Jack Thursday – Tranche Your Land Deals (LA 1681)
Jack Thursday – Tranche Your Land Deals (LA 1681)
Transcript:
Steven Jack Butala:
Steve and Jill here.
Jill K DeWit:
Hi.
Steven Jack Butala:
Welcome to the Land Academy Show. Entertaining land investment talk. I’m Stephen Jack Butala.
Jill K DeWit:
And I’m Jill DeWit, broadcasting from the valley of the sun.
Steven Jack Butala:
Today’s Jack Thursday. And I’m going to talk about traunching your land deals. Jill thinks for some reason, this is some highfalutin concept, but I’m not sure. I don’t think I agree. It’s pretty simple, actually. Buy a bunch of property.
Jill K DeWit:
I wonder how many people are Googling this exact phrase right now. What do I want to do this week? I want to traunch my land deals. This is good.
Steven Jack Butala:
Traunching is used. It’s a French word. Meaning-
Jill K DeWit:
I know.
Steven Jack Butala:
Separate and gather, or it’s not just separate.
Jill K DeWit:
I always thought it was more, I thought it was grouping them together more than that.
Steven Jack Butala:
Yeah. That’s a little bit. The American use of the word, especially in finance, is a little bit different than the strict translation. I researched all this before I went [crosstalk 00:00:53]
Jill K DeWit:
Well, good, because like you’re making me need to do the research. That’s the whole point. If we have a show that I got to actually, excuse me, I need to Google this for a moment. [crosstalk 00:01:01] Make sure I’m right.
Steven Jack Butala:
You’ve heard people in the stock market or in finance markets traunching their portfolio and you know-
Jill K DeWit:
Bundling them up, right?
Steven Jack Butala:
Yeah. Yeah.
Jill K DeWit:
That’s how I think of it like-
Steven Jack Butala:
Buying and selling in traunches, which means not just taking a certain asset and selling it. It means bundling it up, putting the good with the bad. We heard the word traunch a lot in 2010 where they were taking home loans.
Jill K DeWit:
Houses.
Steven Jack Butala:
Yeah. AAA rated home loans and bundling them with non-performing C minus loans.
Jill K DeWit:
Putting a few crappy ones in with the good ones and just kind of sliding them under the rug that way.
Steven Jack Butala:
Yeah. Well not under the rug, but here’s a portfolio. Take it or leave it. There’s some golden here and there’s some terrible stuff.
Jill K DeWit:
Got it.
Steven Jack Butala:
Like every garage sale. Let’s say.
Jill K DeWit:
Thank you for not associating it with dating.
Steven Jack Butala:
Oh my God. You could buy-
Jill K DeWit:
Or marriage.
Steven Jack Butala:
Buy partners in traunches. I think that’s a felony.
Jill K DeWit:
Yeah, oh my gosh. Wow. I didn’t think we were going there, but it is Jack Thursday. He can do whatever he wants.
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. Don’t forget to subscribe on the Land Academy YouTube channel and comment on the shows you like.
Jill K DeWit:
Here’s what’s going on right now for some of you, “Mommy.” This is from the back seat, “Mommy. What did Mr. Jack mean when he said that?”
Steven Jack Butala:
I hope that’s not true.
Jill K DeWit:
Exactly. Somewhere.
Steven Jack Butala:
Poor kids.
Jill K DeWit:
Somewhere in the minivan, this woman is quickly turning off our show.
Steven Jack Butala:
Poor children have to… All you children. I’m sorry.
Jill K DeWit:
Who are stuck listening to this.
Steven Jack Butala:
Your parents make you listen to this.
Jill K DeWit:
This is their nap time. Fall asleep.
Steven Jack Butala:
Yeah, yeah.
Jill K DeWit:
Thank you everyone because you put my kid to sleep every afternoon at three o’clock like clockwork. That’s awesome. Better than Dr. Seuss. All right. Peter wrote, “I am slowly scaling up my land business and would love to hear about the anatomy of bigger deals. I presume we all start small, usually under $10,000 purchase, and then we, or 20 to $30,000. What do the whale size transactions look like? Do you find them the same way? Do you use a red, yellow, green test for them the same way?”
Steven Jack Butala:
Want me to answer this?
Jill K DeWit:
If you want to.
Steven Jack Butala:
All right. So let’s break them down into three categories. The under $10,000 purchase looks like this. You go to a county, usually it’s a desert type county, or a very, very, very rural county where properties are really cheap and you buy them even cheaper. This is the land, one of the land academy models. So you buy a property for $2,000, you know it’s worth 10 and you sell it for six or eight quickly. That we all are very familiar. That’s option one. Option two is what Jill and I love. Buy for 30, sell for 80, 90. Buy for 50 sell for 150. Maybe do some stuff to it, light stuff. Put an RV on it. Put a cute little shack. You can buy those, not a shack, but a shed that you can buy on Amazon.
Jill K DeWit:
Like Tough Shed.
Steven Jack Butala:
Yeah. Tough Shed.
Jill K DeWit:
Or Home Depot.
Steven Jack Butala:
There’s a few things you can do. Blade a driveway in. Really inexpensive, fast things that don’t require permits or anything like that. Or maybe just do nothing to it at all, which is-
Jill K DeWit:
My first choice.
Steven Jack Butala:
You just buy it really, really well, which is what we do. And then resell it. Machine-like. When you get to these larger type transactions, yes, the red, green, yellow test works, but it’s almost always specialization property. Here’s a few examples of specialization property. Agriculture property that’s being farmed, that’s on the edge of town, a town like Phoenix or Las Vegas, and it’s 40 acres or 80 acres or some number. And every single new home developer is chomping to get ahold of this dirt so they can subdivide it and put houses on it.
Jill K DeWit:
Right.
Steven Jack Butala:
And so you can make millions of dollars doing this. It takes years. There’s tons of regulations. You have to really have a person on your team like Jill, who can meet with the farmer and say, “It’s time to sell. You’re not going to get any…” And really befriend them and work them over for quite some time. So what does it look like? It looks very different. The mail works just the same. These way higher priced properties, people generally know what they’re worth. That farmer knows what that property’s worth. He’s not just some dumb farmer who’s just farming, and he’s ready to let his land go. He’s looking to sell at the tip top of the market and he knows exactly what he needs to do with that money, from a tax standpoint, for his kids or siblings or whatever, where that money’s going to go. So you’re not dealing with somebody who’s got multimillion dollar property. They know what they have.
Steven Jack Butala:
So there’s a few exceptions. One of the exception is, that I think these deals are really easy to do, are defunct trailer parks. They’re licensed for 50, 80 trailers. It’s been grossly mismanaged. There’s maybe 10 trailers on there. Everybody’s doing crack. It’s just a mess. So you can buy undervalued assets like that.
Jill K DeWit:
What’s crack Mommy?
Steven Jack Butala:
That’s how much Jill’s listen to this. Of all the words I just said, all she heard was crack.
Jill K DeWit:
Sorry. Keep going.
Steven Jack Butala:
So special, we’ll end it like this.
Jill K DeWit:
Okay.
Steven Jack Butala:
Literally everyone’s bored.
Jill K DeWit:
Yeah.
Steven Jack Butala:
Special use property. You can make hoards of money on these deals. They’re more complicated. They take longer. Jill and I’ve done some-
Jill K DeWit:
I hate them.
Steven Jack Butala:
I don’t like them either.
Jill K DeWit:
I’ve got to say I hate them.
Steven Jack Butala:
I don’t like them either.
Jill K DeWit:
I got one right now. It’s like, we’re going to go on, we’re a year and a half waiting on this one. I’m like, I just can’t stand it.
Steven Jack Butala:
I agree.
Jill K DeWit:
It’s too long for me. I lost interest a long time ago. It’s like, and it’s a couple $100,000. I’m like, I don’t care at this point. I just want it over with.
Steven Jack Butala:
I totally agree.
Jill K DeWit:
Yeah, so I don’t, if I make a dollar I’d be like, “Great, thanks.” I just want my money back.
Steven Jack Butala:
Today’s Jack Thursday. And I’m not going to talk briefly now, I guess, about traunching your land deals. This is why you’re listening.
Jill K DeWit:
Why briefly? Because you’re going to lose me?
Steven Jack Butala:
No, because, yeah that, and because I spent a lot of time on the question.
Jill K DeWit:
You’re fine. It’s your show.
Steven Jack Butala:
Here’s the deal, on every Thursday call we have, for those of you who don’t know, we have a Thursday webinar for Land Academy members, and we review everyone’s deals. So all these deals are coming in and they ask us, “Hey, where’d you do this deal?” And they give us all the stats and we talk about it. And every single Thursday, and usually every month with us personally, someone will call us back and say, “I got you a letter and I do want to sell my property, but I have 19 more.” And so now you’re looking at value in portfolio of land. Usually in one county, usually close together. Most of the time it’s adjacent. It’s a great deal. It’s an amazing opportunity. And so what Jill, Jill has a very intelligent and templated way of going about these transactions where you no longer are valuing each deal at all.
Steven Jack Butala:
You’re taking all of them together, spread sheeting them out. They’re separate APNs, which is great for you, because you have a lot of choices on the sell side. Then she’ll go back in, value the whole thing, and then she’ll shave a ton of money off and say, “Look seller, how’s $100,000 sound for the whole thing? I know we talked about $20,000 for this, for one property. I know you have these other 18. What we’re really valuing it, it’d be 100, 120.” And when you break it down on a spreadsheet, the profit on a deal like that is much, much higher than a single property.
Jill K DeWit:
The point of my, this little exercise is, they hear the… You want to give them one big number. You don’t want to say, “All right, I’ll give you 20 for this and 10 for that. And five for this. And that one is worth about 40 to me.” Da, da, da. You just give them that big number, and that’s all they hear.
Steven Jack Butala:
Speak in dollars, not in-
Jill K DeWit:
Price per acre.
Steven Jack Butala:
You’ve got price per acre. You just want, everybody loves price per acre.
Jill K DeWit:
I hate that.
Steven Jack Butala:
I do too, Jill. I do too. I don’t want to talk about this property.
Jill K DeWit:
I will, behind the scenes, look at that, of course, I don’t discount that, but it’s not how I talk to the sellers.
Steven Jack Butala:
Now you have a surefire way. You have like four or five options, if you buy the property, in how you sell it. You can buy, you can sell one property. You can sell the portfolio, where somebody pays for one of the properties and you release it. You deed the property to them, that one APN, and then they, you sell it on terms. This is traunching. Sell it on terms. The rest of them, until that person can go and resell them to whomever, or maybe they’ll piece them out and retail sell them, and they’re going to make you payments on it until they sell each APN and pay you as you go. So there’s a lot of traunch opportunities. That’s one way. Another way is just, you got such a great deal on all of them for cash, is ship it into the Land Academy environment, because it’s such a good price somebody’s going to pay you a lot more. For all of them cash. And so you have options on these traunches. Or you could list them all separately as APNs at separate times.
Jill K DeWit:
That’s my favorite. That’s my-
Steven Jack Butala:
That’s not traunching.
Jill K DeWit:
And that’s, though, how you make the most money off of it. Because then if you buy the bundle, and then spin them off one at a time, you could sell each one individually, better.
Steven Jack Butala:
We have a guy that was in the last career path that bought a portfolio that we valued at the live event like three years ago. He’s still selling them. He said, “When it’s all done I’m going to make like a million eight.”
Jill K DeWit:
Exactly. So awesome. Like we’ve been living off this for two years now kind of thing. It’s really good.
Steven Jack Butala:
Portfolio’s rock.
Jill K DeWit:
Mm-hmm (affirmative). It’s true. Happy you could join us today. Five days a week you can find us here on the Land Academy Show
Steven Jack Butala:
Tomorrow’s Jill Friday. And she’s going to talk about how to talk to a seller. You are not alone in your real estate ambition. Sounds hokey, but it matters.
Jill K DeWit:
Thank you. Like one of the things is give them a big number. Talk like that. They get excited about it. Wouldn’t you? Who’s going to get it. Wouldn’t you get more excited about, instead of going and having to do the math. I don’t know about you, but I would be sitting there going, “Okay, 20 for that, five for this, three for that.” Like Jill, just tell me how much money would I get, because that’s what they want. And when I say, “Look, I’m going to give you $100,000.” You’re going to be like, “Oh ka-ching! Baby pack you your bags. Now we’re going on that trip.” Kind of thing. That’s what they want to hear. Thank you for tuning in. We hope you find our content valuable and we do appreciate your support. If you haven’t already, please check out our YouTube channel and hit that subscribe button. We are Steve and Jill.
Steven Jack Butala:
Information.
Jill K DeWit:
And inspiration.
Steven Jack Butala:
To buy undervalued property.
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