Good Bad Ugly About Land Sales on Terms (LA 1427)

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Good Bad Ugly About Land Sales on Terms (LA 1427)

Good Bad Ugly About Land Sales on Terms (LA 1427)

Transcript:

Steven J. Butala:
Steve and Jill here.

Jill DeWit:
Hello.

Steven J. 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 awesome Central Arizona.

Steven J. Butala:
Today, Jill and I talk about the good, the bad and the ugly. About land sales on terms. You can sell a property for cash, buy for $50 sell it for $100 or you can sell it on terms, buy for $50, $10,000 down, $1000 a month until you pay it off.

Jill DeWit:
Right.

Steven J. Butala:
Who doesn’t want to have more money in their bank account? Who doesn’t want to talk less on the phone and listen to [inaudible 00:00:40] get to know your tenant.

Jill DeWit:
We’ll talk all about that and more.

Steven J. 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 and if you’re already a Land Academy member, please join us on Discord.

Jill DeWit:
Greg wrote, this is a long one, bear with me. “Hi everyone. Love to get your feedback on this one. I have a desert junk property in New Mexico, bought it for $1,600, six months ago and it’s not selling. I’m about to unload it at $3,200 to a fellow and I haven’t signed any papers yet.”

Steven J. Butala:
I don’t know how that’s losing or failing, but okay.

Jill DeWit:
I know. And that’s not junk to me.

Steven J. Butala:
We don’t use that word.

Jill DeWit:
Exactly. “A couple of days ago, a guy called me claiming to be an attorney and offered to buy this parcel from me for $2,000. Claimed to have tracked me down from the previous seller. I told him I wanted $3,800 and he proceeded to tell me that this property was subject to a quite a title that he and his family were working on. Something about it being sold incorrectly 50 years ago.”

Steven J. Butala:
Lies.

Jill DeWit:
Wow. That mean?

Steven J. Butala:
All lies, [inaudible 00:01:48].

Jill DeWit:
Yeah. “I thought that was strange that he offered to buy it, combined with a quiet title information. I gave him my address and told him he was welcome to send any claim or action my way, but I haven’t received anything yet. It’s only been a couple of days.”

Steven J. Butala:
This is the last you’ll ever hear of this.

Jill DeWit:
“So my question is, should I say something to this guy who now wants to buy it, should I say nothing since I’ve seen nothing in writing, or should I not sell it and sit on until I hear something from the quiet title guy? I don’t want to mess. I’m thinking to just sit on it, low value, not a finance problem for me, instead of risking a sale and an unhappy customer. Happy to hear your advice, Greg.” I know what I’d do.

Steven J. Butala:
Go.

Jill DeWit:
Ignore the call. It’s amazing that he even found you and tracked your number and everything. I don’t believe it too.

Steven J. Butala:
I’d chill for about a week.

Jill DeWit:
Okay.

Steven J. Butala:
And I wouldn’t… And then I might… I would actually research. With resources that we have at Land Academy, you can go look at the chain of title.

Jill DeWit:
Sure.

Steven J. Butala:
Here’s the thing about New Mexico-

Jill DeWit:
Do your homework and make sure.

Steven J. Butala:
Specifically New Mexico. Long before I met Jill. I was on the auction circuit in my car, in my SUV, six months a year. And I spent a lot of time in New Mexico going to auctions and buying property and selling it on the internet. And every third auction that I would go to in New Mexico, someone would stand up right before the auction and give us a big, long speech about how we’re terrible Americans and we stole all this property from Mexico. And how dare we buy any land in New Mexico. That’s what this is related to. This is some kind of meeting that either native Americans or Latinos have organized and there’s to call them land owners and something like that. I’m not making a judgment about this. Either way, I’m just informing about anyone who’s listening to this.

Jill DeWit:
Your experience based on what happened.

Steven J. Butala:
That this is a real thing and I have never… There’s nothing that’s ever come with … How many properties have we owned in New Mexico?

Jill DeWit:
Oh my gosh, thousands.

Steven J. Butala:
Right. Nothing’s ever happened like this. And why would you pick on a $2,000 property and why is this guy offering money? If he’s going to do a quiet title action, then do one.

Jill DeWit:
Yeah.

Steven J. Butala:
Then file the papers for a $3,800… $2,000 property, really? You’re going to go through all this legal stuff? No.

Jill DeWit:
Yeah.

Steven J. Butala:
If it was a $20 million ranch or something like that, and I got a call like that, I would get a lawyer.

Jill DeWit:
Well, you’d be going through escrow and doing all the right stuff.

Steven J. Butala:
Yeah. Chain of title is going to tell you what’s going on.

Jill DeWit:
Weird.

Steven J. Butala:
You could pull all this up and end it. I would.

Jill DeWit:
Exactly. It doesn’t come up very often, like you just said, but sometimes these things are, and… Glad you have your guard up and you’re paying attention.

Steven J. Butala:
It’s a good unique question.

Jill DeWit:
Good job, Greg.

Steven J. Butala:
Today’s topic, The Good, The Bad, The Ugly about land sales on terms. This is why you’re listening Jill, go.

Jill DeWit:
In the last couple of weeks on the Land Academy Ladies Group call. Everything you want to know about terms. We have all levels of people on my group. So we had two girls, Anne Marie and Jen, and they put together great presentation based on their experience on term sales. So everybody can know exactly that’s the good, the bad, and the ugly. One has 92 properties on her books. One, I can’t remember how long, but they’ve been doing these for several years. One, for sure came from another land group, Atlanta Education Group who focuses more on terms. Even when you talk about it, the $10,000 a month club, cashflow from land $10,000 a month for life is based on terms. That’s true. Because we have done and no longer do terms deals anymore.
So, we talked all about this and it was funny because the presentation unfolded with basically in information dump, if you will. You need to be aware of this, you need to know this, this is what a land contract is, you have to do it this way, you have to that way, you can file it here, you can file it there, some you don’t have to file, this is why you would do it without a foreclosure. And then it comes to… That’s all the paperwork involved, right? So there’s a lot. I’ve got see people write too. And I’m watching and letting this play out and I’m watching people’s eyes gloss over because it’s like-

Steven J. Butala:
Like mine right now?

Jill DeWit:
A lot. And then they’re going into payment things. Here’s how you can take payment. Here’s you don’t take payment in the night. And each time I’m interjecting truth time, like, “Hey, everybody needs to know that’s not… they don’t bite.” There’s a lot of payments out there at places that don’t legally allow you to take land payments, but people do. And I have to warn everybody, be real careful because if they catch up with you, they can keep your money, they can hold your money. That you’re doing stuff against what they technically allow. Here’s the ways to work around that, whatever. So we’re like, okay. And then we’re going onto what is really going on as far as … So here’s what goes on as far as customer service and with these customers. And what it’s like to take payments from $99 a month customer versus a $250 a month customer kind of thing that they’re making those payments.
I don’t think anybody’s taking anything like you talked about with the $1000 a month. That’s just not there. And what they share too is a couple of them. I think both of them had to hire and take on extra staff to manage the book keeping, the accounting, the chasing, the customer contact, the phone calls, like “My payment’s going to be late. I need this, I need that.” And kinds of things. So we went all through the end and at the very end, what happened was two things. One of them said, here’s what I would tell you. If I had to do it all over again and if you’re brand new right now, I wouldn’t do this.

Steven J. Butala:
Just like marriage.

Jill DeWit:
I wouldn’t start with terms the sales, number one. And number two said, I’m getting out of it right now. I’m actually starting to go back. One of them was selling… One of them was reaching out to the actual seller saying, hey, I’ll give you a 10% discount if you want to make it whole and just pay for it out right now.

Steven J. Butala:
This is free, priceless advice, Jill.

Jill DeWit:
And the other one said, “Really, you’re only doing 10%? I’m doing 25%.” So I’m offering them a 25% discount on the property if they want to just make it whole and give me the cash. Because here’s the reality. Here’s the numbers. So you’re buying these properties for a couple thousand dollars and you’re selling them. This is kind of what their MOS and they’re buying for three to $5,000 and they’re selling them at $20,000. You can do that on these terms sings. It’s a couple of hundred dollars down.

Steven J. Butala:
These are real numbers.

Jill DeWit:
A couple hundred dollars a month for a long time. I came up with what they said, we don’t really want to go over five years. That’s getting out there. Not like… it’s not like a mortgage for 30 years. We don’t want to do that. And these people make these payments. And so you can see how you can get. So you got 92 of these. We could all do the math and they’re paying $100 to $200 a month. That’s pretty good monthly income. Even if half of them don’t pay, we can all live on that. But you have to bring on the extra salary and the headache and the processing and all of that and the paperwork to do that versus just cash. I can do the same thing, buy for $5,000. I sell it for 12 and I’m out in 30 days.

Steven J. Butala:
Great numbers.

Jill DeWit:
I don’t have to wait all that time. And so it’s just… I didn’t know until the end that their presentation… I was very happy and proud that they said, hey, it is a lot. This is the whole point of this presentation. If you want to do this, you need to know all the ins and outs and details. And I wouldn’t start there. Do you have any… what do you want to fire away?

Steven J. Butala:
I have done tons of terms deals. Probably thousands of terms deals. Most of them before Jill.

Jill DeWit:
That’s true. I inherited some.

Steven J. Butala:
Right. And they’re real fast. You can sell them real fast. Everybody loves them for the first month. You can sell it the first day on Craigslist if the property… It’s only really good for property that… They’re going to go see it. If they buy at terms property, they’re going to go see it unlike cash, sometimes they never go see it. My experience in all the terms deals I ever did. One of them, one single property got conveyed. They all rescind. They’ll pay for six months and then you never hear from them again. Is that such a bad business model? I always felt kind of unethical about it. In some cases in the beginning I tried… I paid the money back because we were doing… There was one specific subdivision where I bought a ton of property and sold it on terms. And I knew I was new, the subdivision I was there. So there was a little bit of a different story, but in the end, everything that Jill just said is right. It’s very difficult to manage people. And that’s the end of the sentence.

Jill DeWit:
Yeah it is.

Steven J. Butala:
You don’t have to manage people at all with the way that we do it here. And the way that our members do it.

Jill DeWit:
Especially if you do it in big numbers. You could be in this business very successfully, not having a staff, buying everything through escrow and selling everything through an agent.

Steven J. Butala:
It’s almost like you buy.

Jill DeWit:
That’s your staff.

Steven J. Butala:
Yeah, exactly. You buy apartment building and then… What’s the first thing you do when it’s an institutional, classy apartment building that the owner.

Jill DeWit:
Property manager.

Steven J. Butala:
Yeah, let’s enjoy it. You have a property manager. The owner usually never even sees the property. They just send their property manager out there to make sure the cap rate works and that they’re going to be able to sell it for… in addition… They’re going to get to raise the rent. That’s all the owner cares about. I’m going to raise the rent in any year and I’m going to resell it for the same cap rate. So as long as you buy it right, you don’t ever talk to the tenants. You can’t do that on term sales here as well you can. It’s what Jill just said, you have to hire some people. And they’re going to get burned out. People get yelled at. It’s not for me.

Jill DeWit:
It’s just not an easy road. And so my thing is, I understand people. It’s like, do you want to go this with your bank balance? Every month you get a little ahead, little head, little head, little head for all that work versus… Or you could hockey stick it, which I prefer to see.

Steven J. Butala:
Here’s true time. Here’s why I never considered doing term sales. Here’s why I did, because I was in that… I taught Mark Podolsky how to do this. And he loved term sales. He’s a total sales guy. He’s not… As math and all the data part of this is not his thing, but he sells. And so he could deal with these people that… He could deal… He would love to just sell the property the first week. And he loved it. He loved back then 40 acre properties in Nevada. There’s just nothing there. And so we went in, created a spot… Thousands of acres, created a subdivision, bladed the roads in literally, and then started selling on terms and did very well, extremely well. So I’m looking at that going… what am I doing over here? And it turns out this is a better way.

Jill DeWit:
Yeah. Now we have how many years to compare. So it’s just a lot of work. Happy you could join us today. Hold on a second. You went down a little too far.

Steven J. Butala:
I’m sorry.

Jill DeWit:
That’s okay. Five days a week. You can find us right here on The Land Academy Show.

Steven J. Butala:
Tomorrow. The episode on The Land Academy Show is called The Red, Green, Yellow Test for picking a County explained. You are not alone in your real estate ambition.

Jill DeWit:
So tomorrow I get to zone out a little bit.

Steven J. Butala:
Yeah.

Jill DeWit:
And take a little bit of a break.

Steven J. Butala:
Yeah.

Jill DeWit:
Okay. I look forward to that. Hey, do you need to send out a few thousand offers to property owners like we do? Check out Offers 2 Owners. It’s offers the number 2 and owners.com. No setup fees, free mail merge, and exceptional service. We should know because it’s our company. Give offers to owners a call today.

Steven J. Butala:
[crosstalk 00:14:09]. Information.

Jill DeWit:
And Inspiration.

Steven J. Butala:
To buy undervalued property.

—————————————-

If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.

The BuWit Family of Companies include:

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I would like to think it’s entertaining and informative and in the end profitable.

And finally, don’t forget to subscribe to the show on Apple Podcasts.

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Concierge Data+ (with data) Included mailers each month (data + concierge + mailer + postage). Our team will do your data for it and get it out the door.
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PatLive introduction at no cost We will help you establish your first script and get PatLive set up on your behalf to answer your phones.
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Transaction Coordinator Use of our personal Transaction Coordinator team to manage your deals. Trained and ready to go!
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AirTable Ready-for-you CRM managed by your personal Land Academy Pro Transaction Coordinator
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Personal Consulting 1 on 1 personal consulting with our Transaction Coordinator each week.
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$100 value
Personal Consulting 1 on 1 personal consulting with our Transaction Coordinator each week.
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Regular Office Hours Regular office hours with Jack and Jill + our staff. Private for LA Pro Members Only. (Think Career Path Office Hours)
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ParcelFact ParcelFact is included in your LA Pro membership with unlimited pulls.
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