How to Fund Deals and What You Should Look for if You’re the Bank (LA 1473)

How to Fund Deals and What You Should Look for if You’re the Bank (LA 1473)

Transcript:

Steven Butala:
Steve and Jill here.

Jill DeWit:
Hi.

Steven Butala:
Welcome to the Friday Land Academy show. I’m Steven Jack Butala.

Jill DeWit:
And I’m Jill Dewitt broadcasting from sunny Scottsdale, Arizona.

Steven Butala:
Today Jill and I talk about how to fund deals as the funder and what you should look for in the bank roll.

Jill DeWit:
All right.

Steven Butala:
We’re reversing the talk this week.

Jill DeWit:
How different deals, what you should look for if you’re the bank. Okay, got it.

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. And if you’re already a member, join us on Discord for sure.

Jill DeWit:
Saba wrote, and I’ve got some comments it looks like too?

Steven Butala:
These are two really nice compliments about how these two new members found us and why they made a decision to join. It’s not really a question.

Jill DeWit:
Okay, good. This is cool. Saba wrote, “It’s nice to meet you all. I was trying to look up on Google how to use Google Maps and search for properties by APN, and I ended up here. After reading a few posts, I decided to create an account because you guys seem to have pretty interesting discussions here. I’m a real estate development professional with a decade of experience in a corporate setting, I’ve sourced multiple deals and processed entitlements for many projects. I’m currently helping a few clients with financial modeling, market research, and zoning research on a consulting basis. Some of my clients are not in the area where I’m located, so I think I may be able to find some good, useful info about how doing deals in various municipalities work in this forum. Feel free to ask me any question you might have. Thanks.” How sweet is that?

Steven Butala:
You’re in the right place.

Jill DeWit:
I’m going to use you guys for information for me, and I’m happy to share what I know. That’s our community. That’s awesome. RSally wrote, I hope I’m saying your names correctly, thank you. “Hello. So I’m just starting my late in life dream of buying, investing, and owning land. I found Land Academy on Instagram and I’ve already learned so much. I was about to start my coursework and get my real estate license. I know you don’t need to have a license to buy and sell land, but for me, it’s about gaining new knowledge. The coursework is a small investment for me to understand best practices, terminology, contracts, et cetera.”

Steven Butala:
There’s one more paragraph, but I’m going to jump in here and say that Jill and I have both been through the coursework portion of getting a real estate license with no intention of taking the test, just to learn very specific State-specific real estate laws and rules. And I think it’s cheap. When I went through it, it was like four or $500 and it’s intense. There’s a huge legal component to it.

Jill DeWit:
It’s like 60 hours for the course here in Arizona.

Steven Butala:
I learned a lot. It’s really worth it.

Jill DeWit:
Mm-hmm (affirmative). Back to the question. He said, “My dream is to buy small parcels of land that have minimal deed restrictions to build and rent out or sell small custom modern cabins for city dwellers. I live in Philly, Philadelphia, and I’m fortunate to be a short drive to wooded land. Personally, all this started with my desire to have a few acres where I could have a small off-grid cabin and get away and let my dog run around freely. I guess I can have both, huh? Anyway, I’m excited to continue learning and hearing from all of you.”

Steven Butala:
All of this started because I had a desire to have a small cabin on a small piece of property, 30 years ago. And here we are. Welcome everybody.

Steven Butala:
Today’s topic, how to fund deals and what you should look for if you’re the bank. This is the meat of the show.

Steven Butala:
If you have a ton of money, this is what I’m finding in general. It’s not that there’s not exceptions, but in general, you either have a bunch of money and absolutely no interest in ever sending a mailer out, or you don’t have a lot of money, but you love the aspect of bird-dogging deals, sending op line offer campaigns like the rest of us and making some bank. And so, we all need each other.

Steven Butala:
There’s a few exceptions. Lori Phillips comes to mind because for whatever reason, she wants to do both and she’s very good at it. And Jill and I do both, we do our own deals and we play it [crosstalk 00:04:39]

Jill DeWit:
There’s a lot of members that are testing the doing both.

Steven Butala:
Yeah. Oh, are there?

Jill DeWit:
Uh huh. More than you realize.

Steven Butala:
So I’ll tell ya, if you have both sides of your brain working at the same time, I think Joe and I do, or maybe one side of mine is one side of hers is so it’s one brain.

Jill DeWit:
That’s perfect, babe.

Steven Butala:
Doing both is the perfect situation. But, if you’re the bank, you do a lot of deals, so what’s your thought process? What’s your advice to somebody who has never funded a deal, but they want to do it.

Jill DeWit:
I would set boundaries. Seriously. No, I’m not kidding! Set it up right, let the person know what you’re willing to do and not willing to do. You think I’m kidding? I’m totally not kidding, because you don’t want to go into this and have the person overuse you or under use you.

Steven Butala:
Is that what’s going on here with you and I?

Jill DeWit:
Yeah. I’m over-used.

Steven Butala:
You have to set boundaries?

Jill DeWit:
Holy cow. I am crappy at setting boundaries with you. I need to get better at it. Just kidding.

Steven Butala:
Here’s a sentence that Jill said to me yesterday. I have a girlfriend coming over later. Can you put these guns away, please?

Jill DeWit:
I did.

Steven Butala:
Did I overstep my boundaries?

Jill DeWit:
Holy geez! Who has to say that? I don’t really want to alert somebody when they walk in our home, but what’s that in the corner? Geez.

Steven Butala:
It’s a tiny little pellet gun.

Jill DeWit:
I know, but it out of the corner of your eye it’s a little scary.

Steven Butala:
Me and my teenage son, has no power at all, and we have fun in the back yard, like with little camp fire sometimes. That’s all it is. It’s not like a 20 gauge shotgun. Because I can put a 20 gauge shotgun there if you’d like.

Jill DeWit:
Again, out of the corner of your eye, you don’t need to see something there. If it’s a squirt gun, fine. But anything other than that, no.

Jill DeWit:
Okay, so-

Steven Butala:
So set some boundaries.

Jill DeWit:
Yeah. So if I’m thinking about doing this, well, number one, first of all, I would sit down and have a discussion with myself. How much money am I willing to do? What kind of deals do I want to do? Do I have a location-specific thing that I want to do? And these are all things that we put on … We did a questionnaire with all the Land Academy members. We do it every January now, where we send it out to as a mass email. You got money, you want to partner put down here, your contact information, how much money you’re willing to do per deal, how much money you have in total, so we have an idea how many we can throw at you. On a scale of one to 10, how much handholding are you willing to give, and things like that.

Jill DeWit:
So, have that conversation with yourself. Because the last thing I want to do is be tied down all day long, looking at other people’s deals and taking away from your own deals and your own stuff. I want this to be, if you’re looking at funding other people’s deals, I hope it’s just an extension of your business. It’s money that’s sitting there that you could put to work and having somebody else do it for you. That’s the point here.

Jill DeWit:
And some of it for me is just setting boundaries and letting everybody know, “Hey, here’s the deal.” I found your deal on land tank. This, this is exactly the [inaudible 00:07:50] I’ve been working with anyway. This looks fantastic. I’m willing to fund it, but I’m not going to do the work. I will give you the $50,000. What’s your plan?

Steven Butala:
And then here’s my real world advice. It’s going to fall apart on some of them. So you need to have a contingency plan, whether it’s an operations partner or you yourself are going to have to step in and say, “This manager just didn’t do what they … They made a lot of promises, didn’t follow through. I can’t get them on the phone. Fortunately, I own the property now. I’m going to have to get rid of it myself.” And so, you need to have a plan for that before you ever go down the path with a manager, unless you’ve done 50 deals with them already.

Jill DeWit:
Well, yeah, that’s another thing. Do one deal. Don’t say, “We’re going to do 10.”

Steven Butala:
Yeah.

Jill DeWit:
I would do one deal initially and have it all in writing like we do. You can download and reuse and mark up, use our contract, we don’t care. And having a writing, who’s responsible for what, how it’s going to go, exactly what the payout is going to be, so there’s just no questions. And what’s going to happen? What if you’re the hundred percent the bank and they’re the hundred percent the manager of the deal you, so you put up all the money. Your name’s on the deed, right? Have a timeline in there. If it doesn’t sell, that you can take it back. No questions asked. Like, “Look, I gave you six months. Something happened. I’m going to take it over now. And now the deal is all mine.” And that’s a fair time, really fair amount of time.

Steven Butala:
When you go to get a mortgage, the bank says, this deal looks great. If it passes your presence, passes our test. You have a rational credit score that pass our tests. And so everything looks good. We want you to put 20% down. It looks like you have that in your bank. So, we want to do the deal at X percent. We don’t do that. We don’t suggest that you do that, but what we replace all those things with is your attitude, your experience at doing real estate deals. We don’t ask for money down or skin in the game or any of that. But we do want to see if you have some experience in this very specific area with successful transactions completed. That’s our 20% down. And so for that, we’re willing to forgo, looking at all that other stuff like conventional banks or even conventional partners. But stuff goes sideways.

Jill DeWit:
Mm-hmm (affirmative).

Steven Butala:
Banks take property back. We’ve taken property back. I like to think that how we do this as very generous.

Jill DeWit:
It is. I know it is.

Steven Butala:
And as a funding partner, I would like to you to have that sentiment too. It’s a mutual thing. It’s not a one-way thing where … The skin in the game translates for me into experience an attitude. If I go online and I look at, we’re going to fund somebody and we Google them and we go on line and they’ve got a website and they’re intimate with their spouse and they have couple of dogs and they’re online. You know, there’s couples that we have that are in our advanced group. We’re doing a deal with one of them right now where their online presence is so cool, it’s just a pleasure to do stuff with them.

Steven Butala:
And so it’s not some weirdo in some strange corner of the country that’s holed up into some weird thing. All that stuff really, really matters. Your online presence really matters. And if you have a little bit of gray hair like me, that can be really problem.

Jill DeWit:
A problem?

Steven Butala:
Yeah!

Jill DeWit:
Gray hair is a problem?

Steven Butala:
No, not the gray hair. I mean age. If you’re an older, like I am, sometimes being online is just not something that you do.

Jill DeWit:
What do you do, put a stand-in in there or something? I’m confused. What do you suggest?

Steven Butala:
Make up for it in another way. Like yeah, I don’t have a Facebook account, but I did 22 transactions last year in XYZ, small town of Indiana. This is just the next one and I’m pretty sure that this guy’s going to buy it. We just need the money.

Jill DeWit:
Okay. I understand.

Steven Butala:
That’s your 20% down.

Jill DeWit:
I understand. Me, it’s confidence and knowing your stuff. I love what you said about the presence and everything, that’s important. But also just knowing this area. When someone comes to me and says, “I’ve been working in this area for a year now, and the momentum is getting out of control, and I know how this is going to go. I’ve done 32 deals like this. I am out of money and I can’t let this go.”

Steven Butala:
That’s the greatest situation for us ever.

Jill DeWit:
Mm-hmm (affirmative). I can’t wire the money fast enough. I’m totally in.

Steven Butala:
Have you ever gone to … When somebody brings a deal in to you and you’re like, “Yeah, I love this deal, but you needed to shave $10,000 off the price and I’ll fund it.” Have you ever done stuff like that? And do they come back and say, “Yeah, it’s shaved.”

Jill DeWit:
I do that all the time. It’s funny you ask that. It happens all the time. I’ve said, “Shoot! I see where you’re going with this, but,” I had one the other day, I’m like spending like $130,000 in selling for $200,000. I’m like, “Well, hold on a moment. Those deals I’m selling for 200,000, I’m buying them for 50. I’m not buying it for 130. I see where you’re going at it. Cause we’re going to split 60 grand. That does look good slash however, I’m not really loving it. So, what can you do with this?” And that really was my response. And I’m waiting to hear back. And I said, “If that doesn’t work for you, please put it in Land Tank. I totally get it and someone else may jump on it.” There you go. But it’s funny. I do that a lot.

Jill DeWit:
I usually have a lot of questions. I’m here, and you as the bank, don’t be afraid to be extra cautious with your money. Because they’re doing the deal. They not, you. If you’re doing it, like I do it there. We’re letting them really take charge. The photographs. Because you don’t have time for that. That’s the whole point here. Your money’s working for you. You’re not the one taking the photographs and picking the photographs and writing the posting and getting the drone guy, or managing a broker if you have one.

Jill DeWit:
So don’t be afraid to ask all those questions and be really picky. And the right manager gets it and they’re happy that you’re doing it. And that’s what they want too. They want that extra pair of eyes. Everybody sleeps really well.

Steven Butala:
Very early in my career, long before I was in land, my job was to generate acquisition opportunities or candidates for people who owned or operated or were financing long-term care facilities, like nursing homes or assisted living facilities. And they were emphatic about the fact that they had to do four acquisitions, let’s say, a year or whatever, because they were publicly services, all these mandates on growth. And it tragically ended in a fiery ball of disaster for everyone involved except me, because I wasn’t an owner. And so, here’s what happened. I would go out and like a crazy person find acquisition opportunities. Most of them sucked. They knew it. I knew it. And they were buying them, because they had to fulfill this criteria. I’m here to tell you don’t do anything like that.

Steven Butala:
Jill and I had a finance partner for a while who’s no longer in this group, and that was his attitude. He said, I have … he had a lot of money. Tons and tons of money. He’s like, “I’ve allocated this amount of money. I expect it to be placed and earning money, on a schedule.” And he gave it to me, he’s a super-bright guy, super-nice guy. And so, I refuse to do bad deals just to fulfill and that’s what was happening.

Steven Butala:
In the end we parted friends. I still talk to the guy. He still wants to do things with us, but I just said, I’m not not going to do acquisitions with a gun to my head.

Jill DeWit:
Exactly.

Steven Butala:
So that’s not the kind of lender you want or acquisition person you want to be.

Jill DeWit:
My last comment is, I love how this has grown, this whole deal funding thing. When we started Land Academy, we started the community. It used to be, everybody would just kind of help each other with questions. Like someone helped you get over whatever hurdle at the three month mark, six month mark, nine month mark, 12 month mark, whatever. And then you in turn, so many people like, you know what? Someone helped me. I’m going to pay it forward and help them.

Jill DeWit:
So now what’s happening is the same thing with deal funding. It’s kind of a natural progression. I see new members coming in like, “Okay, I did this. I got round of money. I got funding here. I got funding there. This person helps me. Wow, it helped me grow my business that much faster.” And that’s their next phase and their goal is like, I hope I have boy, the minute I have a hundred thousand dollars in the bank, I’m going to start doing deals for other people too, and helping pull them up. And it’s the greatest thing and everybody’s winning.

Steven Butala:
Jill and I’s goal, and I say this from our souls, we want you to do better than we have ever done. And it’s like, you want your children to do better than you you’ve ever done and it just makes us feel great. That’s why we’re here. So, work with each other, just generate whoever … Become a funder of an investor or a funder or a manager, or both. Just do it at a hundred miles an hour.

Jill DeWit:
Excellent. I love it. Happy you joined us today. Five days a week, you can find us right here on the Land Academy show.

Steven Butala:
Join us next week for another interesting episode. It’s a good week.

Jill DeWit:
You’re not alone in your real estate ambition.

Steven Butala:
Oh, is that not there?

Jill DeWit:
That’s okay.

Steven Butala:
That’s a good week. Thank you.

Jill DeWit:
You’re welcome.

Steven Butala:
Oh, it is there.

Jill DeWit:
It’s okay. The script doesn’t change dramatically over the years, so-

Steven Butala:
And who wrote the script.

Jill DeWit:
So, yeah, I was just kind of wondering, that’s okay. I got you baby.

Steven Butala:
Thank you.

Jill DeWit:
Thanks for tuning in. We hope you find our content valuable and we do appreciate your support. If you haven’t already, please zip on over to our YouTube channel, hit the subscribe button and please comment on the shows that you love. We are Steve and Jill.

Steven Butala:
Information.

Jill DeWit:
And inspiration.

Steven Butala:
To buy undervalued property.

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