How We Test for Reason 3 Times During the Acquisition Process (LA 1554)
How We Test for Reason 3 Times During the Acquisition Process (LA 1554)
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 awesome Phoenix, Arizona. I’ll get my new little spiel down.
Steven Butala:
If I were you, I would’ve fast-forwarded through that too. Today, Jill and I talk about-
Jill DeWit:
What?
Steven Butala:
… how we test for reason three times during the acquisition process.
Jill DeWit:
How much do you fast-forward in life?
Steven Butala:
I fast-forward everything.
Jill DeWit:
I know.
Steven Butala:
I mean, it’s just the way the world is. Like the greatest thing in the world is that 10-second button on Netflix and Amazon.
Jill DeWit:
I don’t use that unless I miss some dialogue because somebody else is talking.
Steven Butala:
Or like [crosstalk 00:00:37]-
Jill DeWit:
I go backwards.
Steven Butala:
Really? You wait [crosstalk 00:00:41] for all the stuff in the beginning, like which production company did what and who did the-
Jill DeWit:
No, I don’t do that but-
Steven Butala:
So that’s what that 10-second button’s for.
Jill DeWit:
Okay. I thought you meant just my comments.
Steven Butala:
That’s why half the people that are listening or watching this, they already know what the intro is. They’re [crosstalk 00:00:53] going to fast forward to it.
Jill DeWit:
They didn’t hear any of this anyway.
Steven Butala:
This is where they probably started.
Jill DeWit:
Yep.
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 land academy member, please join us on Discord.
Jill DeWit:
Hello. Eve wrote, “Hello all, I’m working on my first mailer and came across the data that I did not have a situs address or zip code. Do you all have any advice on how I can price these properties, since I did zip code pricing?” Thank you in advance.”
Steven Butala:
Go ahead, Jill.
Jill DeWit:
Why? This is kind of your area.
Steven Butala:
The vast majority of real estate in the country doesn’t have a post office address, therefore, does not have a ready-made zip code. You only get an address for a property, or the person who built your house got an address for the property by contacting the post office.
Jill DeWit:
And saying we want to get mail there.
Steven Butala:
Yeah. We want to get mail.
Jill DeWit:
Yeah.
Steven Butala:
It’s not that hard to work backwards. If you have a small data set, you can just go on a map and look. It’s not hard, or if mailing one small little area, that’s pretty easy. But that’s not how we roll here. We we send 10, 20, 30,000 mailers out at a time and all different zip codes. So DataTree was nice enough to populate the GPS coordinates columns really effectively. So it’s not hard. In fact, it’s incredibly simple to copy and paste the GPS coordinates out of the mailer that you’re building, whether it’s a 100 unit mailer or a 100,000 unit mailer. Drop them into an application that we use called geocod.io into a spreadsheet, pay them a couple of bucks and then dump it back out, back into your spreadsheet, into your mailer that you’re building, and now you have a situs address. It’s as simple as that, and then you can move through the zip code pricing like we teach in the education.
Jill DeWit:
Exactly.
Steven Butala:
Today’s topic, how do we test for reason three, no less than three, sometimes more, during the acquisition process. This is the meat of the show.
Steven Butala:
What is test for reason? Test for reason is an old, I think it’s an accounting concept, it might be, I mean, it’s just pure logic to me. But I’m not sure where I first heard about it, but it’s just applying logic. You go through all this brainy stuff in the world, especially at Land Academy, and you come up for air and you just want to see if it tests the reason of reality.
Jill DeWit:
Like Eve’s pricing example here. After you do all this, did my zip code pricing work? I test for reason.
Steven Butala:
If in your forties and you’re married and you have kids, you’ve just one day you wake up and you look around and say, “How the hell did this happen to me?”
Jill DeWit:
You didn’t test for reason.
Steven Butala:
That’s exactly right, Jill. You didn’t touch the reason three times.
Jill DeWit:
Let’s have one kid and see if it makes sense. And then test for reason, decide do I want to do this two more times?
Steven Butala:
Or how about we live together for five years-
Jill DeWit:
There’s a test for reason.
Steven Butala:
See if we liked each other at all?
Jill DeWit:
Okay. We won’t go there. So, I understand.
Steven Butala:
So when you’re building your mailer, you go through all the process, the steps and the education, and you get to a point where you’re pricing zip codes, just like this person’s asking, Eve is asking. And so you take the first zip code. You find for the retail price per acre, and then you say, “Let’s say, I want to send out offers at 25% of the retail price per acre.” It populates the data and now you’ve got a zip code full of properties in that universe of land, in that zip code. You pull out a half a dozen of them and you drop them into Zillow, just like you would if the offer was signed and sent back. You take a look at it and you say, “You know what? If the offer came back signed at this, I would buy it.”
Jill DeWit:
I explain it a different way. Let me know when you’re done.
Steven Butala:
Yeah.
Jill DeWit:
Do want me to go?
Steven Butala:
Yeah!
Jill DeWit:
Okay.
Steven Butala:
Absolutely.
Jill DeWit:
So here’s how I explain this. Test for reason is, do these numbers work? And when we say we do it three times, we really do. And I want you to think about this too. This came up in a Career Path session in the last couple of weeks, and people were going, “You do this that many times?” I’m like, “Yeah, we really do. I want to make sure we’re on the same page. It’s a real good temperature check all along to make sure that what we’re thinking is going to work and our pricing makes sense.”
Jill DeWit:
So Jack perfectly explained test for reason is taking the numbers on your spreadsheet of the offers you’re about to send out, making sure that if the offer came back signed, when you look it up, you still like that price, you would still buy it at that price, the numbers still make sense to you, the area still make sense to you, just all of those factors. So three times meaning, and what should you do? So when you’re sitting and picking the county, I have three different times, picking a county, pricing the mailer, and the offer comes back. So I’m kind of calling test for reason also due diligence. It’s just basically, again, a pricing temperature check is the whole big picture.
Jill DeWit:
Here picking a county. You’re sitting here thinking about it. You’re looking around at different areas. You’re on Zillow. You’re looking at DataTree. You’re looking at all these factors. You haven’t done anything yet. You’re kind of just getting a feel for the area and you’re getting a feel for price per acre and that kind of a thing. So your first phase would be, all right, if I send out offers to this area priced at X, they sign them and send them back. Would I buy it? Does this make sense? Can I double my money and sell fast? That’s kind of one. Yep. Great.
Jill DeWit:
Number two is you go along, you do all your pricing, like Eve. You got into it. You do zip code pricing. You can get your situs address in there. I mean you’re in it, man. Now you’re about to send the mailers out. You’ve got your whole spreadsheet and you’re staring at it going, “How did I do?” There’s number two test for reason where you’re going to go, “All right, the software came back. Do I still like this price? Did I do it right? Are my formulas working? Is the area I chose a good area?” All those things. That’s number two.
Jill DeWit:
The third time that you’re kind of doing, it’s not really test for reason, but it’s still, I call it it’s a due diligence pricing check again. So now the mail went out. It comes back. It’s signed. Now you’re really staring at, and that’s the third time is when you go, “Do I still want to buy it? Does it still make sense to me? Did I price it well? Are properties still moving in this area?”
Jill DeWit:
Keep in mind too that usually when you picked the county, you price it, days should have passed, not months, just days. Maybe weeks, I’ll give you that, but days or weeks, not months. Now, by the time these offers come back, you could have days, weeks or months. Sometimes we have years. So that’s why when the offer does come back and signed, you don’t just blatantly go, “Yep, here we go. Let’s run and buy this.” And that’s now we’re talking due diligence and you’re doing other things, but you still test your reason. Just make sure that, “Do I want to buy this? Do I like these numbers still?”
Steven Butala:
Every Thursday we have the Thursday Member Call, the webinar, and the vast majority of the call is us reviewing people’s deals that came back. It’s called Would You Do This Deal? It’s not something we ever set out to do. It just became a thing. We’ve been doing it for six years. And so, when we look at somebody’s property, they give us the APN. We pull it up on NeighborScoop. We look at all the information that they provide us. This is for members, and we, Jill and I, either say, “Hell, yes, I would love to do this deal,” or “No, I think it’s priced too high,” or “No, it doesn’t have access,” or whatever the response is, that’s what testing for reason is. Are we going to buy it? Does it make sense? And it gives you confidence. That’s what testing for reason does for me in a lot of different areas in life, not just pricing real estate.
Jill DeWit:
Right.
Steven Butala:
You do the academic part upfront usually. And then after kind of really getting in there and figuring it all out or deconstructing or reconstructing, whatever you’re doing, take 10 steps back and say, “Does this make any sense at all? Whatever I’m building or trying to do here, if I do this for five years straight, is it going to pay out? Is it going to destroy my relationship? Is it going to make it better?” Just tested for a reason. So that applies here times three.
Jill DeWit:
Did you see that one that Jeff had that just came in a little while ago? A guy named Jeff… is it Schafer, I want to say?
Steven Butala:
Yeah, Jeff. I would have said “S,” but okay.
Jill DeWit:
Oh, sorry. I thought you said a different word, not the initial. Anyway, but he had to deal that’s like, “Oh, we did this deal on the Thursday call. You guys liked it, Jack and Jill liked it. I was on the fence about it. I bought it. I made 50 grand.”
Steven Butala:
Oh, great.
Jill DeWit:
I’m like, “Haa, there [crosstalk 00:10:09] you go. That’s really good.”
Steven Butala:
That’s a Land Academy deal.
Jill DeWit:
He is a member. It was in Discord. Happy you could join us today. Five days a week, you can find this right here on the Land Academy Show.
Steven Butala:
Tomorrow, the episode on the Land Academy Show is called The Real Math Behind the Number of Needed Offers You Need to Send Out to Succeed. You’re not alone in your real estate ambition.
Jill DeWit:
Sounds like a tongue twister.
Steven Butala:
Sometimes they are.
Jill DeWit:
Good thing you [crosstalk 00:10:38].
Steven Butala:
Should I sent out 10,000? Should I send out a 1,000?
Jill DeWit:
Oh, that’s going to be good.
Steven Butala:
Should I test the market? Should I test the market, just send a couple of hundred and see what happens? What do I do?
Jill DeWit:
Exactly. If you need access to any sort of ownership or property details, including owner phone numbers and FEMA flood map overlays, please check out neighborscoop.com or parcelfact.com, created by Investor Success 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.
_____________________________________________________________________________________________________________________________
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.
