Covid has Special Use Property Sales Way Up (LA 1377)

Covid has Special Use Property Sales Way Up (LA 1377)

Transcript:

Jack Butala:
Steve and Jill here.

Jill DeWit:
Hello.

Jack 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.

Jack Butala:
Today Jill and I talk about how COVID has special use property sales way up. Special use properties are things like, in commercial real estate, it could be property that’s a very specifically zone for hotel, motel or another special use property would be a mobile home park or special use property like mountain, second home property. Anything that’s just not in a subdivision that’s your primary residence or strip mall and even strip mall there’s an argument. But Jill read an article, and she’s going to explain it to you here in the show about the Florida property on the water with boats. That’s a really special, specific use property. The sales are just through the roof right now, we’ll talk about that in a second. 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:
Steve wrote, is this you?

Jack Butala:
No.

Jill DeWit:
Okay.

Jack Butala:
If that was me, I would have said.

Jill DeWit:
SJB?

Jack Butala:
Yeah, I would have said Oscar.

Jill DeWit:
Okay, Oscar. Is that the guy inside of Steven?

Jack Butala:
Yeah. There’s an Oscar, the grouching side of me. It’s that’s where it’s fun.

Jill DeWit:
Is he really inside? I’m sorry. How bad will Oscar get? How mad would Oscar get?

Jack Butala:
Just like, I believe in my soul that there’s a stripper inside of Jill named Stacy.

Jill DeWit:
Keep that careful. There could be kids in the room. Oh boy. Okay. Steve, not my Steve asked, “I’m looking for smaller land contracts to buy, all or part, minimum of two years left on them, at least one payment made.” Well, that’s easy. This is all very easy.

Jack Butala:
This guy joined our group to do this, by the way.

Jill DeWit:
Interesting. We are experienced in paper, but not so much in land. We have done six land deals to date. If you have a pool of notes and you want to get some cash out, now let’s see if we can find a way to help us both out, thanks.

Jack Butala:
Here’s how this works; you buy a piece of property for 10,000 bucks, let’s say, then you sell it on terms as to the end user for $500 down, and $200 a month or some number. This is a huge business model for a lot of people who used to be our business model. Jill and I got tired of the hassle. So you can create a very amazing cashless with cash flow, from land release. After a certain amount of time, where that note’s been performing the $500 down, you get the $200 payments, six months, eight months, 10 months, two years; that’s a five-year note. It starts to have some serious value to people like Steve who are note investors, they’re not really land investors or house investors, only that. They’re they’re in a paper business as he accurately said. Over the years, I’ve done a lot of deals like this, not buying the pay but selling it, because I win.
If I buy a property for 10,000 bucks, I got all these payments that have come in and then I sell it for 20,000 let’s say, because the value of that contract, as it goes out, grossly exceeds how much I paid. They don’t care, by by the way, how much you paid, they only care about that income stream, the future income stream. Because they’re going to pool it into their existing portfolio, take the averages and clink each other’s beer at the end of the day. So is this a good thing for us? It’s a great thing. If you have properties on terms that you’re selling, that have season notes, seek these people out, you can make a ton of money. It could be your exit strategy.

Jill DeWit:
That could be the model right there. Because let me think about this, a lot of people, the money is tied up in the land, now they’re getting payments back. So the money is still there, but I could sell these notes, have a quick cash balance right now, and go do it all over again, and then do it again.

Jack Butala:
That’s right.

Jill DeWit:
Yeah.

Jack Butala:
You have to have, if you’re going to be a successful terms seller. You have to have another source of revenue to fuel that because very quickly, you’re going to, from a cashflow standpoint, not a balance sheet standpoint, but from a cashflow standpoint, you’re going to get upside down. That’s why a lot of people in our group just do they do, two for cash, one on terms two for cash, one on terms, and it fuels the whole thing. There’s a lot of different ways to do it, but I would encourage you to establish a relationship with people like Steve. Today’s topic, COVID has special use property sales way up. This is why you’re listening.

Jill DeWit:
Not funny. The whole note thing, I’m just thinking about it, it’s just not my thing.

Jack Butala:
It’s not my thing either.

Jill DeWit:
Yeah. We know people that are big into notes. They have whole shows and things around notes.

Jack Butala:
Or companies.

Jill DeWit:
Companies all around the notes.

Jack Butala:
Here’s why…

Jill DeWit:
Not my thing.

Jack Butala:
Here is the magic charm.

Jill DeWit:
I wish them well and I like them. I’m like, “You’re killing it, good for you.” Not my thing.

Jack Butala:
You take a piece of property that’s got all five A’s. It’s really important when you’re thinking of selling terms that you can drive right up to the property, because the end users eventually are going to drive right up to the property. They’re probably not going to do it before they buy the property.

Jill DeWit:
It’s true.

Jack Butala:
They’re going to do it maybe a year or so, later. It’s at that magic moment that they’re going to decide, “You know what? It’s not what it looked like on the internet.” Or they’re going to say, “Wow, I did great here. In a perfect world do you want them to say, “Wow, I did great here.” every single time?

Jill DeWit:
Right.

Jack Butala:
That’s just not what happens. Or their life changes. Their kids have to go to college, or something. They need the money for something else. So the retention rate, the number of people that stop paying, is very high and then you have to go do it all over again, which makes somebody like Steve here, a note buyer really, really attractive. So you can get a good down payment on a piece of property that you bought right, get 12 months of payments and then sell the note. It’s a great thing.

Jill DeWit:
Mm-hmm (affirmative)

Jack Butala:
Jill doesn’t like it because there’s a tiny little hint of dishonesty. There’s that magic moment where it’s like, they just changed their mind or they should have gone to see it before they actually bought it. Then that’s when she gets the phone call or their staff gets a phone call and there’s disappointment and all that, and you know what? When you buy for cash and sell for cash, nobody’s disappointed the person you bought it for, you solve their problem, the person you’re selling it to sees this huge value on the price. So everybody’s jumping up and down and happy. That’s the kind of business we want to be in.

Jill DeWit:
That’s very true. The reason people do this is because it’s a property that you’d buy for 10 and I would sell for 20, for cash. But they’re selling it for 35,000 on terms and the person is happy with that. The buyer, theoretically, because it gets to make terms payments on it. I’m not a fan. You’re right. Because I’m doing it, because I feel bad and it’s the right thing to do and then it’s a big mess. Then I will try and sell it for cash, sorry.

Jack Butala:
Just tell us your Florida story.

Jill DeWit:
Okay. Are we in the middle of the show now? That’s right.

Jack Butala:
Yes.

Jill DeWit:
Okay. The Florida story. Oh, so I was reading an article about boats, about Marina property in Florida, and how this professional investor stumbled across this niche and said, “Holy cow.” So they bought this property, it had 14 boat slips, right? That came with the property and they were snatched up and he started to dig a little deeper and he found that, I have the numbers here. He found that boats sales are through the roof right now and like RVs…

Jack Butala:
As are RVs.

Jill DeWit:
So he’s now…

Jack Butala:
In mobile homes.

Jill DeWit:
He’s now building out a division of his company to deal specifically with Marina property. So here are the numbers; power boat sales have already been seeing a consecutive gross year over year in the past decade, but since the Corona virus pandemic, it’s exploded. According to the National Marine Manufacturers’ Association, 115,000 new power boats were sold in May and June alone…

Jack Butala:
Oh my gosh.

Jill DeWit:
Which is a 30% increase, over the same time period last year. [crosstalk 00:08:49] So in 2019, and then additionally, by the way, In Europe they export nearly $20 billion worth of boats each year. So this is all fueling the demand of Marina space and then the whole point is, this guy said, “There’s nowhere to put them.” So I’m like, “What the heck?” So his companies now developing marinas is in United States and Central America. They’re focusing on taking boats that are 30 to 50 feet in length.
So the problem is they can’t put them all in the water. There’s two things you can think about, talking about the awesome thing is if you have a place to put them in the water, great. But what they’re focusing on, is taking boats that are 30, 50 feet in length, moving them to dry storage in a place that they can be retrieved quickly and in an automated fashion. Then they’re going to leave the slips for the larger vessels, so that’s just not possible.

Jack Butala:
Right.

Jill DeWit:
But they can get them in and out. Like what the heck?

Jack Butala:
What a crazy world we live in right now. We were supposed to have the biggest recession slash depression, economic depression. After this COVID thing started in March, Jill and I were battening down the hatches, figuratively.

Jill DeWit:
Exactly.

Jack Butala:
To keep with the Marine theme. It just didn’t happen and what happened, is our businesses exploded, every single one of them. So tomorrow I’m not going to let, I don’t want to talk about this too much tomorrow. The show’s called “As About Why”, the results of this COVID thing, but today about special use property. So special use property like houses that have a dock down and you walk down there and get your boat in Florida, you can’t find property like that right now. So those are great places, properties to buy as an investor right now, if you can get them cheap and resell immediately.

Jill DeWit:
I think…

Jack Butala:
Anything, that’s got a little flare to it that has to do with not living in a city, because people don’t have to live in cities anymore to go to work, most people.

Jill DeWit:
In some States, if you’re the owner of a property and it’s a certain size you’re allowed to hunt on it and not have to jump through all the hunting restrictions and some of the hunting licenses thing.

Jack Butala:
That’s a great example.

Jill DeWit:
So that is really valuable, little special use thing as well that I’m buying and selling, it’s amazing.

Jack Butala:
Right. The list of special use property is endless and the place to start to build that list for you is exactly what Jill did. She, and I know how this hunting property came up, because we bought a bunch of property in a very specific area, in a specific state. One of those pieces of property was set up for that, based on location in size and man, we made some dough.

Jill DeWit:
I got another one; cannabis.

Jack Butala:
Yeah.

Jill DeWit:
It’s very interesting. Most places have a lot to say about it, but just the basics of cannabis prop… Don’t get too deep by the way, too. This could get you down due diligence nightmare. But there’s a lot of States and places where you can literally get a map and it’ll tell you, “If you’re inside this area, it’s allowed. If it’s outside this area, it’s not allowed.” Or vice versa. So that’s another good, special use thing that I guess be aware of. That’s my whole thing, to be aware of it. Don’t dig too deep I don’t know if I’m wanting you to make it your property type. Maybe you do, but just know that it’s out there.

Jack Butala:
It’s still no replacement for the red, green, yellow test.

Jill DeWit:
Right.

Jack Butala:
You’re still going to look down to the zip code for houses that are down at the County, for sure, for the land and it’s got to pass all those tests. Property sales need to be higher than what’s listed. If you’re in our group, you know what I’m talking about. We teach all this stuff in there. I’m not going to go into it now. If there’s special use property sales are way up, people are buying these properties. There has to be some property that they’re moving from, or that it is not getting purchased. What is it? It’s a three bedroom, two bath property that was built in the eighties in Warren, Michigan. You tell me, who’s moving to Warren, Michigan right now, in a three bedroom, two bath property, that’s about 1200 feet, which is what I grew up in, by the way.

Jill DeWit:
I understand.

Jack Butala:
That’s why I’m picking on Warren. because I’m from there.

Jill DeWit:
What does it cost you now, about what? Five, $8,000?

Jack Butala:
There is properties that are spattered all over the MLS and Wailea, Macomb County for 1500 bucks.

Jill DeWit:
I don’t know.

Jack Butala:
There’s a massive migration of people who can work online into warmer, more fun climates. Forget about red States and blue States, who the hell cares about that? People are moving to places where they can work, have a bigger house in a more rural location that maybe got a boat dock at the end of it, like Jill is saying, in droves. They’re moving in droves out of the cities and I don’t see this changing. There were some permanent effects to nine 11, there’s going to be some permanent effects to COVID, and this is one of them. People are going to work from home. It’s the new thing, companies love it.

Jill DeWit:
Thank you for not saying the new normal

Jack Butala:
Companies love sending people home. As long as they can hit their numbers, they don’t have to deal with their personalities. They don’t, trust me. They don’t want to deal with…

Jill DeWit:
Have a cafeteria…

Jack Butala:
They don’t want to deal with any of that

Jill DeWit:
Maintain the building, think of the internet savings, the desk, oh gosh. Not to mention, if you have an office right now, oh my goodness. We’re lucky that we still have an office which everybody gets spread out anyway. But a lot of places couldn’t. What if you had an office and everybody was like, real estate agents; desk, desk, desk, desk, desk. Now you got to spread everybody out. You got to need twice the space, if you’re trying to do that, I wouldn’t.

Jack Butala:
Since the beginning of the industrial age in this country, which is around the first world war, 1915 maybe a little bit before that, 1900 let’s say. People were had to live where they worked up till last March. So think about that from a real estate perspective. Look, these kids, and I’m talking about people that are, let’s say younger than 35. Most of them have kids, the millennials. It’s the largest generation since the baby boomers, and it’s also the smartest by leaps and bounds, because of the internet. They grew up with the internet. The first generation that grew up with a phone in their hand and they’re very comfortable working from wherever, and hitting their numbers. So those are the people that are making these decisions and they want to have fun.

Jill DeWit:
Well, wait a minute. So do I.

Jack Butala:
Well, I don’t think that’s the norm for people our age. I think that the little groups that we’re in, Jill socially, but man, I grew up with people that just weren’t interested in having any fun, they’re interested in suffering. And so I think that…

Jill DeWit:
That would be the difference between Michigan and California, maybe.

Jack Butala:
Just one of them, yeah. So I’m not knocking on Michigan at all today. I’m just saying there’s a new type of buyer. They have a tremendous amount of freedom, they’re disciplined enough to work at home and hit their numbers, and their employers love and twice as much because they never really have to deal with their opinion on whether the office is too hot or too cold, and it’s here to stay. I think you can’t send a bunch of people home and have them hit their numbers for a year and a half, then the COVID ends and you tell them to come back to work, they don’t live in the same state any more.

Jill DeWit:
Yeah, that’s true. You’re right, thank you. Happy you could join us today. Monday through Friday, you can find us right here on the Land Academy Show.

Jack Butala:
Tomorrow, the episode on the Land Academy Show along these lines, is called “Five real estate results of COVID”. You are not alone in your real estate ambition.

Jill DeWit:
Are we going to each write down five tomorrow and then share our own five?

Jack Butala:
Sure, if you want to do that.

Jill DeWit:
Okay, I’m kind of curious.

Jack Butala:
Mine are already written down.

Jill DeWit:
Of course, they are. Jeez. Could you imagine? Can you imagine living with going through what I go through all the time?

Jack Butala:
Hold on, here is what happens. The only way that you can pull off working with your spouse is if you separate everything. Because if we work together in the same companies all day long together, we would both be dead probably within a week. So this podcast is mine. I spend all this time and energy in pre-production and post-production, and writing stuff and all of that. And Jill sits down about two minutes before we’re scheduled to record, rights down, scribbles down some notes [crosstalk 00:17:40].

Jill DeWit:
I help with the topics. [crosstalk 00:17:39]

Jack Butala:
Oh yeah, this week you did, yeah.

Jill DeWit:
I did last week, I every week help with the topics, thank you very much.

Jack Butala:
I’m not complaining at all, I’m not. Because I love it, I like doing podcasts, I really do. She’s got a million things on her side that I don’t even know about. Like we buy property in States that I didn’t even know we were even looking at. So I’m just saying, it’s just funny to have her sit down kind of like an actor would sit down.

Jill DeWit:
Are you done? Thank you for joining us. We hope you find our content valuable and we appreciate your support. If you haven’t already, and it’s kind of fun, check out our YouTube channel. While you’re there, please hit the subscribe button,

Jack Butala:
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