeWit:
You don’t want to go down the … which is true. I mean, I guess that is a whole nother conversation on …
Steven Butala:
I mean, think about how often some heir calls us-
Jill DeWit:
Oh, that’s true.
Steven Butala:
… and says, “I would love to sell you this property. And I love your price. It’s in my mom’s name. She passed away 10 years ago. Please solve it.”
Jill DeWit:
It happens all the time. It’s funny, because I tell that to people. I didn’t tell you this. I told it to a guy yesterday. I said, “Okay.” And we’re still talking because I might do the deal, but I wasn’t sure at his price. I don’t like his price, but I’m still rethinking it. I don’t know. Anyway, he said … I said, “Well do me a favor.” I said, “Promise me this,” because you could tell he’s older. And my assistant said that he had shared that he’s ill also. I said, “Promise me that you’ll put it in the kids’ names, something so they can transfer it easily.” And he said, “Oh honey,” he said, “I’m a bachelor. Is this a marriage proposal kind of thing?” It was really cute.
Steven Butala:
That’s hilarious, Jill.
Jill DeWit:
I was like, “Aw, that was very sweet.” So, we had a really good laugh.
Steven Butala:
That’s great. Now the guy’s going to sell you the property no matter what.
Jill DeWit:
Probably. We’re still communicating.
Steven Butala:
That’s the sting of Jill.
Jill DeWit:
It’s so funny.
Steven Butala:
She gets you to love her and then you’ll give her anything.
Jill DeWit:
Well, here’s what happened. You want to know the truth? Truth time. So my offer was 98,000. He countered at 125,000. I’m like, “It’s not too far off, but I’m not sure this is really worth it. It could be.” So we’re going back and forth. So I says, “You know what? I’m going to do a little more digging.” So I went to almost like my phase two and a half digging. I went into TitlePro 24/7. I pulled up a property report because my broker is asking me for a plat map. I’m like, “Okay, fine. I’ll get you a dumb plat map.” So I pulled the property report and then what uncovered on there, it looked like the property was sold last year for like $68,000. And I said, “Did you forget that you sold this and they took out a loan and stuff?”
Steven Butala:
Oh, shoot.
Jill DeWit:
And he’s like, “That is not correct.” I’m like, “Oh.” So I’m helping the guy right now. I gave him names. I gave him phone numbers. I could see the escrow company. I could see the lender.
Steven Butala:
Something’s wrong.
Jill DeWit:
That’s the thing. Something’s wrong there. I think the recorder attached it to his … They got the affidavit of property value or something and they put it against showing his property sold.
Steven Butala:
Or more likely he forgot he sold it if he’s that old.
Jill DeWit:
He’s not that old. He’s not that … So anyway, I called him and I said, “What do you think?” He’s like, “Oh, no.” Because he has five other properties and we talked about all of them and who’s buying this one. He’s got a deal with this guy. Anyway, there’s a very likely chance that it was a mistake on somebody else’s part, not his part, and it is still available and I’m helping the guy. So then again, my point of that is-
Steven Butala:
You have to stay up to get to the bottom of that.
Jill DeWit:
Oh yeah. Well, he’s going to do that. I gave him everything he needed. I don’t mind. This is a planning for your exit and we’re at level 500 stuff. I’m doing what I want to do. Like, please, I love you.
Steven Butala:
Oh, here we go again.
Jill DeWit:
Oh, sorry. But I’m making the call because I want to, not because I have to.
Steven Butala:
I know.
Jill DeWit:
I know that. And it’s fun for me.
Steven Butala:
I’m not. I’m just asking you questions.
Jill DeWit:
Okay, cool.
Steven Butala:
See how mad she gets?
Jill DeWit:
Yeah, well. All good. I know you’re trying to save me and I appreciate that.
Steven Butala:
No, I’m trying to do a deal.
Jill DeWit:
Oh yeah, me too. And that’s what I’m saying. If anybody’s going to get it, I’ll get it. I’ll get it at my price. Just wait. 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 content you’re here for. Hitting the like button on your favorite episodes helps to support our channel’s algorithm and gauge your interest for feature 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.
Jill DeWit:
I almost forgot.
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