Investing in Other Business vs Real Estate (LA 1509)
Investing in Other Business vs Real Estate (LA 1509)
Transcript:
Steven Butala:
Steve and Jill here.
Jill K DeWit:
Hello.
Steven Butala:
Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill K DeWit:
And I’m Jill Dewitt, broadcasting from sweet Scottsdale, Arizona.
Steven Butala:
I don’t think it’s Scottsdale, Jill.
Jill K DeWit:
Oh, I’m sorry. Well, let’s just say-
Steven Butala:
This is new for us.
Jill K DeWit:
Well, I’m near Scottsdale, Arizona, we’ll just say that. I’m sitting in front of what appears like, you know what it looks like? It looks like we’re at a resort. Coming to you from the Camelback Inn Resort and Villas. Coming to you from Ballroom A. We should do that.
Steven Butala:
Jill and I are recording this week from a property that we purchased in Paradise Valley.
Jill K DeWit:
Thank you very much.
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, please use Discord, but don’t overuse it.
Jill K DeWit:
Noted.
Steven Butala:
I’ll leave it at that.
Jill K DeWit:
Noted.
Steven Butala:
This is a long story that’s worth reading. I’d happily read it, if you’d like.
Jill K DeWit:
I like reading it. I will settle in. And you too should settle in, as I look how long this is. Tony wrote, “Hi everyone.” Wait, wait. Was this in Land Investors or was this in Discord?
Steven Butala:
Land investors.
Jill K DeWit:
Okay. “Hi everyone. I just wanted to chime in, introduce myself. My name is Tony and I’ve owned and operated an insurance agency for the past 11 years with great success. Finally I got tired of the company that I was selling for and sold my agency about six months ago. Was in the process of trying to figure out what to do next when I came across a YouTube video ad for land flipping. I thought to myself, is this for real? Well as most of you know, research leads you down some pretty deep rabbit holes, and I finally came across Land Academy with Steve and Jill. Those guys really struck a chord in me, as I found them to be probably the most sincere and entertaining educators on the subject out there.” Entertaining.
Steven Butala:
I’ll take it.
Jill K DeWit:
I’m sincere, you’re entertaining. We’re going to change our ending.
Steven Butala:
I think it’s the other way. Insincere? This is Steve and Jill. Insincere.
Jill K DeWit:
And entertaining. Insincere and boring. No, I’m just kidding. That’s so cool. Thank you, Tony. All right. Back to the comments here. “As much as I’ve researched and tried to learn, and trust me, there’s plenty more out there to learn, I was and still am a bit skeptical. One night I was talking about possibly doing land flipping at the dinner table with my family and my 15-year-old daughter got intrigued as much as I did. Afterwards, little did I know she started to watch Land Academy episodes on YouTube.” You’ve got to be kidding me.
Steven Butala:
Entertaining teenagers.
Jill K DeWit:
Wow.
Steven Butala:
It’s something that Jill and I haven’t been able to accomplish in our own family.
Jill K DeWit:
Wow. This is the only one.
Steven Butala:
Congratulations, pal. You have the unicorn.
Jill K DeWit:
Okay. “YouTube and started to learn on her own the basics of land flipping. She came to me a little over a week ago and said, ‘Dad, we could totally do this.’ She then went on to tell me why and she went into steps of one” … I’m still flipping proud of her.
Steven Butala:
Me too.
Jill K DeWit:
I want to give this little girl a hug.
Steven Butala:
We should have her on the show.
Jill K DeWit:
She’s so good. “One, researching counties. Two, pick a county. Three, get the data. Four, scrub the data. Five, send out mailers. Six, buy the land. Seven, sell the land. Eight, rinse and repeat. Now I’m sure to all the experienced land folks out there, this is way over simplified, but I was shocked at how a 15-year-old understood it and was trying to explain it to me.”
Steven Butala:
It’s not over simplified. That’s about it.
Jill K DeWit:
That was spot on. She did great. “I guess this was a higher being’s way of guiding me and letting me know that perhaps this is what I should do. So here I am starting my journey by first joining landinvestors.com. Next I will be ready to join Land Academy and start my formal education process and begin the next chapter in life being a land investor. I look forward to learning and hopefully giving back to this wonderful community. Oh, and my 15-year-old is negotiating the percentage she should get as I type.”
Steven Butala:
I hope she gets 51%.
Jill K DeWit:
You know what’s kind of cool? When I was a kid, I used to work and do little side projects for my dad, and I liked it. And I was probably 14, 15 before I got my job at a pizza place, at Straw Hat Pizza, and back then it was data entry and filing. Isn’t that funny?
Steven Butala:
So, I mean, I don’t know, this kind of leaves me speechless. It reminds me of me because I was up. As soon as I could work, I was trying to figure out how not to work.
Jill K DeWit:
How’s that going for you?
Steven Butala:
It’s great. I don’t consider this a job at all. I successfully got myself out of accounting and I could still put ramen noodles on the table. So, yeah.
Jill K DeWit:
You put way more. You put steak on the table, steak on top of ramen noodles.
Steven Butala:
On Tuesday. Let’s not get ahead of ourselves.
Jill K DeWit:
Yeah, there we go.
Steven Butala:
This question is pertinent to today’s topic, which is investing in other businesses versus real estate. This is the meat of the show.
Jill K DeWit:
So, you’re just going to segue right in.
Steven Butala:
Yeah.
Jill K DeWit:
Cool.
Steven Butala:
We can talk about, but I mean, it’s all the same thing. This guy had an insurance company for 15 years. I think he said 15. And he was done. Even though it was profitable. We have in Career Path right now, this guy’s a real logical Career Path person. We have 15 people in Career Path right now and we’re past the middle of it, and we obviously will start another Career Path in a few months. Every single one of them except one has or has had other successful businesses. So this is a really important part of comparing real estate to non real estate types of businesses. And every single one of them, without exception, in Career Path said this, by leaps and bounds, buying a piece of land and reselling it over and over and over again is a better business than I already own.
Jill K DeWit:
Yep. The numbers are higher. I mean, I’m trying to think of all the reasons that I love what we do. Number one, I sleep so well at night having land. What’s bad about that?
Steven Butala:
Right, exactly.
Jill K DeWit:
I can’t think of anything better. I can go out. I can roll around on it. I can use it. I can live on it.
Steven Butala:
Let’s do the technical piece first. So when I look at any business, and I think anyone, most people should look at it like this. I take a look at it from the accounting perspective. So there’s fixed costs and variable costs, and you always want more variable costs versus fixed costs. So here’s an example. Let’s say you’re selling a mouse trap. When you take a sale, you sold a mouse trap, and then you go manufacture it or buy it from China or whatever and then deliver it, that’s 100% variable cost for you. You already have the money, so now you’re going to go sell it. Now you’re going to deliver on the product that you promised. Take the money, deliver. You don’t have any electricity bills that you have to pay. You don’t have any employees. You don’t have any real estate that you have to pay rents on, and on and on.
Steven Butala:
That’s 100% variable business. Consulting’s like that. If somebody pays me $50 to talk to them about land, that’s all profit for me, in its simplest form. The opposite of that is let’s say a hardware store, where you have to go get a lease. You have to have a bunch of money in the bank. You’ve got to go get a lease. You’ve got to hire a bunch of people and stock the shelves with inventory and several hundred thousand dollars, if not millions of dollars later, you open your doors for business. Somebody walks through and then two weeks, you start to cry because you have so much fixed cost. It’s an all fixed cost business, and you spend your whole time trying to get that money back.
Steven Butala:
Well, Jill and I, believe me, Jill and I have had those types of businesses and they suck. Fixed cost businesses suck. Now take that hardware store example and look at a manufacturing facility. We have a buddy, he’s either smiling or crying every Friday.
Jill K DeWit:
I was waiting for you to talk about him, yeah.
Steven Butala:
Every Friday, it’s a sink or swim situation. He’s a government contractor. He makes little tiny parts for airplanes and you name it. He’ll manufacture all kinds of stuff. Some years he makes $25 million literally, some years he makes negative 2 million because he’s got to keep his staff on, and on and on.
Jill K DeWit:
It’s a big facility.
Steven Butala:
Massive.
Jill K DeWit:
It’s huge.
Steven Butala:
It’s massive. So, that’s fixed costs and variable costs. So there’s no real … When you look at land or if you look at the Land Academy model, this didn’t happen on accident. I didn’t say buy a piece of property one day and say I love doing this and I should make this my whole business.
Jill K DeWit:
And deeds, I love deeds. I love paperwork. I love deeds. I love calling the county recorder.
Steven Butala:
And this is working out so well that I want to work with my wife. That’s my goal here.
Jill K DeWit:
Hold on a moment. Some people aspire to that. Give me a second. Yeah.
Steven Butala:
When you join Land Academy or just become a land investor, you don’t have to join Land Academy, you go out, you find a piece of property for a lot of reasons that you spend, I don’t know, a week or two weeks on the computer, figuring out where your journey leads you to the piece of property that you want to buy. And you justify it in all different kinds of ways. Well, all the other properties around that area are selling for more or have sold for more. This one’s cheap. What’s wrong with it? Well, let’s find out. Oh, nothing’s wrong with it. The seller just wants to sell it. And on and on and on. You go through this thought process and you go buy the property for $30,000 because you think it’s worth 80. So what do you have in this so far from a fixed cost standpoint and a time standpoint? Two or three weeks, maybe a month and 30,000 bucks.
Steven Butala:
And Jill’s comment was dead on in the beginning. What’s the worst thing that can happen? If you made a good acquisition decision, you sell it for $30,000. What’s the worst thing that can happen to that hardware store guy, or God forbid our government contractor buddy? You can lose your butt. Millions and millions and tens of millions of dollars, you can lose upfront just to see if a business is going to work. Maybe you picked a bad location and they’re never going to walk through the door. Maybe he doesn’t get a contract. For six years, he gets out bid. There’s all kinds of stuff that can happen. So the more seasoned you are in any business, the better your chances are of succeeding. My buddy does just fine. He does great. He complains about it a lot, but that’s more of a personality problem than anything else.
Steven Butala:
If you’re new, what better business is there for you to go buy a piece of property that you’ve really justified? You believe in yourself, you’ve got the education and you’re making a decision. And by the way, if you’re in a Land Academy group, you’ve talked to 50 people in let’s say Discord about the deal. Should I be doing this deal? Hey, Steve and Jill, it’s Thursday on the webinar call. Should I be doing this deal? Absolutely, you should be doing the deal, or absolutely not is how it goes. So, I would love for someone to say what’s a better business.
Jill K DeWit:
Is it my turn?
Steven Butala:
Yeah. That was a positive Steve rant.
Jill K DeWit:
Woo. That was like, I’m just sitting like.
Steven Butala:
Okay, make it all soft.
Jill K DeWit:
No, it’s all good. No, I’m trying to think here. I just think of, you gave me the whole accounting reasons, the fixed costs, variable costs and all that, which is great, babe. But I just look at the facts. I don’t have to have a warehouse. I mean, just I’m big picture. I don’t have to store everything. Boy, we’ve tried them. It’s funny because why did we do that, by the way? We’ve known all along. This has always put food on the table, period. We have had other different things that we did and offices and staff and other kinds of businesses. And then we must be nuts and just get bored, I guess, or something. We just want something different to do, because-
Steven Butala:
That’s not it.
Jill K DeWit:
… at the end of the day, it all comes back to land. I can say for decades, this has put food on the table, period. Through all the other things and paid for all the other things while we tested some stuff, like, well, that didn’t work. That’s okay.
Steven Butala:
Jill and I bought a pizza place. It’s like a Domino’s. It’s not a restaurant at all, but it’s like a Domino’s delivery location, a real small square footage. And for all the reasons that I described, it made sense to me at the time, because the rent was really low. Two people could run the thing, two pretty close to minimum wage people could run it. And then with all this new delivery scenario, I thought I was bringing some tech to it, a tech piece to it to even deliver the pizza with Grubhub or all those places, and make that a variable cost, which in theory, on paper work’s great. And the pizza was good and the whole thing, and we got a smoking deal on the business. So we proceeded to run the whole thing into the ground in about three months, and luckily sold it to a friend of ours, who still owns it now and is doing very well.
Jill K DeWit:
Does much better at it because we don’t want to show up there. That’s the part of it.
Steven Butala:
That’s it. Our soul wasn’t in it. The whole decision that we made to do this was to diversify. We’ve got these land companies, that’s great. They’re valuable. We need something that’s completely unrelated just for diversification investment reasons. I don’t have to explain that. Diversification is better versus just concentration.
Jill K DeWit:
Let me tell you, pizza’s not it.
Steven Butala:
It was terrible.
Jill K DeWit:
Anything with food, probably not it.
Steven Butala:
For us, but the guy that we sold it to is a former vice president for US Foods and a regional vice president, and he’s killing it. He knows everybody in the area. He’s putting the pizza into bars, little kiosks and all kinds of stuff.
Jill K DeWit:
Yeah, it’s great.
Steven Butala:
He goes there every day.
Jill K DeWit:
He shows up.
Steven Butala:
He’s just a great guy. We talk to him all the time about it. And yeah, we lost our shirt on that, but it ended up being a good tax situation against all the gains that we make in land. So here we are back in front of the camera, licking our wounds and saying our experience. This time this question is perfect because I always looked at insurance as potentially one of the competitors for a great business compared to the land business, where you just acquire-
Jill K DeWit:
It probably is. Tony didn’t say it was a bad business. Tony said he got burned out. I believe that. I can see how that can happen.
Steven Butala:
If you watch Shark Tank, if you’re bored, go back and watch episodes of Shark Tank and look at all the panelists, look at the look on their faces on how much they hate being there. These little products that are presented to them, a better way to iron your jeans or whatever … People don’t iron their jeans, but whatever. Some people do probably. That’s a different problem.
Jill K DeWit:
For a guy that didn’t have … Did you have coffee?
Steven Butala:
I just had a cup of coffee.
Jill K DeWit:
Oh, that’s what’s going on. You were like on fire this morning.
Steven Butala:
I have a lot to say about businesses.
Jill K DeWit:
I guess so. This is totally fine. I’m just cracking up, like, where is this coming from?
Steven Butala:
You know what? I want to hear the-
Jill K DeWit:
That’s okay.
Steven Butala:
No, I want to hear the non-accounting version. So does everybody else, Jill.
Jill K DeWit:
No, no, no, I kind of did. It’s fine. Go. You go.
Steven Butala:
No seriously, you have something to say, go ahead.
Jill K DeWit:
I mean, it was just, I looked at this very differently, but all of your reasons are correct. And I just think too, for me, I can’t think of another business where, aside from all the stuff you mentioned, where can I get margins like this? I can’t get margins like this selling, even in mass volume. Like I have a kiosk selling popsicles in the middle of Disneyland.
Steven Butala:
This is Jill’s mind. We went from government contractor to Disneyland.
Jill K DeWit:
Popsicles. Seriously, I have Dole popsicles and I’m right outside the Tiki Room. We all know where that stand is. I’m not going to do numbers like this, and I’m going to have to stand there all day. I love that I can do as few deals as I want or as many deals as I want. I could sit here and choose to do one deal a month and it’s going to net $100,000, and that’s all I do because I don’t want to work that hard, period. You can do that.
Steven Butala:
And that’s my point too. It’s scalable, and it fits your personality type. We have a packed number of members who just want to do one or two deals a month, make 50 or 60,000 a month and not have to work, which talk about a retirement dream. We have House Academy too, where you can do that with houses, which is becoming more and more feasible as time goes on for retirement. Kind of, I just want to do a couple deals, even two deals a year, which anybody can do, two deals a year. So how can it fail? This is my final point.
Steven Butala:
So when you a look at that hardware store, there’s a pretty high percentage of likelihood that it’s going to fail unless you market the heck out of it. Same thing with government contracting. You’re all tied to stuff you can’t control, like who’s in office. Who’s in office for the next four years, and are they pro government contractors and pro defense and pro whatever? With hardware, what if there’s a recession from a housing standpoint? You’re really tied to that. And so with land investing and just real estate in general, you’re only as good as the last acquisition you’ve done. So if you suck at acquisitions and you love overpaying for property, this is not the business for you. But for the rest of us, we have control over whether or not we succeed.
Jill K DeWit:
And we’ll sell to you, happily.
Steven Butala:
Yeah, we have a lot of property for you.
Jill K DeWit:
Yeah, happily.
Steven Butala:
This asset that we’re sitting in is probably worth $4 million, and we paid a lot less than, way, way, way, way less than that.
Jill K DeWit:
Well, less than that.
Steven Butala:
Millions of dollars less. And we wouldn’t have done it if we didn’t think it was an amazing deal with all of our experience.
Jill K DeWit:
That’s a good, positive thing that you’ll take out of this. You’re going to look at every single decision differently too. Your next primary residence, you’re going to buy it differently, I promise.
Steven Butala:
Yeah, exactly.
Jill K DeWit:
Which is a good thing. Happy you could join us today. Monday through Friday, you can find us right here on the Land Academy Show.
Steven Butala:
Tomorrow, the episode on the Land Academy Show is called, is it too late to get started in real estate? You are not alone in your real estate ambition. Guess the answer on that? No, it’s not too late.
Jill K DeWit:
No. I have a lot to say about that, but I might not get to.
Steven Butala:
You know what, tomorrow’s your show.
Jill K DeWit:
Oh, no. No, it’s all good. Hey, if you need any access to any sort of ownership data 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 still and Jill.
Steven Butala:
We are Steve and Jill. Inadequate.
Jill K DeWit:
And uninformative to buy undervalued property.
___________________________________________________________________________________________________________________________
If you enjoyed the podcast, please review it in Apple Podcasts . Reviews are incredibly important for rankings on Apple Podcasts. My staff and I read each and every one.
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
The BuWit Family of Companies include:
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.
