Deal Funding with People who are Unfamiliar with Land Investing (LA 1420)
Deal Funding with People who are Unfamiliar with Land Investing (LA 1420)
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 DeWit, broadcasting from sunny, southern Arizona. I have to change that every time. You watching can tell my background is different. You probably have an idea that I’m not in Southern California. We’re not in Southern California, but.
Steven Butala:
We’re going through a back and forth. We’re making some changes.
Jill DeWit:
We got some projects we’re working on and it involves us spending a little more time here. It’s all good stuff.
Steven Butala:
Exactly.
Jill DeWit:
What were you saying at the beginning? When we just were starting?
Steven Butala:
Our numbers were, on this talk show, we get all kinds of analytics back. We always have for five, whatever, six years that we’ve been doing this show. And our numbers have been incredibly well. They’re doing very, very well. This last two months, I guess.
Jill DeWit:
Where did we record last time?
Steven Butala:
Because I think Jill and I are just having little bit more fun. I really do.
Jill DeWit:
Were we sitting here? I can’t even remember.
Steven Butala:
Yeah.
Jill DeWit:
Okay, got it. I’m like, we’ve been traveling around, not traveling around, but you know, making changes in different, doing different things and trying to do stuff. So I’m like, I don’t even know where I am. It’s Friday, right?
Steven Butala:
It’s actually Tuesday.
Jill DeWit:
I know. It’s Monday.
Steven Butala:
Yeah. No, it’s Tuesday when this airs.
Jill DeWit:
That’s true.
Steven Butala:
That’s what I meant.
Today, Jill and I talk about deal funding with people who are unfamiliar with land investing.
Jill DeWit:
But before we get into it first, let’s take a question posted by one of our members on the land investors online community. It is free.
Jen wrote, got my first response today from my mailer. Yay. Lady inherited three parcels from her-
Steven Butala:
Mother-in-law.
Jill DeWit:
Mother-in-law, thank you.
Steven Butala:
M-I-L.
Jill DeWit:
I’m like, I see it. I’m like military. I’m like what the heck? Mother-in-law, okay, forty-five years ago. And recently quit paying taxes on them. She owes about thousand dollars so far in back taxes. There’s access to only the first parcel, all three equal, and about two acres. So I’m thinking I’d have to sell them all together. Could probably get around $2,000 as I’m thinking she just wants out. Probably buy them around $2,000. Called the county to confirm utilities and access and found out the ground is rock hard, and to get utilities to it, they have to use explosives. They were very nice and actually going to call me back tomorrow with an estimate. Oh my gosh, I can’t imagine. Thinking this one’s dead, but good first learning experience.
Steven Butala:
I think, and Jen, we all know who you are. You’re very new and very vocal in our group, and I appreciate that.
Jill DeWit:
You are.
Steven Butala:
But it seems to me, you’re trying to find a way to kill this deal. I’m not sure why. How about we just look at the core economics of it. You can get it for 2000, 3000 with back taxes. I don’t know what the value is. It’s all economics for me. The hard rock thing, the hard rocks been that way for as long as that property has been there. And people, hopefully, have found a way around that or there’s solar panels now and stuff. So I don’t know enough about this deal to tell you, yeah, you should do it, or no, you shouldn’t. But I do know you just found five reasons not to do the deal instead of maybe the one reason that you could do the deal that, and hopefully it’s some version of, I’m going to be into it for three or 4,000 bucks, by the time it’s done and it’s worth 20.
Jill DeWit:
This made me think of what you took a picture of just yesterday. We were driving around and I said, “Look up on the side of this mountain.” And you took a picture and you zoomed in because they were building, it’s a residential area. It’s looks like, I’m sure it’s an acre in this area. They’re all acre lots. And you even said, “I bet they had to use explosives to get where they are right there with that equipment.” And so people do stuff. People will do crazy things if the value’s there, or they love it.
Steven Butala:
So I chose this question for a reason exactly Jill, and I want to drive this point home. Especially with the new people and bright people like Jen, you have to unlearn a lot of all the stuff you’ve learned about real estate, largely because of HGTV and weirdo real estate agents. And depending on your age, like the real estate deals that Jill and I watched our parents do, that type of stuff, and this is a positive thing, it doesn’t go that way anymore. You know, it’s way better now. There’s a lot more information. You don’t have to rely on salespeople for anything. You can find out and dig, find out. So don’t try to kill these deals. Just look at them and say, “If I bought it for three and sold it for 10, I don’t really have to talk about explosives or rocks ever again, I don’t think there’s anything wrong with that.”
Jill DeWit:
I concur.
Steven Butala:
You don’t have to improve the property and get to know everything about it in the land business. All you got to do is make sure the economics work and then market the hell out of it when you buy it.
Jill DeWit:
Yeah. Your job is to convey what you know, and do a lot of deals.
Steven Butala:
Yep.
Jill DeWit:
And you’re right. I don’t get into it that far. Like I just told the guy the other day, we’re in escrow right now. It’s awesome. Bought it for 11, selling it for 50, and it’s cannabis friendly. And that’s all I know. Did I apply for the permits? No. Do I have the permits? No. Do I know that much more about it? No. All I know is, for my purposes, for resale value, it’s in the part of the county and the zone that this is allowed. Now it’s up to my buyer to take it to the next level, if that’s what he wants to do.
Steven Butala:
Jill and I were watching Shark Tank last night and Mark Cuban said this, “I own a basketball team, but I’m smart enough not to play on it. Not to be a player in my own basketball team.”
Jill DeWit:
That’s true.
Steven Butala:
That’s kind of what this is. Your job is to know the data, understand the markets enough so that you can buy some property, ask a few questions, and then market it to sell it. And Jill’s exactly right about what she found out about that cannabis property, and she stopped it right there. That’s all she needs to know. It’s cannabis friendly property with a well on it. I think that property has a well on it. And then whoever’s in the cannabis business, or the development business, or whatever they do to improve the property to get their margin where they want it, knock yourself out. That’s just not the business for it.
Jill DeWit:
Exactly.
Steven Butala:
Today’s topic, deal funding with people who are unfamiliar with land investing. This is why you’re listening. The sentence I just said is my point to the show.
So there are people that are very successful real estate investors and there’s, boy, there’s about as many types of real estate investors as there are bread. You can be a commercial developer. You can be a land person, like we are. What we run into most often are house investors. People who are either hard money lenders, or some version of a house investor, and they’ve had some success. So to apply the regular stuff to make houses as profitable as land, is night and day. And you look at the two products and they seem the same, but they’re not. Jill and I have a whole company called House Academy.
And we talked all about the differences in how different it is and everything. I have horror stories of people coming to me that are wealthy saying, “I want to do this with you because you guys are obviously successful, and you understand it. Tell me how it works and what to do.” And that’s where I stop. If I have to tell an investor how it works and what to do, they need to come to me and say, “I’ve done 22 land deals. I made half a million bucks. I’m allocating three or $400,000 to it. Please let me know when you have a hundred percent margin deal. I’ve got this much money available and I trust you.”
Jill DeWit:
Exactly. This is funny because we had a long chat about this on my Land Academy, ladies group. This is kind of where the topic came from. Because we were talking all about deal funding, and we were sharing stories, like you said, about the time I thought, and I said, “Tell me, you guys are catching up to me. I’ve been there, done that.” I can’t tell you how many times, these are the scenarios that always happen. Number one is we’re out somewhere, we meet some people, they find out what we’re doing, and they’re like, wow. And it’s usually a good friend. And they’re like, “I saved up $10,000. Can I give it to you, and you turn it into 20 for me?” I’m like, “Well, number one, why would I do that? I don’t need $10,000. That’s funny, and I don’t want to go through all the hassle of that.”
Steven Butala:
Do you want to take this delivery or can she just leave it there?
Jill DeWit:
No, they can leave it. We’ll see. This is funny. It’s hilarious. Sometimes too, it’s family. It cracks me up where the family members want to invest and throw money at you, same thing. None of us do it anymore. This is the whole point.
Steven Butala:
I’m going to pause this.
Jill DeWit:
As I was saying, it’s just funny because people think they know, they get what we do and they don’t. People just want to give us money for us to double their money, and I usually don’t need it. And you do a couple of deals like that. I know many people that have done it, we have not. We knew going into it that there’s plenty of Land Academy members that I was talking about with my ladies group, and they have done this and said, “Never again.” Because here’s what happens. You’re dealing with someone that doesn’t know what you do. And they’re so flipping excited. They want to get to know the process. They want to understand it. And sometimes they don’t know you. If it’s a family member, at least they know you and they trust you, but then they’re going to be blowing up your phone all the time going, can I see it? Is it posted? Can I drive out there?
Steven Butala:
We own land?
Jill DeWit:
What can I do? Can I help?
Steven Butala:
I’ve never owned land.
Jill DeWit:
Can I listen? Can I be involved in some way? Heck no. All you’re going to do is slow me down. So that’s the family member. And then the non-family member who doesn’t even know you until you establish a relationship with them, because they’re not in the business, remember? They’re going to be times 10 because they’re not understanding the numbers. How are you getting this again? How are you buying it so cheap? What’s wrong with it?
Steven Butala:
That’s a lot of questions.
Jill DeWit:
That’s a lot of what you’re going to be doing, explaining. You’re going to have a couple of hours of that the first week and you might go, you know what? Forget it.
Steven Butala:
Here’s your money back.
Jill DeWit:
Exactly. Here’s your check, I didn’t cash it. I wish you all the best. So the best possible scenario is what we do. And this is kind of leading up to Land Tank. And we’re taking that to another level here too. There are all within Land Academy, our investors and money people. And sometimes they’re the same person, sometimes they’re different people. But they all know what we do, and they’re all on the same page. They don’t have to be explained about the deal.
Steven Butala:
Yeah.
Jill DeWit:
They sometimes don’t even have to look at the deal. They can just glance it and go, “Oh yeah, I know how that goes. I’ve done deals over that way before. Done, here’s $250,000. I know what you’re going to turn it into, let me know when it’s time for me to wire it over. Let me know when it’s time, when you’re going to close.” Whatever it is.
Steven Butala:
Yeah. And then my final point is that people who are financially investor savvy are always looking for a return. They have a chunk of money. They want to put it in play, so to speak, and get a return on it. So we do transactions for a living. So all of our returns are transaction-based, and more and more and more, the more that Jill and I get into this, decade after decade, it becomes a dollar return, not a percentage return.
I put in $200,000. I bought it for 200, I sold it for 350. I made $150,000. Hey investor, here’s your portion. Hey Jill, here’s your portion. And I’m going to keep my portion. And once the elation settles, of making money like that, then you’re only as good as the next deal that you find. So for many, many investors, they’re used to getting a 12% return on their money annually, or 3% if their mortgage people, or whatever. So the money’s in play permanently and they get a return, like a house rental. That’s a perfect example of a consistent return, or stock market. Put some money in, buy Microsoft, it pays out a dividend and you’re happy. That’s not what this is. This is transactional investing. And it could take six months for Jill and I to find a deal to place that person’s money into it again. That freaks some people out. So last thing you want to do is explain all this to an investor.
Jill DeWit:
Yeah. That’s true. What do you mean we can’t do it again? Hold on. I don’t have anything that big yet. Let me get back to you. Or makes sense.
Steven Butala:
Or God forbid, I got this other guy over here and we did this deal together and well, what do you mean? Why didn’t you call me?
Jill DeWit:
That happens sometimes.
Steven Butala:
There’s these variations of silliness that can really go on. But the land people get it. You know why they get it? Because we are the land investors.
Jill DeWit:
Right.
Steven Butala:
We do as much investing with other members as we do buying our own property.
Jill DeWit:
It’s true.
Steven Butala:
And believe me, we leave everybody alone. We get it.
Jill DeWit:
Yep, exactly. Happy you could join us today. Monday through Friday, you can find us right here on The Land Academy Show.
Steven Butala:
Tomorrow the episode on The Land Academy Show is called, Cloudy Title Drama. You are not alone in your real estate ambition.
Jill DeWit:
That’s going to be fun. That’s a hot topic. That came directly from our customer service staff. Like, can you guys please address cloudy title? I’m getting all these questions. A, I’m not the right place. And B, I don’t know what to tell them. And then C, it’s often more than it needs to be. Let’s all chill out. We’ll explain it all in great detail tomorrow.
Steven Butala:
I’ll explain what the chain of title is, and Jill will explain the drama part.
Jill DeWit:
Exactly. And when it’s appropriate or not appropriate, which is usually never. But there are some things you can get concerned about and we’ll help you. Hey, if you’re interested in learning more about us, or what we do, please check out landacademy.com or houseacademy.com. We provide the education tools and support you need to be flipping property like the pros.
Steven Butala:
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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