SFR vs Multitenant Investments (LA 1660)
SFR vs Multitenant Investments (LA 1660)
Transcript:
Steven Jack Butala:
Steve and Jill here.
Jill DeWit:
Hi.
Steven Jack Butala:
Welcome to the Land Academy Show, entertaining land and investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill DeWit broadcasting from the valley of the sun.
Steven Jack Butala:
Today Jill and I, we’re going to talk about houses versus-
Jill DeWit:
It’s really the House Academy Show.
Steven Jack Butala:
Oh, yeah. It’s the House Academy Show today.
Jill DeWit:
Yeah.
Steven Jack Butala:
Houses versus apartment buildings. The name of the show is SFRs versus multi-tenant investments.
Jill DeWit:
Mm-hmm (affirmative). Before we get into it, I have a question. Do you use all your luggage for hauling things other than clothing? Because that’s what seems to happen to all of our luggage. I had to hold on, physically hold back my one good rollaboard because he wanted to fill it up with stuff.
Steven Jack Butala:
Ammunition’s really heavy, and the easiest thing to haul it around in that I found is suitcases.
Jill DeWit:
The very nice Travelpro luggage that I have. And he tries to take them all. I’m like, “You can have them all, but you got to leave me one.” I am not going to travel on a trip and have my clothes, have gun powder on my clothing when I unpack my suitcase.
Steven Jack Butala:
It turns out men and women are real different.
Jill DeWit:
Yep, exactly.
Steven Jack 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 don’t forget to subscribe on our Land Academy YouTube channel and comment on the shows you like.
Jill DeWit:
Amy wrote, “Has anyone run into an issue with Redfin not having matches for zip codes in a county? Doing the Red Yellow Green Test. I wasn’t sure if there’s an alternative. I’m new to this.” This is you.
Steven Jack Butala:
People, especially really young people, believe that the internet sometimes is like a God-given right, like utility companies, like you turn the tap and the water comes out. It’s a public service.
Jill DeWit:
This should work. I just spent $1,200 on the 13 Pro, and I don’t have 5G at this moment.
Steven Jack Butala:
The internet is a collection of independent businesses, like Land Academy or LandStay, and we’re here to make money. And so Redfin’s no different. Redfin chooses who they do business with based on where a lot of real estate deals go down.
Jill DeWit:
Like where the money is.
Steven Jack Butala:
Which are cities. They’re in bigger cities. The bigger the city, the bigger the real estate deals. We’re in volume of real estate deals. Redfin has made a strategic decision, and I don’t disagree with them at all, that they’re just not going to have contracts with certain MLSs that are rural because they don’t care. And that’s fine.
Jill DeWit:
They can do that.
Steven Jack Butala:
Realtor.com is run by the National Association of Realtors and they have 100% coverage of the entire country. Zillow, 100% coverage from what I can see. Redfin has just got, I don’t know, it’s probably 60 or 70%, but it turns out we buy and sell rural vacant land a lot. So Redfin is not… Although they have the greatest data there ever was, they don’t have 100% coverage. I don’t know how else to say it.
Jill DeWit:
No, that was fine. That was good.
Steven Jack Butala:
Today’s topic, SFR versus multi-tenant investments. This is the meat of the show. Here’s the deal with commercial real estate. Here’s how you make money in commercial real estate.
Jill DeWit:
Okay, I’m going to settle in now.
Steven Jack Butala:
You buy a piece of property. I don’t care if it’s an apartment building, a skyscraper, a trailer park. Doesn’t matter. It’s got tenants, and they pay every month, and you go about your merry way. It’s a terrible return on investment if you line it up against any company, like a manufacturing company or a company like Land Academy. It’s just not a good… You can’t… Most people that are very, very successful in life professionally will look at real estate and say, “It’s a necessary evil and I can’t stand it.”
Jill DeWit:
Who says that?
Steven Jack Butala:
Every person I know who owns a manufacturing company is like, “I can’t stand real estate. We just lease it.”
Jill DeWit:
Oh, the fact that they even have a lease is painful, and I understand that. Okay. Leases stink.
Steven Jack Butala:
So here’s-
Jill DeWit:
Sorry. I’m sorry.
Steven Jack Butala:
Let me get through this, all right?
Jill DeWit:
Oh, sorry. Do you want me to-
Steven Jack Butala:
“Leases stink.” That should have been the show, the title of this show.
Jill DeWit:
Seriously. When was the last time that you read a lease and said, “Oh, this sounds right. This is fair.”
Steven Jack Butala:
“Oh, this is great. I can’t sign this fast enough.”
Jill DeWit:
“Yeah, I’m going to win. Oh, I’ll get two because I might want another to expand next year.” No, leases are awful.
Steven Jack Butala:
Talk about opinions. Sheez.
Jill DeWit:
I didn’t say I don’t have opinions.
Steven Jack Butala:
When you make… When you go to sell… If you own a trailer park, you buy it, and you buy it at a rational price. You raise the rent or you fill it up.
Jill DeWit:
Lease out the spots.
Steven Jack Butala:
Or fill up the vacant spots, and then you go to sell it. You make the money when you sell it. The fact that it makes, it generates income or revenue is nice, but it’s not setting the world on fire by any stretch. You make the money when you buy and sell it. So I ask you, why not just chuck to the chase and buy and sell it with intent, which is what we do, which is what Land Academy is.
Steven Jack Butala:
You can take a multi-tenant building. This whole show came up because a couple weeks ago, or a few weeks ago during Thanksgiving, a friend of mine was out, a friend of ours was out from Los Angeles, walking through a house. He pulls a house up and he looks on his phone and says, “Wow, they paid $780,000 for this three years ago, and they’re selling it for $2.3 million.” And then he looks at me and he says, “I bought and sold three apartment buildings in LA, and I didn’t make this much money. All I had to do is buy one of these houses and buy and sell it within that time period, I would’ve made more money.”
Steven Jack Butala:
So my whole point to this show is, this is actually informational,-
Jill DeWit:
Oh, I’m sorry.
Steven Jack Butala:
… unlike yesterday.
Jill DeWit:
Oh, I’m sorry. I’m sorry. I’m on the entertainment part of this.
Steven Jack Butala:
Just, when you go into any real estate deal, know how much you’re going to buy for and know how much you’re going to sell for and how long that’s going to take.
Jill DeWit:
Exit plan.
Steven Jack Butala:
Buy it low, sell it high quickly. That’s the whole point of the show.
Jill DeWit:
It kind of is. When you think about it-
Steven Jack Butala:
It’s not like buy a big multi-tenant property, clean it all up, paint it, love on it for two years, collect some rent, and then resell it. No, no, no. Buy it real cheap right now. Slap some paint on it and get it, move it out.
Jill DeWit:
It was so interesting because you-
Steven Jack Butala:
You can do that with houses.
Jill DeWit:
Your family’s in town, and they do the… I think honestly, I think there’s a mental mindset of who does one way or the other because you and your sister are the exact opposite on this.
Steven Jack Butala:
I know.
Jill DeWit:
It’s so funny.
Steven Jack Butala:
Well, she flat out says… She walked into our garage here because she’s staying with us at the house. She’s like, “You guys don’t have any stuff.” She’s like a real estate hoarder.
Jill DeWit:
Oh. And she does.
Steven Jack Butala:
Yeah.
Jill DeWit:
They have like 20 rentals or something.
Steven Jack Butala:
She just has a lot of crap. She said flat out, “I don’t ever throw anything away. I don’t ever-“
Jill DeWit:
Really? Seriously said that?
Steven Jack Butala:
Yeah.
Jill DeWit:
Oh, watch me.
Steven Jack Butala:
Yeah, me too, Jill. We’re on the same page about this.
Jill DeWit:
I throw away too much.
Steven Jack Butala:
Me, too.
Jill DeWit:
Sometimes I’m like, “Aw, shoot. I wish I had that.”
Steven Jack Butala:
Same thing.
Jill DeWit:
Oh, that’s wild.
Steven Jack Butala:
So, multi-tenant versus houses. There’s house deals that you can make a million bucks on in five months, and there’s multi-tenant properties that you can own for 10 years and not make a million dollars.
Jill DeWit:
That’s the thing.
Steven Jack Butala:
So that’s the thing.
Jill DeWit:
Yeah. That’s where I was going with that. I was trying to understand who makes that decision because I would say I want to double my bank balance faster, not slower. So I’m like, who does that, and why do they even do that? Because it’s not like one’s safe and not safe because the way we do it, it’s 100% safe, anyway. I don’t buy it unless I can double my money. Maybe triple my money. But double my money, for sure. And so there’s no risk there.
Steven Jack Butala:
Exactly. Risk is the word. We don’t buy property ever if there’s any risk at all.
Jill DeWit:
Correct.
Steven Jack Butala:
If there’s any risk of not knowing what the outcome is and how fast it’s going to happen, we don’t do the deal.
Jill DeWit:
You know, I have one right now, I can end it on this for me, in deal funding. You know who you are. We’ve been going back and forth with this, and I finally had to say-
Steven Jack Butala:
You know who you are.
Jill DeWit:
No, I finally had to say, “I’m just not feeling it.” I just have this gut feeling about it. I said, “What about this? What about that?” And then she said, “But did you look at this? Did you look at that?” I talked to this person. I talked to, it might have even been the mayor in the town that answered the phone, so you really know who you are. And she’s like, and she very nicely said, “Jill, what is it? Because I’m trying to learn from you.” I said, “You know what? Here’s the deal. It’s my gut right now. I’m just not feeling it.”
Steven Jack Butala:
It’s your gut?
Jill DeWit:
Yeah. Yeah, at the end of the day, I’m like,-
Steven Jack Butala:
Can you describe the deal?
Jill DeWit:
Commercial property on a busy road. I’m not 100% sure… I’m afraid it would sit in the inventory for too long. You would think it’s in a big… It’s technically in a big city because it’s got the name of the city. Let’s just say Nashville. It’s not Nashville, but it’s like Nashville proper, you know, if you want to say that. So it has that attribute. Again, commercial. But I’m like, there’s not enough going on around it, that I’m just… I just have this gut thing that it’s going to take-
Steven Jack Butala:
I looked at that, too.
Jill DeWit:
… a year and a half for the right person to come along, and then there’s going to be… Because I’ve these deals. This is why I can say this, too. I think it’s going to be six months of them doing their due diligence, and then it still might fall through, and then we’re back. Now we’re at two years trying to… And the price is right, so that’s a funny thing, too. It’s almost like, “All right, I’ll just throw this amount of money at it,” because it’s not a lot of money, but I’m like, “I still just don’t want to tie it up and have the aggravation.”
Steven Jack Butala:
I looked at the deal and I passed on it immediately, and here’s why. For me, it was, again, it took Jill 10 minutes to talk about this, but I looked at it and it’s got a very specific use zoning. That’s a red flag.
Jill DeWit:
It’s not the two pack. It’s a different one.
Steven Jack Butala:
That’s a red flag. And number two, there’s just too much Bacon property there.
Jill DeWit:
I’m just like, “Hmm. I don’t know.” But anyway, the point of this was risk and how we look at things. It might even just come down to girl gut.
Steven Jack Butala:
Yeah, which is good.
Jill DeWit:
And whatever you are and however you want to do it, there’s nothing wrong. You could play it safe doing SFRs or even multi-tenant investments, buy them so correctly that you turn and sell them overnight quickly. Or you can also play it safe and knowing that I’m going to own this for 10 years, fill it up. I’m going to change the rent, and I’m going to take that money and do it this way. It’s just whatever your personality is.
Steven Jack Butala:
Right.
Jill DeWit:
So, happy you could join us today. Five days a week, you can find us here on the Land Academy Show.
Steven Jack Butala:
Tomorrow is Jack Thursday, and I’m going to talk about 2022 and how we’re probably going to buy less frequent but bigger land deals. You are not alone in your real estate ambition. Wouldn’t it be great if we could do 20 deals next year?
Jill DeWit:
I love it.
Steven Jack Butala:
Make $150,000 each deal.
Jill DeWit:
I’m good with that.
Steven Jack Butala:
Two or three million bucks.
Jill DeWit:
Last time I checked, we know how to do that.
Steven Jack Butala:
Mm-hmm (affirmative).
Jill DeWit:
Okay, good. Thank you for tuning in. We would love to connect with you on Clubhouse, so make sure you’re on there. Go find the Land Investing club. Join it, follow me. We’re on there the first and third Thursday of every month, and you can find the time and the details right inside Clubhouse. You don’t need an invite anymore, but you could reach out to our team if you need one. If you need help with that, no problem.
Steve and Jill:
We are Steve and Jill.
Steven Jack Butala:
Information-
Jill DeWit:
And inspiration-
Steven Jack Butala:
… to buy undervalued property.
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