How and How Not to Review a Land Acquisition Deal (LA 1462)
| How and How Not to Review a Land Acquisition Deal (LA 1462) |
Transcript:
Steven Butala:
Steve and Jill here.
Jill Dewitt:
Hello.
Steven Butala:
Welcome to the Land Academy Show entertaining land, investment talk. I’m Steven Jack Butala.
Jill Dewitt:
Oh, and I’m Jill…
Steven Butala:
What’s going on?
Jill Dewitt:
I don’t know. For some reason I was waiting, I was ready for what I was going to say after that I forgot about my name. I was focusing on what word do I want to use today? So I’m going to say, and I’m Jill Dewitt, broadcasting from sizzling, Scottsdale, Arizona.
Steven Butala:
It’s perfect weather right now though.
Jill Dewitt:
Mm-hmm (affirmative).
Steven 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 Dewitt:
Isn’t it funny when you live in some of these places, by the way, where the forecast doesn’t change? I’m sure it’s like that for some people in the winter, in some locations, like, “Well, and today’s another cold one.”
Steven Butala:
I moved to Arizona in 1994. And I can tell you very accurately that all the perceptions that people from Michigan have about Arizona and specifically Phoenix are completely incorrect. It’s only old people live there, it’s too hot all year round, you can’t really, it’s just so hot. None of those things are true at all.
Jill Dewitt:
That’s cool.
Steven Butala:
And there are 10 other ones, but some of them are really derogatory, so I’m not going to… I’ll stop right there.
Jill Dewitt:
Okay. Cool. All right. I’m not sure how to say this name [Sitoboh 00:01:18] wrote. Thank you both for providing insightful answers and guidance on last evening’s accountability group call. Following up now on one of the topics discussed, accounting as a land investor. Within that topic, you Steve had spoken about the importance of setting up separate bank accounts and to never co-mingling funds. Would welcoming the opportunity to continue discussion here and potentially receive further guidance on handling bank and funds and bank accounts in the land business, tracking expenses and related areas of accounting within reason since this could be an entire course that you believe are important to an entry to mid-level land investor. That’s a lot.
Steven Butala:
This is posted on Discord and what ended up I answered it. And I’m going to answer the question here, but more importantly, what ended up happening is that we have a member who lives in Salt Lake City, who’s a CPA and has his family practice in California, so he quote-unquote escaped California a lot of years ago, more than 10 years ago. Good for him. We just did too. And this became a massive topic. And now this guy, I’d plug his name if I could remember it, is taking on new clients and customers and setting up bank accounts and helping people in our group. This is my point about Discord. It just became this topic. Then it turned into, “Hey, you got to read this book.” And then we all… Did you see it?
Jill Dewitt:
No no.
Steven Butala:
Then we all piped in like, “No, you got to read this book and you got to read this book.” So my Amazon cart’s full of books, that members are saying, you need to read and you need to think about it this way.
Jill Dewitt:
That’s really cool.
Steven Butala:
Here’s what you do. Wherever your personal bank account is right now, go on there and open another account. It takes seconds. In most cases, I know for Bank of America it just take seconds.
Jill Dewitt:
Like a sub-account kind of thing?
Steven Butala:
Yeah separate account. And go fund it put some amount of money in from the other account. Whenever Jill and I start new companies, I always put $10,000 in there. I don’t know why. Sometimes it takes a lot more, sometimes it takes a lot less. And then every single expense you incur, get checks, order checks and a debit card, and it doesn’t have to be in an LLC yet. What’s important is it’s separate. And then you start incurring expenses, whatever expenses are in your land of business.
Steven Butala:
With that and it makes your accountant’s life a hundred times easier when you separate this stuff out. If you are a member, please go on Discord and look this all up because the amount of how people handle this that are very, very successful within our group. Their suggestions are amazing and they’re all in the right direction, but make sure you separate it. From an accounting standpoint, what this allows you to do is forget about it. You don’t need to be an accountant. If you want to, you can set it up with the QuickBooks because the reoccurring expenses, but you don’t have to because your accountant, whoever does your taxes just needs to see that they have access to it and they can take it from there. So it’s important to really separate it. That’s my point.
Jill Dewitt:
Could you see the zone out on my face? Could you tell?
Steven Butala:
No.
Jill Dewitt:
It was zoned out.
Steven Butala:
I’m sorry Jill. That’s why we’re good partners.
Jill Dewitt:
It’s okay. No, no, no. I know it’s kind of funny, I agree.
Steven Butala:
You do some stuff that zones me out.
Jill Dewitt:
Totally. I’m well aware of that. That was actually the question. I can see it all over your face. Could you see it on mine?
Steven Butala:
You know, accounting is always, I never went into accounting because I like it. I did it because understanding money is one of the first steps to creating wealth.
Steven Butala:
Today’s topic, how and how not to review a land acquisition deal. This is why you’re listening. Did you ever think about going into accounting even for like one minute?
Jill Dewitt:
No. Are you kidding me? Hell no. Not a thought ever, ever, ever. Nope. Not me man.
Steven Butala:
That’s some classic stuff Jill.
Jill Dewitt:
Nope. That’s so funny.
Steven Butala:
It’s interesting because I thought about going into sales, never pull a trigger on it.
Jill Dewitt:
No, here’s, what’s funny too is, how different people are, I took after my dad and I think my brother took after my mom, as far as keeping track… Boy sound like Michigan, did you hear that? Mom, what the heck? So it’s you, the Michigan on you.
Steven Butala:
We’ve been hanging out with somebody like in a…
Jill Dewitt:
I don’t know.
Steven Butala:
Your girlfriends from Pennsylvania. It’s the same thing. That’s what it is.
Jill Dewitt:
Oh maybe that’s it. Maybe it’s Lori and Nick, that’s got to be it. So that’s so funny. Anyway, my dad was not good with money. My mom had to take over and pay the bills. She was really good with money. And one of the main things was my mom would pay the bills at the beginning of the month. When you have the money, you pay everything and then you live on, what’s left over. My dad would pay the bills at the end of the month and try to scrape together enough to pay the bills. So I obviously have to change all that, but I’m not a finance person.
Steven Butala:
There’s a whole string that this question sparked with the account in Discord about exactly what you just said. And there’s a traditional accounting. You look at revenue, expenses and net income or profit. And they’re turning that on its ear now. What they’re looking at is revenue plus profit equals expenses. And so it’s an equation. And the point is this, and the explanation they used is this. When you buy a tube of toothpaste and you take the cap off for the first time and start using it, you put a lot more on your toothbrush than at the end. So at the end of the tube, and you’re trying to just get by with whatever. So that’s the same thing. The vast majority of vast, vast majority of people in their personal lives and in their companies.
Steven Butala:
If money is abundant, cash is abundant. You should never run your life by cash, right? You have to stop thinking that way. I should do a class on this. If you allow cash to your cash balance for you to make decisions, you will never get ahead. You have to look at it. You have to look at leverage as part of this. So that’s a tough topic for a different discussion, but I’ve been in accounting my entire life. And this is the string in Discord is changing how I think. And it is the greatest thing ever. I’m so proud of Discord. Thank you staff for coming up with that.
Jill Dewitt:
Cool. All right. So here’s-
Steven Butala:
I can’t live without it, Discord.
Jill Dewitt:
Okay. That’s cool. All right. Here’s the thing. How to, and how not to review a land acquisition deal. Okay. Let’s move on.
Steven Butala:
Yeah. Zip it.
Jill Dewitt:
That’s crazy.
Steven Butala:
That’s great. Jack Thanks. I’m really excited for you and your accountings.
Jill Dewitt:
I can go off and let you just talk by yourself if you want. I have nail polish around here somewhere. Okay. So here’s what you want to do. Let’s talk about how, and then we’re going to talk about the pros and then what you should be doing, what you shouldn’t be doing. Okay. First of all, what you should be doing. To review a land acquisition deal, when the call comes in, you should be trying to get yourself to 15 minutes and get your 15 minutes down to 5 minutes. Here’s what I want you to do. The call comes in. You have the checklist, you know the checklist. If you don’t know what I’m talking about, go to landinvestors.com. it’s free on the left hand side, you see Jill’s inbound seller checklist, print that baby out. That’s the stuff you need to intake when the seller calls you with the property and that’s the stuff you’re looking at.
Jill Dewitt:
So you have the State County APN, you know the owner situation, they agreed on the price, is there anything special, maybe about the taxes, is there some to attribute, whatever it is, you’ve got all this stuff right there. Now sit down and review it, pull up the prep. You’re not that comfortable doing it on the phone with a seller. I get it. That’s okay. That sheet will make sure you get all the information like, make sure you get the right phone number. What’s the best time to reach you back. What’s your email and whatever it is kind of thing. So you have them already there. Now you hang up the phone. I want you to go onto neighbor scoop or something similar and review the property. Look at it. Make sure everything checks out. Is it the right guy? Is it the right price? Do you still like that price? Is it the right size of you’re trying to go after? Is it have access? We all know the five A’s. Those kind of things.
Steven Butala:
Does it have access, that’s a huge point. Does it have access.
Jill Dewitt:
Right, So reviewing land acquisition, I’m topping 35,000 feet on this here. Not the details about it. Because we do that on other shows. So my point here is try to get yourself to 15 minutes. And then when you’re at 15 minutes, then I want you to try to get yourself to 5 minutes. This is not to review the whole thing. Your 15 minute is your phase one due diligence.
Steven Butala:
That’s right. Good job, Jill.
Jill Dewitt:
Thank you. I may know something about this or two.
Steven Butala:
Yeah. Do You want it to go to phase two? That’s what this is about.
Jill Dewitt:
Yeah that’s it. And then quickly then decide if you’re going to go to the next level. So that’s how you do it, 15 minutes becomes 5 minutes. And then at the end of the day, at the end of the week, you have a handful, that you’re now going to dig into and go, all right, these three passed those tests. Now I’m going to go through and see, do I want to buy all of them? Do I want to buy none of them? Do I want to buy one of them? Whatever it is. That’s how the right way to review a land acquisition.
Jill Dewitt:
What you don’t want to do, the way not to review a land acquisition is to get hung up on that one and spend all day on it. And maybe not even-
Steven Butala:
Wait, that one opportunity?
Jill Dewitt:
Yeah, the first phone call that came in and you go down the rabbit hole and you’re going down to find out zoning or talking to the accounting. You’re looking at building, you might be even reaching out to builders. You might even be thinking you’re so far down that rabbit hole about who’s going to buy it. You don’t even know if it’s good, you forgot to even check that does a guy even really own it, is his wife alive, just the basics. So-
Steven Butala:
I’m going to drink some coffee.
Jill Dewitt:
You are welcome.
Steven Butala:
You got this.
Jill Dewitt:
Thank you. So I want you to don’t get all into what’s possible or undoing a mess. Two, another rabbit hole I heard people get into is like, well, my wife died and you’re going down and you spend all day. Maybe finding an attorney talking about this and figuring that out and pulling up, Oh, it wasn’t JTROS, what kind of a deed was it? This kind of whatever. And you’re helping this person. And guess what? You forgot to even look at the dumb thing on a map and you realize it’s a side of a cliff and you don’t want it anyway. You can’t do that.
Steven Butala:
You sound really passionate about this.
Jill Dewitt:
I am passionate about this.
Steven Butala:
It sounds like you have some experience, personal experience doing it the other way.
Jill Dewitt:
I don’t know. Maybe I did. Maybe I did. I just talked to people and I know it’s possible. And at the end of the day, what usually this tells me is two things. One you’re not cutting yourself off, setting a time limit, cutting yourself off, knowing the few things you need to check and then move on. And the other thing is you didn’t send enough mail because I find people that only have one or two, a week to review, let’s just say. Then you didn’t send enough mail. You should be busy enough that you only have 15 minutes to do your phase one check, decide if you want to move on because you’ve got enough deals to review. What would you like to say or ask?
Steven Butala:
There’s two things that I do when a deal comes in. And honestly, I don’t to do anything when a deal comes in Jill and her staff do, but when it gets to me, there’s about a critical 30 seconds, ish, 30 to 60 seconds where I know if I’m going to do the deal or not. Number one, I go to the neighbor’s group and I find it with the State County APN. I look at it, I connect it to Google Earth, through neighbor scoop. I move myself around try to get it. If you’re lucky enough to that, you can go to street view. You take a look at the property. Now I’m getting a feel. I pretty much know at that point, whether or not I’m going to buy it.
Steven Butala:
And then number two, I check the money. So if I know Joseph buying it for 50,000 bucks in every single other property that’s in the immediate area has sold for, or is listed for more than a $100,000, it’s done, done and done. And I shove it back. We use air table in the CRM. I make my comments. I say, we absolutely should buy this. Or in some cases right now, I’m driving out there to look at it because we’re doing some different stuff with land these days. And I see if it qualifies for making some of the improvements in that we do now. So it’s very, very, very, very fast due diligence review for me. I don’t care about if they’re alive, there is a five A’s and if you’re brand new, you should really practice the five A’s, which is everyone alive to sign. Acreage the larger, the better, almost always. Affordability, the cheaper, the better. Access, critical, critical, critical issues with access and then-
Jill Dewitt:
Attribute.
Steven Butala:
Attributes. Is it cool? When you go there and stand on it or whoever’s going to buy it and stand on it, you get this happy feeling or is it just in a trashy, dumpy area? And maybe that makes some people happy. Really some people like that. So again, I was joking about it yesterday, or maybe it was today. I didn’t know we had to talk about this. I thought this is something that people are born with.
Jill Dewitt:
No, this is important. You got to learn. You have to learn.
Steven Butala:
I never. You didn’t learn. I never sat down and sit with Jill in my entire life and said, “This is how you analyze a land transaction.”
Jill Dewitt:
Here’s the deal. There’s things that are special about me, and then there’s things that are special about you.
Steven Butala:
You mean special needs?
Jill Dewitt:
You listener, you decide. One of us is more special than the other person, but that’s okay. When it comes to the accounting part, I was telling somebody this the other day, because it ties into “What we’re we just talking about? Oh, the money, the question at the beginning of the show, your accounting money thing.” Like you will send emails or text me, or message me on teams that, “Check out what just happened. Look at this company or that company and this, or it’s the land sales have you looked?” And I’m like, “Nope, that’s why I have you.”
Jill Dewitt:
Isn’t that funny? You send these emails, patting somebody on the back about efficiency and numbers and we have our marketing team and how well they’ve been doing with something, right? Oh, yeah. It’s our own numbers, our own accounting numbers. You’re like, “Do you know what’s going on?” I’m like, “Actually I don’t.” And he’ll say, “Do you know what’s going to happen this year?” And I’m like, “That’s why I have you.”
Steven Butala:
Floored at the financial performance of the group of people that work for us now, right now.
Jill Dewitt:
They get better, they get more efficient.
Steven Butala:
Just constantly and in all of them. There’s not a dead weight employee that we have in anywhere. No.
Jill Dewitt:
Not anymore. Thank goodness. Yeah.
Steven Butala:
I mean, it is truly amazing.
Jill Dewitt:
Yeah. It’s really cool.
Steven Butala:
You know, I look at it because it makes me happy.
Jill Dewitt:
I know. But it was just hiring into this. That’s one of the things that I just don’t pay attention to. I get it. But it’s tough to talk about. Stuff you have to talk about though. It’s important. Happy you could join us today. You can find us right here. Monday through Friday on the Land Academy Show.
Steven Butala:
Tomorrow the episode on the Land Academy Show is called how to Jillify a land transaction. You are not alone in your real estate ambition.
Jill Dewitt:
So who came up with that topic?
Steven Butala:
Me.
Jill Dewitt:
Are you going to ask me questions?
Steven Butala:
Yep.
Jill Dewitt:
Okay, cool. I like those ones. If you can just lead me.
Steven Butala:
I will give everyone a hint. Jill has something like some actors have. You can’t explain it. I’m going to try to explain it tomorrow, but it’s why we get a lot of deals done.
Jill Dewitt:
It’s important.
Steven Butala:
It’s a special sauce.
Jill Dewitt:
Hey, you need to send out a few thousand offers to property owners like we do? Checkout offers2owners.com. It’s offers, the number 2 owners.com, no setup fees, free mail merge, and exceptional service. We should know because it’s our company. Give offers to owners or call today.
Jill Dewitt:
We are Steve and Jill.
Steven Butala:
We are Steve and Jill. Information.
Jill Dewitt:
And inspiration.
Steven Butala:
To buy undervalued property.
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