Pros and Cons of Using your Own Money for Land Flipping (LA 1444)
Transcripts:
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 the pros and cons of using your own money for land flipping.
Jill DeWit:
Let’s talk about the pros and cons of going back and forth from state to state. It’s a little nutty. Truth time. Before we recorded this, we went through, I don’t know, how many hours setting this whole thing up now, because we’re half here, half there, but at least we’re set
Steven Butala:
I think we have two pretty permanent studios now.
Jill DeWit:
Yeah, now we do. It took a little while.
Steven Butala:
Today Jill and I talk about… Oh, I already said that. Before we get into it, though, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free.
Jill DeWit:
Okay. Corey wrote, “Good evening. I received a response from a potential seller. I sent an offer to him on 40 acres. He replied saying he has an additional 40 acres for sale right next to the property I sent an offer on. Both properties and landlocked, but the timber company that owns the last next to the parcels allows access. Is this something you guys would move forward with? It seems good to me, but this is only my second positive response I’ve gotten from this first mailer. Let me know. Thanks.”
Steven Butala:
Well, two 40-acre properties at the right price, Corey, would be fantastic.
Jill DeWit:
I agree.
Steven Butala:
I think that this is a perfect example of how you can make a true success story on rural vacant land, buying rural vacant land, with just jumping over one little hurdle. So, if the timber company is going to allow access, all you need to do is get it in writing, and then maybe cut them a deal. So, the more contact that you can have with people in and around the property where you’re taking a look at it, where you’re considering buying, maybe it’s with adjacent property owners in this situation, if you can take two 40-acre properties, buy them for a very small amount of money, create access, that’s what you’re actually saying here, that’s the improvement. I mean, wouldn’t you rather do that with a few phone calls and probably a $1,000 attorney bill than renovate a house or renovate an office building?
Jill DeWit:
Right. I love this.
Steven Butala:
I think it’s a great position to be in.
Jill DeWit:
I love it. You touched on something that I’m actually putting a lot of energy in right now and writing a bunch about, is about relationships. So much of our business is not just our offers and how well it’s done and the data and what you do, and getting them in the right people’s hands, but making these transactions happen because we can forge these relationships with these people.
Steven Butala:
Yep.
Jill DeWit:
If you didn’t have a good relationship with the seller, you wouldn’t know about the property nextdoor, number one, and then he’s sharing great information with you about the lumber company, and then you have the opportunity now, Corey, to reach out, like Jack said, to the lumber company, get a relationship and a dialogue with them going, and say, “Hey, let’s make this work for everybody. I just need to get to these properties. What’s it going to… I’ll do the work and I’ll pay for the attorney. How is it going to go best for you?” and I’d have a hard time saying no to that. It’s awesome.
Steven Butala:
Yeah. I wonder how… He says the timber company that owns the land next to the parcels allows access, quote-unquote, so I wonder how he knows that. Did he talk to a neighbor?
Jill DeWit:
I bet he’s been driving over their land for a long time, and they never said boo, and there’s no fence. That’s what it sounds like to me. Allows access, to me, I could be reading this wrong, but it sounds like there’s a path, we know you’ll use it, it’s totally fine, have at it, it doesn’t mess with our world, and you’re not driving it every day, so no big deal.
Steven Butala:
Who knows? I mean, they might say, “Hey, we’ll timber your property-”
Jill DeWit:
Maybe there’s something else there.
Steven Butala:
“… for X amount of money.” [crosstalk 00:03:58]
Jill DeWit:
That might work out well too.
Steven Butala:
That’s my point.
Jill DeWit:
Yeah.
Steven Butala:
The more you talk to people locally, you’re going to find out really quickly if you should do this deal, and that’s really what you’re asking here, should I do this deal?
Jill DeWit:
I love it.
Steven Butala:
So, the answer is give them a call and find out.
Jill DeWit:
Yeah.
Steven Butala:
I would probably not do the deal without getting it in writing.
Jill DeWit:
That’s true. You do need that.
Steven Butala:
Today’s topic, pros and cons of using your own money for land flipping. This is the meat of the show.
Jill DeWit:
So, I wrote down three pros and three cons, but first I was going to explain what this is. So, you said about the offers, like Corey, he just got the offer back. Corey works out an arrangement with the guy. Now say it’s an $8,000 acquisition. So, Corey’s now scratching his head, going, “Do I use my money, my $8,000, or do I put it out there to let somebody else fund the deal for me, and I use their money for this $8,000? I do all the work, but I’m using their money.” So, that’s the setup. So, what’s the good and the bad, the pros and the cons? Well, here’s the pros. I’m going to go through my list of my pros, we’ll talk about the pros, and then I’ll give you my cons, and then we’ll talk about the cons.
Jill DeWit:
So, my pros is using your own money for these deals as a land flipper, or A, number one, you control the deal, and you get to make all the decisions. That’s huge. Number two, you have no stress. You don’t have a lender or anybody breathing down your neck, “Is it sold yet? Is it sold yet?” It’s you. You decide how you want this to go, and again, they’re not bugging you. If it takes three hours or three days or three weeks to sell, it’s your money. The third thing is should you need some cash… What if you’re in a pickle or something great comes along, and you need some cash, and you’re like, “You know what? I got this thing for $8,000. I know I have it listed for 30, but I know I can dump it real quick right now for 20 because I need some cash because this other thing came along that’s even better. I can do it. I’m going to sell it fast. It’s mine. It’s my money.” Do you want to add to that, or do you want me to go on to my cons?
Steven Butala:
Please go on, because I have a lot to say.
Jill DeWit:
Okay. Of course, you do. That’s so funny. Now, the cons… So, again, the scenario is 8,000 bucks to buy this property. I don’t want to put my own $8,000 in. I’m going to use Jack and Jill’s $8,000, or take it back. I did this wrong. I wrote something wrong. So, anyway, pros and cons of using your own money-
Steven Butala:
Well, I can give you mine if you want.
Jill DeWit:
Give me your cons, because as I’m looking at my notes I realize I’m having trouble reading my notes.
Steven Butala:
I mean, mine are a little bit more [crosstalk 00:06:48]
Jill DeWit:
Oh, I got it.
Steven Butala:
Go ahead.
Jill DeWit:
Okay, sorry. I had to switch my hat again.
Steven Butala:
I’m just trying to save you.
Jill DeWit:
Okay. You do-
Steven Butala:
I should not save you, just infill.
Jill DeWit:
You’re like, “I don’t want to save you. Let her sink.”
Steven Butala:
That’s what I was trying not to [crosstalk 00:07:04]
Jill DeWit:
Oh, you’re all good. Okay. So, here’s the cons of using my own money. Okay. My cons are, well, I just tied up my cash.
Steven Butala:
Yeah.
Jill DeWit:
I tied up eight grand.
Steven Butala:
Yeah. My pros and cons are all money-based, and Jill’s are more transaction-based, which I understand.
Jill DeWit:
I used my own money. Well, now I’m slowing down my deal flow because there went $8,000, and I only have 10 to play with. Shucks. Then at some point, my cons of using my own money, I’m going to run out. If I do it all right, I’ve placed all my money, shucks, and here comes a deal back that I wasn’t expecting, like maybe this one. Maybe you had just enough money allocated to buy one more, and this guy comes along and says, “I got two,” and you’re like, “I got to buy these. Shoot, I ran out of cash because I tied it all up on these other deals. I didn’t plan for this, and now I don’t want to miss out on this great deal.”
Steven Butala:
So, clear your mind of Jill’s pros and cons for a second, and let’s get out of reality, because those are all very realistic, very real world, real day stuff, everyday stuff, and just think with me philosophically for a second, and then we’ll get back down to Jill’s reality. If all you ever did in your entire life was send out mail and do what Corey did here, bring in a deal, it’s got a little thing, maybe we can adjust it, maybe we can’t, I don’t know, and then go on to the next deal, and the next deal, and pretty soon, Corey’s got… We’re picking on Corey a lot today. Pretty soon, Corey’s got 20 properties, 20 great acquisitions, because he sent a ton of mail out, and he doesn’t have just one partner. He doesn’t have one money partner. Maybe he’s got two deals with us, a few other deals with… Jill has just created a running list of people that want to provide money [inaudible 00:08:46] 50 or 60 million dollars.
Steven Butala:
So, let’s say now Corey’s diversified his whole scenario. He doesn’t care about money. He has two or three properties with us, two or three properties with someone else. He’s got 20 properties going, doesn’t have a dollar of it into it of his own money. All he’s really good at is bringing these deals in and talking to money people like us. What’s he have to lose, seriously? What does he have to lose. He’s completely diversified, as a scenario, and realistically, he’s going to find a money partner, and maybe he doesn’t like working with us, but he loves to work with the next person in Land Academy.
Steven Butala:
So, through this process he’s going to find two or three or four people, or maybe one person that he just really gets along with that provides all the money. So, his job in life becomes a bird dog to find great property and split the profit with. Here’s the con. So, that’s the pro. Here’s the con. He has to split the profit. So, my question to you is, philosophically, as a bird dog, would you rather have 50% of 20 of these properties that you found, or 100% of two, because that’s all the money you have? I know which one I would choose.
Jill DeWit:
The first one.
Steven Butala:
Yeah.
Jill DeWit:
Yeah. I agree.
Steven Butala:
What happens is this. People do both because they… One time Jill and I tried this experiment where we said, “You know what? We’re only going to eat in restaurants. We’re not going to eat ever again at home, ever.”
Jill DeWit:
Guess whose idea that was.
Steven Butala:
In fact-
Jill DeWit:
It involved unplugging the refrigerator.
Steven Butala:
We unplugged the refrigerated.
Jill DeWit:
Again, guess whose idea that was. I’m pretty sure you know, and it wasn’t me.
Steven Butala:
So, it worked great, except Jill couldn’t do it. She couldn’t just not have any… It’s a maternal, and I say this with-
Jill DeWit:
Yeah, there’s kids in the house.
Steven Butala:
… love and stuff, maternal thing, there just need to be food around, and I understand that. So, we ended up doing both, which is probably what the world does. We still go grocery shopping, and we still go out to eat, and now we’re paying both, and that doesn’t make sense to me. I would rather just either do one or the other, it’d probably be half the price, seriously. I’m not exaggerating, or not half, but some number.
Jill DeWit:
That’s a different show, babe. That’s one that involves a counselor. Save it for Dr. Phil.
Steven Butala:
So, my point is I think it’s… Because of Land Academy, you could never… I could never have done this in the beginning, the first 20 years of my career. I would’ve gone to some money person, usually a house money person, and hard money lender, and said, “I’ve got all this land. These deals are great,” and they would’ve said, “Please get out of my office. This is a ridiculous product type. Nobody buy’s rural vacant land. You’re never going to be able to sell it. Call me when you have a couple of great house deals,” but that’s different now. Over the last seven years, Jill and I have collected an amazing group that understands land and has got an open checkbook.
Jill DeWit:
Can I add to that real quick here? That’s something that I don’t think people realize, and I’m talking about it today. By the time this airs, it’ll be last week I’m talking about it on Clubhouse, which is I got $55 million, and it’s not even… That’s just scratching the surface again.
Steven Butala:
That’s who answered the survey in our group.
Jill DeWit:
There are other people like, “Oh, I didn’t get in in time,” and there’s people that hold back like, “I don’t want to give my real numbers out.” I got at least $55 million behind of people just in our sweet Land Academy group that want to fund deals for the people, rural vacant land with no improvements that are never going to have improvements.
Steven Butala:
Yep.
Jill DeWit:
People can’t wrap their head around that.
Steven Butala:
That’s okay, but the people in our group, they get it. We have people who are hedge fund managers in our group just for this reason. They have no interest in ever sending out a mailer.
Jill DeWit:
I love it.
Steven Butala:
So, that’s why we did this show. Actually, the title of the this show was my idea. Usually, it comes from people asking questions. So, please hear me on this. There’s so much money out there for this type of investment now, way more than there was five years ago, and we have their email addresses in our group. So, mail, mail, mail. You get some great deals. Your job is to get great deals and get a certain amount of the proceeds that you negotiate with your money partner, including us. We review other people’s deals in this group every single day.
Jill DeWit:
No, it’s [crosstalk 00:13:23]
Steven Butala:
I don’t think there’s any cons.
Jill DeWit:
No. What’s great about this is we’ve now got to a level where it’s kind of like the next step. Everybody’s doing it. If you’re new, you’re maybe using some of your money, some of other people’s money.
Steven Butala:
Yes, or-
Jill DeWit:
If you have no money-
Steven Butala:
It’s the refrigerator thing.
Jill DeWit:
… you’re using other people’s money-
Steven Butala:
Don’t do the refrigerator thing.
Jill DeWit:
… and then you go along, and you’re like, “Now I’ve got some extra money. Now I’m going to try and put my money to work, and I’ve been in this business now for a year. I’ve been with Land Academy,” however you want to look at it. “Now I’m going to start funding some of these newbies’ deals. Somebody helped me, and I made them rich and got myself where I needed to be. Now I’m going to get myself richer, and I’m just-”
Steven Butala:
I love richer.
Jill DeWit:
Seriously, “And I’m going to put my money to work with some newbie that reminds me of me, and that I connect with. I’m going to fund their deals and be doing my deals, and maybe I’m doing all three.”
Steven Butala:
[crosstalk 00:14:13]
Jill DeWit:
In a perfect world, I’m probably using… For really massive, big deals, I might be partnering with somebody. We’re each putting in some money, like, “Hey, I need $300,000. Let’s split it,” done, kind of thing, and then everybody feels great about it too. Those are my favorite scenarios. I love it when you have skin in the game, and then I’m happy to match it or whatever it needs to be. I don’t care. Then the next level is you’re buying your own deals. I’m going to do my own for cash because I’ve got this going on, and then over here I’m also funding deals for some other people because I don’t do any work. It’s awesome.
Steven Butala:
Or, and Jill’s exactly right, now by doing deals with other people, now you’ve, let’s say, got a quarter of a million dollars of money from the splits and everything. You haven’t put any money in yourself, but now you’ve got a bunch of dough, and you’re still a crazy person mailing a ton of properties and working the phones, and you got a bunch of deals coming in. Invariably, there’s going to be two or three of those deals that are just amazing. Now you just use your own money. You don’t have to be loud about it. You cherry pick your own properties. No one’s going to criticize you for that. I’m not saying send the garbage over to somebody else just to see what happens, because some people do that.
Jill DeWit:
Yeah, please don’t do that.
Steven Butala:
That’s the fastest way to never have a money person call you back.
Jill DeWit:
True.
Steven Butala:
Jill and I have… There’s multiple people in a continuing, continuous scenario like that. So, in any given week, there’s maybe two or three people that throw all their crap at us just to see if it’s any good, and we never call them back ever again.
Jill DeWit:
[crosstalk 00:15:46]
Steven Butala:
Every other money person I’ve ever met, it’s just like that.
Jill DeWit:
You’re correct.
Steven Butala:
So, it needs to be a good deal.
Jill DeWit:
Yeah. Happy you could join us today. Five days a week, you can find us right here on the Land Academy Show.
Steven Butala:
Tomorrow, the episode on the Land Academy Show is called The First 10 Weeks of Our Land Academy Accountability Group. It was a huge success with our members, way bigger than what I thought. You are not alone in your real estate ambition.
Jill DeWit:
Yes. I am so happy with this group.
Steven Butala:
Me too.
Jill DeWit:
I know. We’re going to talk about it tomorrow, making huge strides, and that’s leading us to our next thing, which is Land Academy Career Path, which is going to be announced to the public here shorty.
Steven Butala:
Well, it already has been because this here is a week from now, so [crosstalk 00:16:31]
Jill DeWit:
Yeah, I know. I just let it out. That’s okay. I’m good with that. Our members right now are getting the first access, because they always get everything first, as they should. If you need access to any sort of ownership or property details, including owner phone numbers and FEMA flood overlays, check out neighborscoop.com, creating by investors, that’s us, for investors like you. We are Steve and Jill.
Steven Butala:
We are Steve and Jill. Information-
Jill DeWit:
Inspiration-
Steven Butala:
… to buy undervalued property.
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
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