Using Real Estate News to Forecast Your Land Investing Choices in 2022 (LA 1748)
Using Real Estate News to Forecast Your Land Investing Choices in 2022 (LA 1748)
Transcript:
Steven Jack Butala:
Steven Jill here.
Jill K DeWit:
Hello.
Steven Jack 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 the valley of the sun.
Steven Jack Butala:
Today Jill and I talk about using real estate news to forecast your land investing choices.
Jill K DeWit:
Okay. This, I like this because, and I’m glad we’re talking about this because we all are reading “oh my gosh, it’s slowing down. Interest rates are 5%. We haven’t seen that since 2000 and whatever”, everybody’s panicking now it’s going to be changing. What do we do? What do we do? And so everybody there’s always a fire somehow. Happy to talk about it. And I want to talk about too, what pieces of that do we pick out and use for our purposes? And when do we just go, well, whatever,
Steven Jack Butala:
I don’t care who you are or where you come from. If you don’t agree with this statement, something’s wrong. The news is a mess.
Jill K DeWit:
Oh gosh.
Steven Jack Butala:
I don’t care.
Jill K DeWit:
They like it that way.
Steven Jack Butala:
I don’t care. Yeah. It’s all shock value. I don’t care where you come from. Right, left, up down doesn’t matter. We have now more than ever, I tell our kids this all the time, you kids have a massive responsibility in your generation to cipher through all the gunk that’s out there. Way more than, and Joe and I ever had to. We had three or four television stations, a bunch of radio stations and old school parents telling us and just it’s we didn’t have any choices and I’m not saying that’s good or bad. I’m just saying it’s a lot harder now.
Jill K DeWit:
Do you think we’re swinging back, I do.
Steven Jack Butala:
I hope so.
Jill K DeWit:
I think we’re swinging back where everybody was someone of their phones and this and that, no one communicated. And now I honestly think that there’s a little bit of a pushback and swinging back a little bit where I’m going to pick up the phone or I’m going to get on my bike.
Steven Jack Butala:
Look, there’s some really…
Jill K DeWit:
I’m going to get on my bike and ride over to see and see who’s home.
Steven Jack Butala:
I’m a lot to say about this and it is very, in my opinion, very easily decipherable. And it’s real easy to find the good real truth in news and statistics and economics and all of that really easily. And I’ll talk all about it here in a few, few minutes, every single week on Thursday at two o’clock Pacific time, we have a map closed membership call for land academy members. There’s several hundred people on there every week. And I start the call off by talking about exactly what we’re going to talk about today, right? Hey, let’s look at the market and is it good for us or bad for us or what’s coming? The good news is that if you pay attention, if I don’t know, four or five things she’ll talk about, you can see into the future. It’s not like the stock market.
Jill K DeWit:
That’s true.
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 I hope you know that Jill and I personally instruct a handful of new and existing land academy members in a live class called Career Path. If buying and selling your land is your career, or you want it to be give us a call or actually email us at support@landacademy.com and find out if it’s for you.
Jill K DeWit:
Dave wrote, is anyone out there having their deal funders ask them to assign the contract to them. The funder prior to closing on the buy side, one of my funders I’ve done multiple deals with is asking for this now. I like this person and trust them as much as you could trust someone you haven’t met, but it makes me nervous signing over all legal interest in this property with only a TIC agreement, whatever the little…
Steven Jack Butala:
This is very encrypted.
Jill K DeWit:
Contract in place to protect my interest in proceeds…
Steven Jack Butala:
Not you.
Jill K DeWit:
Okay. Thank you. Am I wrong here or is I have a lot to say on this.
Steven Jack Butala:
So do I.
Jill K DeWit:
Or is this the new normal, like I said, I trust this person. I’m not even remotely worried that they’re trying anything funny. It just feels weird, especially since we’ve never done it like this before. And none of the other funders I’ve worked with have I either. So here’s the whole point. If it’s a deal like I usually do where you find the deal you have assigned purchase agreement, has your company name on it, your name, whatever it is, everything’s peachy, you reach out to me. I say, sure, I’ll fund it. I’m going to fund a hundred percent. Now we open escrow. So as we get into escrow, 99%, some of the time, they’re going to say, wait a minute.
Jill K DeWit:
If Jill’s buying it, Jill’s name should be on this purchase agreement, not Mike Smith on the purchase agreement. So, for in order for this to work, we need to get you an updated whatever. So that will normally happen. And that will be requested by the title agent and then go, oh, sure no big deal. We’re all in escrow. We’re all on the same page and we’re moving along. So I think that this person’s probably I’m trusting. If you trust them, I’m trusting them. They’ve done some deals before and they do need to have their name on the purchase agreement. Are they opening escrow? So if they’re handling, it’s depends on who’s doing the work here. If they’re opening escrow for you and getting that part rolling, because it’s their money and they’re predicting, they’re going to ask for this down the road and they’re right. Then I agree with it. So I actually don’t have issues with this.
Steven Jack Butala:
This is a norm. Yeah. The person who has the money, calls the shots, right. Not just in land investing, but everything. So, if you find a great deal and you have a funder and then you need the $20,000 to buy it and it’s going to generate at 80,000. Yeah. It’s going to go in the funder. You bring it to the funder. The funder puts it in their own name or it signs it in this case. I think you’re going to assign it to the funder. You’re going to go about your awesome business of effectively selling the property without this funder’s involvement generate the $80,000. It’s going to go into the funder’s bank account and you’re going to get paid out of escrow. I can’t think of a better arrangement.
Jill K DeWit:
Oh, you both get paid out of escrow. Not for funder can give you a check.
Steven Jack Butala:
The name on escrow is the funder, right? Not you.
Jill K DeWit:
Unless you guys are splitting, I’ve had a few deals like that where we split it 50/50.
Steven Jack Butala:
Well, sure. If you’re going to put 50% of the money, in sure.
Jill K DeWit:
And both both of our names on there.
Steven Jack Butala:
That’s awesome. That’s how it should be.
Jill K DeWit:
Both of our names are on the document. So I’m glad you asked this question and that helped you feel good.
Steven Jack Butala:
This is confusing for this reason. And this is in discord all over the place right now, a regular lending. This is not lending it’s a partnership it’s equity financing technically. What we’re all used to is debt financing. When we go to buy a house from Bank of America, they give us the mortgage. We go on the deed, we own the house. And then there’s a lien. There’s a lien, Bank of America has a lien. And so we pay our mortgage off and then we own it, free and clear with a full bundle of rights. So this is what causes this confusion about the way Land Academy how we fund deals and how we think is the great, I’m allergic to debt. I’ll full disclosure, short time. There there’s a lot of talk right now in discord about hard money and hard money lending. And I don’t believe in that. I don’t believe in debt in general, certainly not unsecured debt. I’m actually going to talk, put on a Thursday call today. I hate great detail. So, and Jill and I are on the same page about this.
Jill K DeWit:
I hear triage and I’m like, don’t do that.
Steven Jack Butala:
Me too. I think it’s sneaky.
Jill K DeWit:
I do too.
Steven Jack Butala:
I think you don’t really have any real position. You have a equitable title, no real position in it. And the other side of the argument is expensive. Equity finance is expensive, but you don’t have to go through any of the stuff. And if something goes sideways, guess what? The funder stuck with it with no recourse. So that’s why your funder’s saying I want 30, 40, 50% of the steel. Because if something goes sideways, it’s stuck with it. I have to take all the risk you’re taking no risk at all.
Jill K DeWit:
That’s true. Today’s topic is using…sorry.
Steven Jack Butala:
I got sidetracked. Go ahead.
Jill K DeWit:
Okay. Using real estate news to forecast land investing choices in 2022, before you start, I would love to make one comment to a comment you made, which I thought was brilliant. You said what’s great about this industry is it’s not like the stock market. Holy moly stock market can change in minutes. Yeah. That’s what’s like…
Steven Jack Butala:
According to the weather, it can change, literally.
Jill K DeWit:
It could be. Yeah, it could be, it could be a tornado takes out, go daddy and watch the stock market change. You think I’m kidding?
Steven Jack Butala:
No I’m not, you’re exactly right.
Jill K DeWit:
And then the stock market plummets in minutes, like what just happened.
Steven Jack Butala:
Or war breaks out like this thing in Ukraine that dramatically alters, doesn’t change how we buy and sell land at all.
Jill K DeWit:
We are very fortunate that what we do, we can see stuff coming. We can plan for it. We can kind of predict it. I know you’re going to talk all about that. So thank you.
Steven Jack Butala:
There’s key indicators all over the internet or all over the news and there always have been. The federal government keeps microscopic track for all the stuff that the federal government does wrong. One of the things that I believe that they actually do really well and have done really well.
Jill K DeWit:
I’m going to write this down. That’s number three, number three, out of 3 million, four hundred and twenty one, six hundred and thirty seven. Thank you.
Steven Jack Butala:
They keep through the census and all kinds of other types of bureau, federal bureaus, they keep fantastic records of all stuff that goes on in our country, like gross domestic product. How many houses, housing starts there are and on and on and on. It’s seemingly limitless. And I’m a data person, so I love this stuff. So that’s the real meat of what all the noise on the internet is. So if you go look at any article or hopefully most articles about, hey, the unemployment rate went up or down at the bottom of the article or in writing the article, whoever’s writing it, including if it’s a computer, which is often, if will say, this is the root of this article or in old old school, he called it a footnote.
Steven Jack Butala:
This is the source of my information. And then they go off. And so you have to separate actual statistics from opinions and the vast majority of its opinions. And when you Google something, you’re going to get 92 opinions. And at the bottom, the federal government article that will, whoever wrote it or released the information that they’ve been tracking for a hundred plus years, literally. And that’s the source of it. So all there’s all news housing starts to get to the real serious topic here. When you get to the source of all these silly articles, we look at new housing starts. We look at not much interest rates, but mortgage rates.
Steven Jack Butala:
We look at now through websites like realtor.com who have spent hundreds of millions of dollars a year, collecting data to tell their real estate agents. And now the public where people are moving, why they’re moving there and on and on and on. So if you track this stuff and you look at it, like we do on a Thursday Member call, you can see slight little movements. Nothing happens overnight in real estate. And I’m knocking on wood here. Almost never do things happen overnight. Like on the stock market.
Jill K DeWit:
No.
Steven Jack Butala:
You don’t ever wake up and say, half my portfolios gone, you just don’t do that. That’s why we’re in this business.
Jill K DeWit:
I’d say like lightning speed for real estate would be 30 days.
Steven Jack Butala:
That’d be lightning speed.
Jill K DeWit:
Weird lightning speed.
Steven Jack Butala:
Really is six months to a year [crosstalk 00:11:48] and so everything in the real estate market is gauged by houses, SFRs why, because everybody understands houses as a consumer we understand a house, as a renter who wants to have a house we get it. As a lender we understand houses. So the vast majority of real estate is tracked in SFR speak. And so, yeah, we track that because land always follows that, land always six months to a year behind it, when it comes to market fluctuation and pricing and all of that. When you get into urban markets and infant, lots houses define prices. And so it’s really, really easy to track what makes sense to you from a housing standpoint to see what’s going to happen in the land market. Let me give an example.
Steven Jack Butala:
If you live in Juliet, Illinois, I’m just picking out a city or a town and you spend about an hour on Google finding, realizing what those zip codes are, even the census tracks if you want to, and then looking at the real estate that is produced on the internet or associated with those zip codes about new housing starts the prices of the median price of houses going up and down over time and all the factors that go into that and why you’re going to get a real feel for that market and maybe an hour or an hour and a half.
Steven Jack Butala:
And then you can line up all the data against that to Jonesboro Illinois, which is south of there. I don’t know why I’m picking on Illinois this today, that’s what came to my mind. And you can pretty quickly see that well stuff. And Juliet’s a lot slower than let’s say Jonesboro, and then start comparing Illinois to Indiana and on and on and on. So you get this relativity and this movement of how prices are happening with houses in a lot of cases in more urban areas land. And so you can forecast what’s going to happen.
Jill K DeWit:
I have a question when you tell me it’s okay. I don’t want to put you on the spot, but I am going to put you on the spot.
Steven Jack Butala:
Sum the chunk.
Jill K DeWit:
Well, I love of this game, but okay, based on current new information about, okay, interest rates going up and people worrying about housing slowing and people not being able to qualify for housing, I’m still feel like we’re sitting pretty beyond six months in the land space. So what do you think about like, let me phrase it another way. I can’t qualify for house. I’ve got all this money lined up. I’ve got this, I can’t get this, but I can sure afford a piece of dirt and I could sure afford to do it on my own. Might take me longer, but I can do it.
Steven Jack Butala:
So this is a great question. You have to separate the questions in it, two parts. You have to think like a seller and think like a buyer. Right now it’s a seller’s market, because there’s so many buyers. Why? Because buyers are flush with cash. Why? Because their house values have skyrocketed in the last 12 months. So they have a lot of cash from a second position mortgage or home equity line and all of that Jill and I’ve seen, this is our fourth cycle. This is my fourth cycle in my lifetime. It’s probably Jill’s third cycle for a bunch of reasons. So it doesn’t matter. It doesn’t matter. I have an unhealthy interest. Well, as a teenager.
Jill K DeWit:
It sounds like Jill was in a program for one of them.
Steven Jack Butala:
Jill was having fun as a teenager while I was sitting looking at a computer.
Jill K DeWit:
Well there is that, yes.
Steven Jack Butala:
That’s really what I mean like that first cycle Jill was 13.
Jill K DeWit:
I was at every concert. I was front row seats at every concert that why you’re in a classroom.
Steven Jack Butala:
So there’s two perspectives in all this stuff, a buyer and a seller and so in both markets, as land investors in our group, we both make money in both markets. It is just different ways of making money. So right now it’s a great market for a seller because everybody’s flush with cash. Well, what’s changing because of inflation, interest rates are going up to try to hedge that off the federal government’s raising interest rates and then direct effect of that is raging mortgage rates. Please don’t confuse the two. Mortgage rates, follow interest rates. And so you can see what’s going to happen if interest rates there’s announcement that then mortgage rates go up maybe a day or two days later, you can see into the crystal ball in this stuff. So how much time do we have?
Steven Jack Butala:
Well, there’s a bunch of factors in effect here. Number one. And first and foremost, the millennial generation from a sheer size standpoint, it’s like nothing this country’s ever seen. There are more people turning 30 and in that 35 year old range than ever before in sheer numbers and they all need a place to live. They also are the most educated. So they have the most money. There’s a huge workforce lust right now. So it’s really easy for these kids to jump jobs and more money and afford more housing. And so that’s all good for us as land sellers, it’s harder to buy property the way that we want, which is a natural, this is the second part of it. A natural progression because prices are higher, we still make just as much money because we pay more and sell it for more.
Jill K DeWit:
And the way we do it, I’m still looking for a situation that’ll never change.
Steven Jack Butala:
Yeah. Yeah. Explain that. I’m like midstream in this.
Jill K DeWit:
Oh go ahead. Go ahead. I’m sorry. I thought you were done. I thought that was it. Go ahead.
Steven Jack Butala:
So, so here’s the thing.
Steven Jack Butala:
If you watch these statistics every week, like we do on Thursday, you can actually predict it, but I’ll tell you I just read an article and the federal government came out with a report about cash on hand and tertiary debt. And so for whatever reason, and I think it’s a direct result of the federal government, subsidizing everybody with cash payments over this COVID period, that’s run out. And so that we took on like more than, as a country, more than a trillion dollars of tertiary debt in the last three months last quarter. So that, and here’s the great news, which means tells me that people are running out of cash, that this flush cash situation. Well guess what? The first thing people do when they run out of cash?
Jill K DeWit:
Sell something.
Steven Jack Butala:
Sell something.
Jill K DeWit:
That’s was my point.
Steven Jack Butala:
They sell land that they’re not using.
Jill K DeWit:
It’s a situation.
Steven Jack Butala:
It goes like this. It’s a slow rolling wave. Most of this time in real estate. And you can just like a surfer, you can see where pretty much see where it’s going to crash. If you know what you’re looking at, go ahead.
Jill K DeWit:
That was it. I explained my situation. Oh, happy you could join us today. Five days a week, you can find us here on the Land Academy show.
Steven Jack Butala:
Remember how the episode on the Land Academy show is called “How to handle multiple land buyers all at once” you are not alone on your real estate ambition.
Jill K DeWit:
That was good. You did have a lot to say it was one of our long shows in a while. Yeah. I know you. Yes. People think that I have a lot to say, but oh no, no, no. I don’t have nearly as much to say. It’s good. Hey, thanks for tuning in. And by the way, if case you didn’t know, we recently released our latest and greatest 2022 educational project for Land Academy called Land Academy 3.0, catching up with Land Academy. We spent months putting this together and making sure you have the most up to date education program on the market to help each succeed. I’d like us at buy and selling land. Call 8 3 3 5 2 2 5 5 4 5, or send a message to support@ landacademy.com. If you have questions and you want to see if this is for you.
Steven Jack Butala:
[crosstalk 00:19:45] We are Jack & Jill, information and inspiration. It’s buy undervalued property.
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