Jack Thursday – Land Investor Dictionary 101 – Equity (LA 1587)

Jack Thursday – Land Investor Dictionary 101 – Equity (LA 1587)

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 DeWit, broadcasting from the Valley of the Sun.

Steven Butala:
Today, Jill and I talk about … Well, it’s Jack Thursday, and it’s Land Investor Dictionary 101. This is going to be a thing now. Every Thursday I’m going to talk about helping new people understand the terminology, the basic terminology of land investing. Today is equity.

Jill DeWit:
Did I hear you say we’re making an online version of this, too?

Steven Butala:
Yeah. So, our team is actually putting together a separate landing page or website with all the terminologies that we talk about here. It’s underway. It’s not going to happen overnight, certainly, but when we get the dot-com I’ll report it.

Jill DeWit:
Cool. I have to tell you, when I heard about this the other day, I had a few things that I wanted to throw in the dictionary.

Steven Butala:
Oh, good.

Jill DeWit:
So I have some of our own terminology that we have created-

Steven Butala:
Like Jillify it?

Jill DeWit:
Exactly. I’ll tell you right now, I have Jillify that’s going to go in there, BaJillian, that’s going to go in there. I also told Aaron lickety-split should go in there. Lickety-split, the definition is going to be something like how fast your property should sell.

Steven Butala:
These are good things.

Jill DeWit:
Right, you like this? So when you see it, I’m going to put side-hustle in there, and a way overused term, wholesale.

Steven Butala:
Yeah. What are some good, silly terms that are silly?

Jill DeWit:
That’s a bunch that I just have. Yeah, lickety-

Steven Butala:
W-2 job, things like that.

Jill DeWit:
Oh yeah.

Steven Butala:
1099 job.

Jill DeWit:
W-2 job … How about the 4:00 AM club?

Steven Butala:
Yeah, like Land Academy stuff.

Jill DeWit:
So yeah, they’re all legitimate definitions. Some we have just made up. Some words and terms we have just made up that you need to know about and we throw around. Like in my world … I confused you the other day. In our world, you’re like, “What does that mean?”

Steven Butala:
Shotgun closing.

Jill DeWit:
Oh yeah.

Steven Butala:
Like shotgun wedding, but shotgun closing.

Jill DeWit:
We could come up with some good ones that you need to know. We’ll give you a chance that you could submit some, too. Like, “I heard you talking about X. What the hell is … ”

Steven Butala:
Like the haight.

Jill DeWit:
Oh, the haight.

Steven Butala:
H-A-I-G-H-T.

Jill DeWit:
Oh, I’ve got a whole list here.

Steven Butala:
There’s a whole Land Academy of vocabulary we can cover.

Jill DeWit:
This is good. This is going to be funny.

Steven Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com community. It’s free, and don’t forget to subscribe on the Land Academy YouTube channel and comment on the shows that you like.

Jill DeWit:
Is it first initial, Burton?

Steven Butala:
Yeah.

Jill DeWit:
Okay, E. Burton wrote, “Besides the LandTank and Facebook, what are other ways to get deals funded? I’m trying to keep my options open, and be open-minded and creative.” Is there more to that? No. Okay, cool.

Steven Butala:
I’m not aware of Facebook, and LandTank honestly is coming down soon. Here’s why: It’s never been easier to get a deal funded, ever. I’ve never seen an environment in my entire career where people are throwing money out … In a positive way, throwing money in, I should say, to get a good deal done. So if you’re brand new and you’re good at finding good deals, forget about the money. You’re going to find so much money being dumped in your lap, it’s silly.

Steven Butala:
Go to landfunding.com. It’s a website we just started. There’s all kinds of products for you. If it’s really, really important to you to get the best percentage that you can, as long as the deal is good, we’ll figure that out. If it’s important to you or you’re a wholesaler, a real wholesaler, and it’s important to you just to get ten thousand bucks out of the deal really fast, and it’s a good deal, there’s a product in there for you.

Jill DeWit:
I’m looking at this a little bit differently though, too, which is most people are getting barraged with this. I get barraged.

Steven Butala:
So do I.

Jill DeWit:
I’m getting emails all the time.

Steven Butala:
Me too.

Jill DeWit:
I’m on everybody’s email list like, “Do you need money? Here’s what we need, here’s what we want.” Including one the other day that came in like, “There’s no background check, you only have to submit four paycheck stubs,” I’m not kidding, “Or four bank statements and we’ll fund your deals.” I’m like, “What the heck is that about?”

Steven Butala:
That’s silly.

Jill DeWit:
Isn’t that crazy? I sent that to our team going, “This is a little bit spooky here what they want, to see my bank statements to fund my deal.” Well, if I’ve got the money, then why am I asking you? Why do you need my bank statements? You know what I mean? It’s really interesting.

Steven Butala:
There’s some idiocy in this industry.

Jill DeWit:
So the big picture is, you’re cruising along great, you’re finding good deals, you need funding. Like Jack just said, there’s plenty of ways to find funding. I’m more interested in who you’re funding with and how the relationship goes, and trusting each other, and knowing that person, and knowing they have experience, and knowing they understand you and all of that. So that, for me, is why we’re solving that problem with landfunding.com. So, like Jack just said, sit tight. It’s us. It’s either us personally, or-

Steven Butala:
Vetted people.

Jill DeWit:
Exactly. People we know and trust, and have done deals with that understand you, so we can take all the guesswork and the scariness out of the equation. And then as far as the percentages and all the different things, oh, dream it up. Nothing’s crazy.

Steven Butala:
Because this has gotten so popular, like everything, there’s really good people that are involved and not good people. There’s predatory people, and we will do our best to make sure that that’s not what goes on.

Jill DeWit:
We’re going to look out for you.

Steven Butala:
Exactly. Today is Jack Thursday, Land Investor Dictionary 101. We’re going to talk about equity. This is why you’re listening. What is equity? From a strict accounting standpoint, when you look at a balance sheet, here’s the simplest terms. Balance sheet: A balance sheet is how much you’re worth, or how much your company is worth. Or, you have a bunch of assets on the left side of the balance sheet. I have a car, I have a house, I have some furniture, and I have a bunch of stuff-

Jill DeWit:
A 401k.

Steven Butala:
A 401k, I own some stock, let’s line it all up. I have $100,000 worth of equity when you line it all up. Well, wait, my house is worth $500,000. I have $600,000 of assets on the left-hand side; Assets minus liabilities equals equity. So, I have $600,000 of assets, I own everything without any debt, but I have a mortgage and I owe $500,000 on my house. $600,000 of assets, $500,000 of liability, assets minus liabilities equals equity, which is what we’re talking about. $600,000 minus $500,000 in debt equals $100,000. I have $100,000 of equity. That’s what I’m worth in this world.

Steven Butala:
Jeff Bezos, a little bit different. He’s got a ton of assets on the left side of his balance sheet that are in the form of stock. He might have a mortgage, he might have some personal debt and whatever, and then he’s got equity. That’s where he’s got a huge net worth. You could have negative equity, you could owe more than you actually have assets-wise.

Jill DeWit:
I’m sure there’s a lot of people that have that.

Steven Butala:
Sure, more than half the country has negative equity, a negative worth.

Jill DeWit:
Because you have a credit card bill. Nevermind you can handle it, but it’s still when you line up the numbers like you just described … I make enough money to afford my house, and afford my cars, and pay for my kids’ college, and pay off this credit card. But when you do it like you just said, what I owe and what I’m worth, not payments, that can be upside down.

Steven Butala:
So what does that mean for us? What does equity mean for people who are investors like land investors, let’s say? Forget about all that personal stuff, I’m just talking about equity in a deal. Just looking at the equity in a deal, well, I know that the property I’m about to buy is worth $100,000. I know that, I can see it. Maybe it’s a house and I can see this estimate. Maybe it’s a big piece of land and I have an appraisal. Maybe you just have so much experience, like a lot of people in Land Academy or like Jill and I, where you know, “I’ve just done a bunch of research, and I know this property is worth a hundred grand, and I’m buying it for $30,000.” Because that’s what we do.

Steven Butala:
What you’re doing is creating $70,000 of equity for yourself. Buying it for $30,000, I know it’s worth $100,000, and maybe I sell it for $80,000 just to do a fast deal and pay it forward. You’re creating equity in a deal. You have created equity for yourself through that transaction and converted it hopefully back to cash. That’s equity. Equity is a beautiful thing.

Steven Butala:
How would an apartment owner create equity? Well, he would buy the land, build an apartment building, the whole thing costs a million dollars. He would rent it all out … This is the improvement way. There’s only two ways to generate equity, this is the second way. The first way is to buy it real cheap, the second way is to make improvements. He buys the land, puts up a building, he’s into the whole thing for a million dollars. He has a million dollars worth of debt, by the way.

Steven Butala:
So, his balance sheet looks like this: A million dollars worth of asset, a million dollars worth of debt liability. Assets minus liability, equity is zero. Two months go by, he rents it out for market rate. It’s all rented, and now we calculate the cap rate, which I’m not going to get into. But he gets now a valuation on the building of $2 million. That’s what a new investor would come in and pay based on that cash flow in that whole scenario, and the building is new and all that. That person created a million dollars worth of equity for themselves.

Steven Butala:
This happens with companies all the time. You hear about startups and valuations, especially on Shark Tank and all those places. These people are experts at creating equity for themselves. That’s why Jill and I are here, to teach you how to create equity. This is why Investor Dictionary 101, I chose equity as the very first episode, because it’s so important to understand just from a basic standpoint. People think we’re here to generate cash and get rich, and that’s part of it. But if you stick to just creating a lot of equity per transaction, that stuff is going to happen anyway, you are going to get rich.

Jill DeWit:
I thought you picked this word because it’s your favorite word. You think I’m kidding?

Steven Butala:
It is my favorite word.

Jill DeWit:
I know.

Steven Butala:
What’s better than the scenarios that I just described?

Jill DeWit:
I know.

Steven Butala:
Buy a piece of property for $30,000, sell it for $90,000? $80,000?

Jill DeWit:
Right, I’m agreeing with you.

Steven Butala:
I had a license plate that said equity on it for years.

Jill DeWit:
I love it. You had companies with that word in it. I recall. Happy you could join us today. Five days a week, you can find us right here on the Land Academy Show.

Steven Butala:
Tomorrow, well, it’s Jill Friday. Thank goodness. She’s going to talk about her concept called “nowhere in the world is this possible”.

Jill DeWit:
Dot, dot, dot …

Steven Butala:
You are not alone in your real estate ambition. You love equity as much as I do.

Jill DeWit:
Oh yeah.

Steven Butala:
We all know what equity is. Even if you don’t really know the strict definition, we just call it different stuff.

Jill DeWit:
Totally, and there’s nothing wrong with that. I think it’s great. Thank you for tuning in, and we hope you find our content valuable and we appreciate your support. If you haven’t already, please check out our YouTube channel and hit the subscribe button. We’re Steve and Jill …

Steven Butala:
Information …

Jill DeWit:
And inspiration …

Steven Butala:
To buy undervalued property.

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