Why Distressed Property Acquisitions Don’t Work (LA 1474)

Why Distressed Property Acquisitions Don’t Work (LA 1474)

Transcript:

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 Dewitt broadcasting from sunny Scottsdale, Arizona.

Steven Butala:
Today, Jill and I talk about why distressed property acquisitions don’t work. It’s a big pile of fiction.

Jill DeWit:
What?

Steven Butala:
And you’ve heard it. Well, we’re going to reiterate.

Jill DeWit:
Wait a minute. Do you mean that I’m not the first one to find this boarded up house and this diamond in the rough that’s just sitting there waiting for me?

Steven Butala:
Yes. You’re not the first one.

Jill DeWit:
Darn it. Oh, come on. It makes me think of those two houses on Jolla Cove that had been there for years. I wonder if they’re still there. They may or may not be there, but it was a good 20 years that they were boarded up in like some of the most prime real estate on the planet and I’m sure people went, “What,” and tried to track them down.

Steven Butala:
Jill and I are staying in a VRVO for a few months while the house that we bought is getting all cleaned up and we’re right next to a vacant piece of property that’s fallen down in a really nice area of old town Scottsdale. You can walk to all the fun stuff and it’s just dying to be renovated or torn down or whatever. If I had a nickel for every car that stopped there and they got a yellow pad out with some pen and paper-

Jill DeWit:
Write down the address.

Steven Butala:
Like it’s 1983, I watched it all day long. I watched people just stop and take down the address and write stuff down on a piece of paper. 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 with us in the Land Academy group, please join us on Discord. I can’t stress it enough.

Jill DeWit:
He loves it. Discord’s the new Clubhouse, in case you didn’t know that. And those of you on the Thursday calls know exactly what I’m talking about. All right. By the way, I have not promoted Clubhouse really once here, so I don’t [crosstalk 00:02:07]. I should. John wrote, “Question for all, but hoping to get Steven’s input when he has time. For those of you with well-established internet presences that are linked to certain geographic locations, rural vacant land San Diego, LandStay, Phoenix for example. When starting a mail campaign in a distant state, do you start up both a new phone number and a new mailing address? If yes to either, when interested sellers are looking up in the internet, how do they say there’s a Tennessee number based with a Phoenix company?” Oh, John, you know us. And that’s me. Yeah. I have a lot to say. “And does this even matter? Thank you.”

Jill DeWit:
Can I go?

Steven Butala:
Yeah. I think this is for you. And I did answer this in Discord and a bunch of other people did too.

Jill DeWit:
Okay. So here’s the deal. I’ve never had someone that said, and if they do, it’s like, “We have a Tennessee office. We’re based out of Phoenix, but we have offices around the country.” Oh, done. That’s all I ever have to say. And it depends on how much mail you’re going to send, how long you going to be in that area because once you start a new phone number, a new address, you want to keep it. So I don’t think it’s wise to have one address and one phone number in 50 states. I don’t think you need that nor do you want to pay for that for years and years because the mail and the calls will still keep coming. You want to own these numbers and put them in. So what we do though, is if I know we’re going to go on for a while and be there for a while, I’ll do it. I’ll bite the bullet. No, I’m going to keep it and I’ll make it like a regional number kind of thing. So I might send, maybe the Tennessee number gets anything on the East coast, except for upper East, which I’m not really mailing right now. So it’s a regional number. It covers a couple of states. They think you’re cool. They’re just happy to know you’re not in Hawaii or you’re not in New York or you’re not in LA or something like that.

Steven Butala:
Specifically, those two, New York and Los Angeles. I personally believe phone numbers from both of those areas will diminish your response. That’s the real question here. And you will never know. And that’s how I answered this. I said, we’ve done it both ways. We get mailed back and we buy properties both ways. So it’s not possible to test this. Could 5% of the people call us less call us back because we don’t have a local phone number? We’ll never know.

Jill DeWit:
Potentially.

Steven Butala:
But here’s the conclusion that I came to and most of the other people on Discord. You’re going to buy property either way. So just get a bunch of mail out. And I’ll tell you, the ruralvacantland.com website, which is [inaudible 00:04:49] Smiths and the Land Stay website, which is ours where we sell property, those aren’t good examples. What you really want is check out Buwit, B as in boy, U-W-I-T.com. It’s a combination of both of our last names, Butala and DeWit. And that’s the parent company, buwhit.com is the holding company for all the companies that we have and it’s also the one we put on the mailer because it’s got a big picture of Jill and I, kind of tells our story, but it doesn’t have any land postings on there. It’s just a reference site for people to essentially look up Jill and see who they’re talking to. And that we’re not a fly by night operation.

Jill DeWit:
That’s it.

Steven Butala:
I actually was the one person in here who said, “I actually think you should get another phone number. And I don’t think you should change websites around or anything.” And I also said, “We have a pretty sophisticated VOIP phone system, so it’s easy for us to just add another number and then it’s coming in. It’s on everybody’s cell phones.” You might not be tacked up at your point, John, to do this as quickly as we can, so what I said was email us.

Jill DeWit:
You can actually, John, mostly with Vumber. So we do that, but when you’re not ready to get a fancy system, don’t worry about it. You can use a service like Vumber and you can have the number, go to Pat Live, have it go to you, have it by call pointing it, point the number to wherever you want throughout the day, throughout the week throughout your schedule, maybe you’re on vacation, whatever it is. You can do this.

Steven Butala:
Today’s topic, why distressed property acquisitions don’t work. This is the meat of the show. A few days ago-

Jill DeWit:
This is funny.

Steven Butala:
Jill was listening as she does about 50 or 60% of each and every day, listening to somebody give a talk on Clubhouse and she got an up about distressed property. And I’m going to let her describe that experience, but she comes running into my office and says, “These people on this real estate channel on Clubhouse have this all wrong and I’m going to set it straight. Watch.” And so she did. They let her talk. I guess that’s how it works. And she said, “No, this is not how you do this at all.”

Jill DeWit:
I did. It was really sweet.

Steven Butala:
I got a big kick out of it to the point where we’re doing an episode on it.

Jill DeWit:
I was late to the meeting like, “I can’t stand it. Can I have five more minutes because I got to chime in and save these people?” He’s like, “Sure. Go for it.” And next thing you know too, they’re like, “Follow, follow, follow, follow, follow, all these followers.” It was really sweet. The guy’s like, “You’re right.” People think that they have a little bit of a misconception about the best way to find property. And they think the best way to find property is to find a distressed property situation. And here’s what I was listening to. This guy’s talking about and everybody’s chiming in, “Yes, you need to drive around. You need to see what looks like a distressed property. You need to skip trace or however you do it.” We use Neighbor Scoop. It’s right there. So get their phone number, call them. They don’t even know what their problem is and you need to find out what their pain points are. That was the funniest thing-

Steven Butala:
This is like the worst advice by the way I’ve ever heard.

Jill DeWit:
I’m like, “Are you kidding me?” I’m like, “How long does that take? So like, what do you talk to 10 people a week that you can maybe reach seriously? So the whole concept is I find them find out what their pain points are. Why are they not paying their taxes? Why are they letting their yard go, whatever it is and then explain to them how you can solve their problem and why selling you that house is going to solve their problem, get cash in their pocket and they can move in with mom or whatever it is.” I’m like, “I don’t know what the result would be.” Anyway, I just went, “This is so hard.” And like I said, how am I going to reach… We reach thousands in a day. I can’t be playing around with one or two here and there and trying to talk them into something.

Jill DeWit:
So I very politely said, “Hold on everyone. There’s a better way.” Because person and it was so good and when… If you’ve not been in Clubhouse, it’s a new social media platform where it’s like a podcast on steroids, so it’s like a live podcast. You can raise your hand, ask questions. Many people can be brought on the stage at the same time and talk and it’s a lot of good discussions anyway. So I raised my hand, but before I got up there, one guy said, “Yeah, I tried this direct mail thing,” and I was like, “Oh, you’re so smart.” [inaudible 00:09:20] So right when they brought me on stage, I was able to kind of chime in. I said, “First of all, whoever said direct mail, you win a prize. You’re right. That’s the best way.” And I very nicely and calmly said, “You guys are smart, but there’s a better way. Imagine just sending out mail by the thousands. Imagine, instead of driving around that neighborhood that you know, that you’ve identified looking for what we’re calling distressed property and just blasting the whole neighborhood and then waiting to see who calls you back because they want to sell.”

Jill DeWit:
They all had to kind of think about that one. And my other [inaudible 00:09:59] had this one point out too. My second argument… Once I got them to think about that, I’m like, “You can pick out exactly what you want. Three bedroom, two bath, how it’s zoned, there’s no mortgage, any little attribute that you want, you could just zero in on that,” and it was sweet because a lot of people goes, “I didn’t know I could do this.” I’m like, “Yeah, you can.” Told them where to go get the data, all that good stuff. Then, my second point was… Oh shoot, I already forgot. Oh, my second point was, “Don’t be confused by a house that’s beautiful next to a house that’s falling down because you never have any idea what’s going on in the house.” The house that’s beautiful, grandma could have just passed on. The kids could still be having the gardener come and the maid come and it looks stellar and they’re scratching their heads trying to figure out what to do with this house.

Steven Butala:
This in the end is not about the real estate. It never has been. And that’s the massive misconception about real estate investment. And this is true for the stock market. It’s about the data. Over and over and over again, I hear people say, “Well, I bought this stock because I own a Tesla and I like it. I like my car.” That’s ridiculous. You should be studying what that stock has done over time and why, and who cares what they sell. And it’s the same thing with real estate. You should be looking at data and you should be manipulating it to suit your need like Jill said. If it’s a three bedroom, two bath that you want in a certain zip code for certain amount of square feet, then that’s the mailer.

Steven Butala:
You don’t know what’s inside that house driving by and it’s just quite plainly not an efficient use of your time. And in three or four hours, you could get 10,000 offers out that are custom tailored to exactly what you want hopefully because went to the person that you’re going to sell the house to and said, “Hey, what do you want,” and they’re going to say something like this, “Boy, if I had three or four houses in 85251 that were three-twos that were more than 1300 square feet-

Jill DeWit:
With a pool.

Steven Butala:
I’d be busy for the rest of the year flipping houses and I’ll happily pay you $210 a square foot for that in any condition because I’m going to go rip it up anyway.

Jill DeWit:
Mm-hmm (affirmative).

Steven Butala:
That’s the conversation you want to have before with somebody who’s flipping houses or renovating houses in that area, maybe three people would be good. Before you send a mailer out, they’re going to buy the properties for you right when you get them. There’s a real efficient easy way to do this. I don’t say it’s easy. There’s a learning curve to it, which keeps a lot of people out of the business, which is good news. But driving around looking at houses that are falling down is a terrible idea.

Jill DeWit:
Yep. I think the hardest part… I’ll tell you, Steven. I think the hardest part with people considering this, it’s not the data, it’s not the learning curve. They can’t wrap their heads around it. It’s almost like they… I feel kind of bad.

Steven Butala:
Absolutely. That’s what I think.

Jill DeWit:
Okay. Let’s think about this. We should come up with a couple of examples. What do you think are other ways that we were like stupid brainwashed that we as a society can’t get over?

Steven Butala:
Are you kidding me? We don’t have enough time on the show.

Jill DeWit:
Oh, come on. Give me a good one.

Steven Butala:
I believe that you need a real estate agent to buy and sell a piece of real estate. No, you don’t.

Jill DeWit:
That’s true. People are brainwashed on that a little bit.

Steven Butala:
There’s tons of stuff like this. Don’t get me started. At this day and age, we just went and got through 2020, you want to talk about brainwashing an entire planet on certain topics? So I think that there’s a lot of… I think that this group that we’ve created and I don’t know how this happened exactly, but Land Academy attracts a lot of technical people that question everything. I can tell you that there’s about five to 8,000 people listening to this right now and about 10 of you, the light bulb is going to go off if you’re brand new and you’re going to say, “Oh my gosh, this is exactly how you buy and sell real estate,” but the vast majority are here probably just to look at Jill’s banks.

Jill DeWit:
Thanks. It’s funny. You can’t get emotional.

Steven Butala:
That’s right.

Jill DeWit:
That’s the thing that… and it’s funny to me as a woman. You think that like, “Oh, I want that one with the cute little whatever.” You can’t get emotional about this stuff. You really have to look at it as a line item and I’m going to leave it on this for me, the last point is of the two of us, which is comical. One of the reasons we don’t go look at properties is because one of us, not me, will always fall in love with it and not want to sell it and it’s very funny.

Steven Butala:
This is true of land, not houses.

Jill DeWit:
Not houses. But it’s cute. I think I-

Steven Butala:
I just love how you just blasted the people in Clubhouse Jill in the sweetest tone. You don’t know when Jill’s yelling at you.

Jill DeWit:
They were so nice. Oh, I think Otis James was leading and he was so cool. He was like, “Jill, I just looked at your bio,” and he was so sweet, he’s like, “Okay, everybody, please go follow Jill.” That was really cute. It was nice.

Steven Butala:
Yeah. The other thing that detours a lot of people from doing a mail merge, which is how we do this mailer is not so much to because they don’t get it, is in the simplest form when you start to think about this, you have this vision of writing and signing your name 10,000 times to send out 10,000 offers. And that’s the first good step seriously, but a good mail merge and you can look it up on YouTube really solves all of that. I mean, brand new members can do a 10,000 unit mailer in about one work day. I can do it. I’m not bragging at all, but I’ve just done a million of these, so I can kick one out pretty effectively in about two hours. So the mechanics of getting these offers out are not hard at all. What I think really stops people is the fact that it costs money.

Jill DeWit:
Well, so does driving around wasting a week.

Steven Butala:
I know, but I’ll tell you that it’s not dollar money. I haven’t talked to a lot of people that said, “Do you know that it costs $5,000 to send out a 10,000 unit mailer?” I said, “Yeah. And you’re going to buy it through probably about three properties and do you know that you’re going to make about 50 to a hundred thousand dollars on that net?”

Jill DeWit:
Yeah. 10,000 units. You can buy a lot.

Steven Butala:
Yeah. I mean you buy tons and tons of property. Can you imagine? We have members-

Jill DeWit:
What do you mean can I imagine? We know.

Steven Butala:
You know what Jill’s favorite sentence to me lately? Can you please stop sending out the mail?

Jill DeWit:
You know what? It’s not my sentence. My sentence is, can I have a heads up please? He pushes the button on insane amounts and I’m not ready for it. My team’s not ready for it. That’s okay though. We love the mail. Happy you could join us today. Five days a week can find us right here on the Land Academy show.

Steven Butala:
Tomorrow, the episode on the Land Academy show is called pick a county and price it, the two Ps. Yes. PP. It’s a thing. You are not alone in your real estate ambition. Somebody made this up.

Jill DeWit:
Who’s going to get this other than parents with little kids?

Steven Butala:
Well, the two Ps have become a viral thing on Discord among members. And here here’s my point and I’ll obviously make it tomorrow and back it up with data. You got to pick a county and you got to price it and nothing’s going to happen if you don’t do those two things right when you start after you’ve got run through the education a couple of times, or maybe you don’t need to run through the… but nothing’s going to start unless you pick a county and price it and get it out in the mail.

Jill DeWit:
If you need access to any sort of ownership or property details, including owner phone numbers and FEMA flood map overlays, check out neighborscoop.com, created by investors, that’s us, for investors like you. We are Steve and Jill.

Steven Butala:
We are Steve and Jill. Information-

Jill DeWit:
And inspiration-

Steven Butala:
To buy undervalued property.

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