Relationship Between Real Estate and Paper (LA 1356)
Relationship Between Real Estate and Paper (LA 1356)
Transcript:
Steven Jack Butala:
Steve and Jill here.
Jill DeWit:
Hi.
Steven Jack Butala:
Welcome to the Land Academy show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill DeWit, coming to you from dreamy Park City, Utah.
Steven Jack Butala:
Today, Jill and I talk about the relationship between real estate and paper. Really, I talk about it. Jill said, “I don’t know what this is. Can you please do it?” And I said yes.
Jill DeWit:
And just for all y’all who are a little concerned, we’re not moving. We haven’t moved, by the way. We’re taking a little break from the beach, and a little change of scenery, which is always good.
Steven Jack Butala:
Take a break from California and all this silly stuff that’s going on there. All the stuff you’ve heard about California in the news is true.
Jill DeWit:
Oh my gosh.
Steven Jack Butala:
We haven’t been here a day and the people that we’ve talked to, we say, “Yeah, we’re here from California.” They say some version of, “Oh, I’m sorry.”
Jill DeWit:
“We read.”
Steven Jack Butala:
“I read this thing in the news. Is this really happening?” Oh yeah, it’s happening.
Jill DeWit:
Yeah. It’s real. The struggle is real.
Steven Jack 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:
Luke wrote, “Hey guys, newbie here, so bear with me. I’ve been brainstorming, and I just want to run this by folks who may have been in the same boat. I’m fortunate enough to be working with a financial partner to set on this journey so we can get out of the rat race into retirement.” He has set aside some funds. “Let’s just say, for the sake of this thread, about $15,000. My question is, given the excellent access to deals on landstay.com, which is our site, should we go buy a few deals around $2000 to $4,000?” I have a lot to say about this.
Steven Jack Butala:
I knew you would do it. I picked this question for you. I’m serious.
Jill DeWit:
All right, “And then resell it for quite a bit more for an instant return and create more cash to work with, or should we hyper-focus on mailing several counties after some due diligence that is laid out in the course, or focus on one solitary county with a more ramped up mailer?” I’m going to get part A, you’re going to get part B on this one. “I’m sure this scenario has been discussed before, but I want to get a fresh perspective. My temptation is to go buy a couple of deals with the cash and get great returns right out of the gate. Thanks for the advice in advance.” Okay. First of all, your plan A is not nuts. I know a lot of people, a lot of members that did that, especially in the beginning, bought cheap stuff from us because they knew how we buy and sell.
Because I’m interested in just wholesale billing and wholesale selling. So you could mark it up, still make some money, and learn the process. So I like that. I really do like that. That’s not crazy. Please read them all. Read everything, because I sometimes have things that I forget about that I throw back in there. So I want you to read all, make sure you’re aware of all the situations and the taxes. If it looks really, really, really cheap I may have discounted it because of the tax situation. So it’s still…
Steven Jack Butala:
Check the back taxes on all those properties.
Jill DeWit:
Check the back taxes, right. But I put it in there, so you’ll know that it’s not really this much money, it’s this plus this. But it’s still way below what you know you can do, and then sell it. And whoever buys it from you is going to be happy. So I guess my whole point of that is, though, that’s not nuts. Especially if you’re really worried about learning to sell, I like that. Getting to learn, how do I sell? How do I post a property, get the photographers? How do I make them look good, write the descriptions? Get that part of the business flowing and then work on this part, because the front end part, with Steven, albeit is the most important, but there’s a lot to it. Getting the mailers out, picking a county, and all that goes into that process. My first choice is both. I would say do both at the same time.
Steven Jack Butala:
Yeah. That’s my answer too. And I’ll say this, there is no replacement for sending out mail. I talk about back tax properties and all these home runs that we hit, and deal funding, and we have all these things. None of it would have ever been possible if I didn’t first learn and then perfect sending out blind offers. It makes me want to give advice like I’m talking to one of our kids. When is something shiny right in front of you been… grab it and hold onto it. When has that ever worked out? It might be a great bottle of scotch. You’re going to pay for that eventually. It might be about a bunch of candy that in the end you’re going to regret. It’s just short-term gratification.
Jill DeWit:
You’re not going to regret it, but it’s a good way to get it going. I don’t think you’re going to regret it, but you’re going to quickly realize, “I’m done with that.”
Steven Jack Butala:
You’ve got to learn the right way.
Jill DeWit:
Right. Well, here’s the whole point, because think about the thing. Say you’re buying a property for me for $4,000. Now you’re selling it for $8,000 because it’s worth $12,000. Well, if you bought it from me for $4,000 and you know I bought it, that means I bought it for $2,000. Wouldn’t you rather learn how to do it for yourself?
Steven Jack Butala:
Yes.
Jill DeWit:
Buy it for $2,000 and sell it for $8,000?
Steven Jack Butala:
She’s right.
Jill DeWit:
That’s better than buying it from me for $4,000 and selling it for $8,000.
Steven Jack Butala:
These properties on LandStay are the leftover properties. Most of them, not all of them.
Jill DeWit:
There’s new ones rolling in.
Steven Jack Butala:
We have new, great ones coming in, but the ones that have some back taxes on them are perfect practice properties. They’re intended to be used exactly how you’re talking about here, Luke. You buy a couple, you resell them, you double your money. You’re not going to retire on it. You understand the process, get your feet wet. It’s while you’re waiting for the mail to hit after you’ve sent a mailer out or… They’re practice properties.
Jill DeWit:
I also have some incredible new opportunities that are coming in. I have a lot coming up between now and the end of the year and continuing on. There’s a lot of people in our community who loved terms. They’re all about the terms.
Steven Jack Butala:
They’re great for that.
Jill DeWit:
So I have some drive up to, dreamy access that I am not interested in in doing the terms. It’s not my thing. We openly talk about it, we did it in the past. We hate it. We’re not set up for it. You might love it. I think that’s wonderful. So you can buy it from me at a really great cash price, you turn around and sell it on terms and ride that for a long time.
Steven Jack Butala:
Today’s topic, the relationship between a real estate and paper. This is the meat of the show.
I came up with this concept because real estate itself attracts people because of the physical-ness of the property. Picture three pieces of land, there’s going to be one of them that sings to you. I love mountain properties. Some people love waterfront property, some people just love cheap property.
Jill DeWit:
Beach.
Steven Jack Butala:
Yeah. Think of three houses or three types of property that have real estate on it. Maybe one’s a strip mall, maybe one’s a broken down house, maybe one’s a completed, finished house, HGTV-ready, maybe one’s a class A office building that a pension fund owns. None of that matters. Here’s the whole point to this, and this is not going to be a lengthy episode. What matters is what that piece of property looks like on paper. You can have the greatest house or the greatest piece of land or the greatest class A office building and every single thing in between. If it’s got too much debt on it, and that’s the piece of paper or the mortgage. If it has too much accumulated back taxes on it, that’s a piece of paper. It have too many liens that are mechanics liens or other things that go on.
So there’s all these papers that represent this piece of property. And I’ll tell you personally, the property comes second to me. I don’t care about the property half as much as Jill does. Another one of the infinite reasons why she and I do really well together. I care about that paper relationship between this asset. And I’ll go look at the asset later, but I need to make sure that all the papers’ in order and the numbers on those papers make sense to me and fit into the big picture of what Jill and I are trying to do day in and day out. So please don’t get caught up. I see a lot of people, mostly on bigger pockets, that are… Driving for dollars is the greatest point of forever about how people are completely missing the relationship between paper and real estate. Please check these papers. It’s not paper any longer. This is an old saying and I don’t hear it anymore and I’m trying to bring it back.
Jill DeWit:
Which is?
Steven Jack Butala:
There is a relationship between real estate and paper that you cannot-
Jill DeWit:
Yeah, you can’t ignore.
Steven Jack Butala:
Yeah.
Jill DeWit:
It has to be good on paper. Who cares what it looks like?
Steven Jack Butala:
I used to do this once a week in the ’80s and ’90s.
Jill DeWit:
Once it looks good on paper, now you can get into it and see what it really looks like. That’s okay.
Steven Jack Butala:
Now you can see if it’s falling down, if you like the window treatments. Whatever it is for you that makes… If it is a mountain property that you can build on.
Jill DeWit:
Right. Yeah, if it doesn’t work on paper, don’t bother wasting your time and getting your hopes up and going to look at it.
Steven Jack Butala:
Yeah. It’s not even doesn’t work on paper. And I’m not criticizing you at all, because I hear that more often now. Like, “Hey, does this business model work on paper?” What they’re saying is, do you get a pro forma? Can you get customers? And all that. And that’s all fine. There’s actual things that you can look up on a piece of real estate, like, what’s the back taxes on it? In a lot of ways it’s way more simple than any company.
Jill DeWit:
Right. I was thinking of this. We haven’t used this saying in a while, that you have to see property like a line item, you can’t see it like the trees and the cliffs and the view and the sunset. They’re all line items on a spreadsheet. And if you look at your properties like that and compare them all like that, you will win.
Steven Jack Butala:
You will win. You will absolutely win. If you check the paper that’s associated with this land or whatever you’re buying, and the real estate checks out, and you do that consistently, you’re going to kill it.
Jill DeWit:
Yep. Happy you could join us today. Every day, Monday through Friday you can find this right here on the Land Academy show.
Steven Jack Butala:
Tomorrow the episode on the Land Academy show is called Land Academy Continuing Education, it’s a new product that Jill and I are launching, Explained. You are not alone in your real estate ambition.
We’re going to get a bunch of comments on that.
Jill DeWit:
The paper one?
Steven Jack Butala:
Yeah. Their comments are going to go like this: “Thank you for just getting to the point. I appreciate it.”
Jill DeWit:
I thought people were going to say, “I have questions.”
Steven Jack Butala:
Hopefully. I’m happy to answer the questions.
Jill DeWit:
Exactly. And I’m okay with that too. I’m also okay with you and happy you are here and happy you are listening and happy you are watching. Please check out our YouTube channel. Leave comments, suggestions, whatever it is. We love them, we read them, and it helps make our shows better. We’re Steve and Jill.
Steven Jack Butala:
Information.
Jill DeWit:
And inspiration.
Steven Jack Butala:
To buy undervalued property.
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