How Money Works in Your Land Business (LA 1769)
How Money Works in Your Land Business (LA 1769)
Transcript:
Jill DeWit: Hello.
Steven Jack But…: 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 Jack But…: Today, Jill and I talk about how money works in your land business, and really just how money works at all.
Jill DeWit: Did you write this for me?
Steven Jack But…: No.
Jill DeWit: Okay.
Steven Jack But…: No.
Jill DeWit: I got to ask. Okay, let me back up here. One of us is an accountant and one of us isn’t. You guess. Who do you think it is?
Steven Jack But…: Yeah, who do you like more? Jill or me? The other one’s the accountant.
Jill DeWit: Yeah. That’s why I thought you wrote this for me. I thought this was your subtle way of, “Babe, we got to talk.”
Steven Jack But…: No.
Jill DeWit: “And your money habits suck.” Because I wrote down…
Steven Jack But…: That is the exact opposite.
Jill DeWit: I have to say, I have, in my lifetime, I have changed dramatically on how I look at, view, manage and budget, and I’m very proud of that.
Steven Jack But…: I have never had a life partner or a business partner who manages money better than you.
Jill DeWit: Thank you. Really? Seriously?
Steven Jack But…: Yeah.
Jill DeWit: That’s…
Steven Jack But…: That’s an absolute.
Jill DeWit: I didn’t know that.
Steven Jack But…: I would never, in a twisted way, write a topic that we need to talk about and then just talk to the whole world about it and then have you try to…
Jill DeWit: I’m sure…
Steven Jack But…: … teach you a lesson.
Jill DeWit: Are you sure we haven’t done… I think we’ve done that before. I’m pretty sure if we go back over the decade, not decade, but the years of podcast, there’s probably a few hidden messages in there. Anyway, I’m excited because I wrote down the three things that I think…
Steven Jack But…: Good.
Jill DeWit: … you need to, how you manage your money in your own personal land business. I’m excited to hear what you think. And then, I know you’re going to set us all straight.
Steven Jack But…: I’m going to give you my opinion.
Jill DeWit: I know.
Steven Jack But…: And then you and everyone listening to this, the six or seven other people that are listening to this, cannot decide whether or not I’m full of it or not.
Jill DeWit: No, I know you’re right, but I’m just… I want to see how close I am. But I think I’m going to be not far off, but this is my perception, but I’m not going to use the right terms obviously, because I’m not an accountant and I don’t care about the right terms.
Steven Jack But…: We’re going to start off with your stuff right after this.
Jill DeWit: Okay, cool.
Steven Jack But…: Before we get into it, let’s take a question posted by one of our land members on the landinvestors.com online community. It’s free, and I hope you know by now, we have full blown operational commercial printing company called offers2owners.com. Jill and I set this up a bunch of years ago out of pure blind frustration with sending our own mail campaigns out and using commercial printing companies that don’t understand our business.
Jill DeWit: Correct.
Steven Jack But…: We decided a few years ago to make it available to everybody.
Jill DeWit: Yeah.
Steven Jack But…: Go to offers2owners.com and see if… If you’re sending out mail, see how it fits in your world.
Jill DeWit: It can hook you up.
Steven Jack But…: I’ll tell you, last month, we did almost 900,000 offers.
Jill DeWit: Cool. All right. Mike F wrote, “This is from the other member who is communicating with a broker.”
Steven Jack But…: This is a…
Jill DeWit: This is part of an ongoing conversation.
Steven Jack But…: This is a written communication…
Jill DeWit: Okay.
Steven Jack But…: … from a broker to a Land Academy member about doing a real estate deal.
Jill DeWit: Okay, so this is what the broker wrote?
Steven Jack But…: Yes.
Jill DeWit: Okay. The broker said, “I understand your guy not needing a buyer’s broker. No problem. Tell him to go do all the work. Or maybe that’s what they have you for. Do not ask me to do the work as I’ve been doing.” What?
Steven Jack But…: Exactly. It gets better.
Jill DeWit: I’ve had people like this.
Steven Jack But…: Sure.
Jill DeWit: I’ve had residential agents that are this bad. I’ve totally been here. This is… Could you imagine? Okay. I’m going to vent.
Steven Jack But…: I knew this is going to get under your skin.
Jill DeWit: I’m going to vent a second. Then, I’m going to get back to this comment here. How is this person going to have any business? Can you imagine? You hire this guy and this is your response. They’re saying, let me go on here, “Or maybe that’s what they have you for. Do not ask me to do the work as I’ve been doing. Do not call me to go look at lots for you and get a good deal, and I get nothing. Do not expect me to work for nothing. I’m helping you as a buyer’s broker. Yes, I do need to be compensated for that. I’m a busy broker and do not have the time to run around for people so they can make all the money.”
Steven Jack But…: Hold on, hold on, hold on. “I’m here. I’m here to make all the money. You’re here as a broker to serve me. If you’re smart, go do what I do, become a Land Academy member, but don’t tell me that you can work for me so I can make all the money.”
Jill DeWit: You signed up for that.
Steven Jack But…: This person must be from California.
Jill DeWit: No, it’s not from California. We’re going to stop on the California bashing soon. I hope, right? Maybe, right?
Steven Jack But…: Yeah.
Jill DeWit: “As a broker yourself, I am confident you would not work for free. Neither do I. Would you do all the work I have done for a client without a buyer agency agreement? I expect to be treated as I would want to treat others. If you get to list, then let me know. The firm price is 10% for a listing. We split that with the buyer’s firm.”
Steven Jack But…: Jill and I have had multiple experiences like that, and it certainly isn’t the last one, but here’s my opinion. And then, I would love to hear Jill’s. I look at real estate agents, not necessarily land agents, but most real estate agents, especially house agents, as one or two notches above a used car salesman. And so, that’s where the disconnect, I’ve recently found out, the disconnect between me as an almost always unhappy customer and a real estate agent is that most of them are walking around this planet, patting themselves on the back saying, “I made it. I’m a real estate agent. I provide this invaluable business to people like Jack and he just doesn’t appreciate it.”
Jill DeWit: Okay. Is it my turn?
Steven Jack But…: Yes, I’m done.
Jill DeWit: Let me undo this mess now. You can tell I’m the ying to his yang. There’s a reason why I talk on the phone with these people. Okay, number one. In this agent’s defense, this person could have overused them and I don’t do that. I don’t call a broker and expect them… Just to be sure, just to be devil’s advocate or whatever it is, you can’t call brokers and boss them around and have them go look at 10 and then never list anything. That’s actually not cool. I very sparingly use them when I get going, because I know what I’m doing, I have a good feel for this property, and I’m calling this… I’m usually calling this broker to A, get a last pair of eyes on it, because I’ve got some concerns.
And then B, I really am using them. I really would use them if it works out, and I’m calling a couple of them, not just this one. I’m calling two or three and saying, hey, I’m about to close on this property. I’ve got everything checked. I have some slope concerns or I’ve got some access concerns. I’ve got whatever concerns, and I’m looking for somebody to help me list a property. Is this something that you… I’d love for you to take a look at, if you’re interested, number one. Please take a look at it, number two. And then B, what would you sell it for? Give me an idea what the price is. And when can you do that? And then, hopefully two of the three [inaudible] like, one will go out this weekend and one will say, “I’m actually going to be out there tomorrow. Give me 24 hours.
Great. And then, they call you back. You have a little talk, and hopefully you pick one if everything checks out and it goes great. What if it doesn’t check out? That’s fine. You are a good person and you created a good relationship with them. But you don’t send them your whole… All 10 signed offers you got back. Don’t do that and expect them. Now on the flip side, there are some people, like you say, I am defending you too, that are just jerks because that’s… What I just described to you is how I go at it and my attitude.
There are people that come back to me like this broker. I’ve had it happen recently in the state that I’m sitting in, in the building I’m sitting in. Truth time. We found an asset and we usually do our own deals, right? I’m dealing with the seller’s broker, and the seller’s broker said, “Go get your own forms, Jill. Have a nice day. Good luck.” I’m like, I’m not going to do that. Why would you do that? Whole point is silly. You’re going to double end this deal. You’re going to get both the commission. I could go get a broker, and now you’re going to get half.
Steven Jack But…: She played us for a fool.
Jill DeWit: I know.
Steven Jack But…: Which is 90% of my experience with real estate agents.
Jill DeWit: Yeah. There are people out there that are like, you know what? This guy is… No matter how we got to this point, we’re not on the same page. Everybody needs to walk away kind of thing. He could have been a jerk going into it. Who knows? Maybe he’s jealous, honestly. Maybe he’s jealous because he’s not an investor and he can’t figure out how to make that transition, and I feel bad for him because I’m here to tell you, we have many successful real estate agents here in Land Academy that do both, because they get it.
Steven Jack But…: Because they get it.
Jill DeWit: They get it, and they’re smart. I think that now, as Land Academy members, they’re better agents if they even choose to do that at all.
Steven Jack But…: That’s correct.
Jill DeWit: Because I know a lot of them too, by the way, that came to us as already successful agents, right? But they’re like, “I’m tired of making money for somebody else. I want to make money for me.” And then, they transition to go, “No, I don’t want to have to do that anymore. I don’t even want to do deals for other people because the time it takes me to close this guy’s deal and get 10%, I’d rather do it for myself and make a hundred percent.”
Steven Jack But…: I know this is true, because that’s me.
Jill DeWit: Yeah.
Steven Jack But…: I was a commercial, a very disgruntled, commercial real estate broker…
Jill DeWit: There you go.
Steven Jack But…: … back in the early nineties, and very frustrated representing other people. I just wanted to do it myself.
Jill DeWit: Yeah.
Steven Jack But…: And so yeah, we have… Real estate agents that are involved in Land Academy end up being great investors as long as they’ve sought it out themselves. I’ve tried to explain this business, I stopped trying a long time ago, to a regular real estate agent, and they’re like…
Jill DeWit: Huh?
Steven Jack But…: They don’t… I might as well be asking them to become a manufacturing expert.
Jill DeWit: Right.
Steven Jack But…: It’s that foreign to them.
Jill DeWit: It’s a small group of people, but boy, do they get it. And then when they get it, they got it.
Steven Jack But…: Yeah.
Jill DeWit: You know what? How lucky for us, because… And you who you are and I’m talking about right now. I know several of you on a first name basis that [inaudible] and things like that with us.
Steven Jack But…: Yeah. Perfect example.
Jill DeWit: And you all… It’s great, because you guys bring some interesting, unique things to the table. And you know what? You answer questions for all of us too. Because sometimes for all of us, we’re like, how do I get this agent to do what I want? And you guys nicely save us and go, “Here’s how you work with these guys over here.”
Steven Jack But…: It’s not… Okay, it’s nothing new.
Jill DeWit: But yeah.
Steven Jack But…: Look, I’ve been ranting about real estate agents for almost eight years on this show and pretty much in my personal life. Everywhere I can rant about it, I do. Not one time has one of them said, “That’s a little unfair, Jack.”
Jill DeWit: I know.
Steven Jack But…: “It’s a little unfair. You’re unfair to real estate agents. They work hard.” Never…
Jill DeWit: No.
Steven Jack But…: … has another real estate agent stood in front of me and said, “On behalf of all real estate agents, I think you’re out of line.”
Jill DeWit: Yeah.
Steven Jack But…: Not a single time. Why? Because I’m right.
Jill DeWit: Yeah.
Steven Jack But…: Today’s topic, how money works in your land business. This is why you’re listening.
Jill DeWit: This is interesting that I could have kept on going on that…
Steven Jack But…: I know.
Jill DeWit: … because I have some buddies…
Steven Jack But…: I can see that.
Jill DeWit: I know. Yeah, I know, because we’re 12 minutes in. No, I make friends with my agents. Then at [inaudible], we’re talking about classic cars and kids and parties. We have a good time and they love me. I don’t overuse them, and I make sure they’re paid well. Okay. Anyway, back to the show.
Steven Jack But…: To cap that, if you find the right real estate agent, we always pay 10%.
Jill DeWit: Yeah.
Steven Jack But…: Always.
Jill DeWit: I don’t argue.
Steven Jack But…: I don’t ever negotiate a real estate fee. I don’t believe that’s okay. If we like each other and everybody passes each other’s tests, I’m all about 10%. Even on a… Not for houses, but for all land deals, because there’s other stuff involved.
Jill DeWit: No. My guys, I’m happy to pay them that. They earn it, so it’s good. You know who you are anyway. Do you want me to [inaudible] my things?
Steven Jack But…: Yeah. Yeah. What’s your three?
Jill DeWit: Okay. This is how money works in your land business. Okay, so here’s how I divide it. I divide it up into three different areas. I feel like I have operating costs is one whole section of money in my business. And taxes, by the way, are rolled into those operating costs. All these things I got to… Everything I need to do to keep the lights on, employees happy, things just humming, just moving at this level. My number two thing, I have growth plan costs. I always want to…
Steven Jack But…: This is fascinating.
Jill DeWit: Okay, good. Why? Is this bad?
Steven Jack But…: This is not…
Jill DeWit: I told you, I told you…
Steven Jack But…: I don’t think about money this way.
Jill DeWit: I told you. Here you go, the accountant’s going to come along and say, “That’s great, Jill” and pat me on the head. [crosstalk] “That’s not at all when it goes on in your business, but you just keep thinking that.”
Steven Jack But…: Taxes. She starts with taxes.
Jill DeWit: What? It’s just part of a… Because it’s a hot topic. Everybody gets excited about taxes. I’m like, you need to bake that into your operating costs. Okay, just let me finish my thing. How money works in my Southern California Disneyland head, this is how…
Steven Jack But…: Yeah, this is how Disneyland functions. Listen to this.
Jill DeWit: Yeah. We have a regular operating cost. I can relate it to Disneyland. And just like Disneyland, we have our growth planning costs. The whole Star tours and the whole Star whatever area they just opened and released, you had to plan for that thing in Disneyland. We had to budget some money to build a new area. And then, the third area in my land business in my Disneyland head is profit. Yay. I like to say… I know he’s going to undo this all.
Steven Jack But…: Jill, this is a crack up. I’m learning a lot about you today.
Jill DeWit: This is how I…
Steven Jack But…: Maybe you should deal with the real estate agents and I’ll do the money.
Jill DeWit: And then, my only comment is about the profit, yay, that you get to someday reward yourself with. Please put it away. Sock it away or sock a lot of it away. Please, I’m going to sit back here, I’m going to take a drink of water, and I’m going to let you undo and fix this.
Steven Jack But…: Good. We’re all joking around today. We are all laughing and ranting and we listened to Jill’s little spiel, but the fact is, money is very serious and I have a ton of respect for it. And so, I treat it that way. I think everybody I know or I’ve ever met, personally or professionally who’s not in the business of money, like they’re not an accountant, they’re not in finance or they’re not people who operate, let’s say, a holding company or their own companies. People who are not in that. They’re a doctor or a lawyer or any type of W2 position that you have, or Disneyland here. If you’re not in the business of money, you haven’t, I don’t think, probably been technically trained or you don’t have a knack for it. And so, you manage money by cash flow. The easiest and simplest example is I get a paycheck. Maybe I get two paychecks a month. They total five or six or eight or $10,000. I pay my bills usually with the first paycheck.
When I get my second paycheck, I spend a bunch of money. It goes close to zero at the end of the month. And then, a month rolls over into the next month and I get another paycheck. And the whole thing starts over and over again, I call that managing cash flow, and that’s it. It all stops right there. I see people doing that and they manage their businesses that way, their Land Academy businesses. And they wonder, “What? This doesn’t work.” That’s not how… You have to sit down, and really sit down in front of a spreadsheet, put money into a separate bank account. Let’s say $50,000. You’re going to spend money on education, whether it’s here or elsewhere. You’re going to spend money on getting mail out.
You’re going to watch that money go down, that money, and the further it goes down, you need to start with a budget. You’re going to put $50,000, let’s say, into this thing. You’re going to consciously target property that makes 30 to $40,000 or some number, even $10,000 of profit. And so, you want to manage and micromanage it in a spreadsheet with the dates. I spent this much on mail. Now, I’ve got $40,000 left. There is a bunch of mail going out. I’ve got these five deals. I can afford to do this deal, this deal, and this deal. I need deal funding for the next deal. And so now, I’ve got two or three deals done. The next month, or the next two months, that $50,000 went down to 40, and then went back up to 70. And then, it went down to 50. And then, it goes back up to 90.
Here’s the kicker. Number one, you need to be conscious about this. Otherwise, you’re going to let it happen to you. And then, you’re going to wonder where all your money went. Probably 98% of the people I know do it the way that I described in the beginning, both professionally and personally. What you want to do is have a budget like I just described, and implement the budget to the letter. And then, once you’ve done that, you want to do it faster. You hear people talk about the velocity of money, that there’re finite components and there’s fixed components to this and variable components. The fixed component is dollars. You have $50,000 to work with. You can turn that $50,000, in three weeks or three months or three years, into a $100,000. That’s up to you. How fast are you answering the phone? How fast are you sending mail out? How fast are you getting the employees that you need or hiring people in the Philippines to do the stuff that you don’t want to do? That’s the velocity of money. You’re putting that money to work. Wow, she’s bored.
Jill DeWit: Was that three? Was that all of it?
Steven Jack But…: There’s no three in this.
Jill DeWit: Sorry.
Steven Jack But…: You assigned three. I’m not sure what Jill was talking about, taxes and stuff, and operating costs.
Jill DeWit: Again, you have your way of reading the topic and I have mine. That’s how I took it. Like I said, you’re going to undo it and fix it. Thank you. I appreciate that.
Steven Jack But…: I’ll say this again. I have never had the pleasure of having a business partner or a life partner be more conscious about where dollars are spent than Jill. I mean that.
Jill DeWit: Thank you. At least you can trust me there. I may not know the big picture and where it all goes, but at least I’m good about it. Thank you very much. Happy you could join us today. Five days a week, you can find us here on the Land Academy Show.
Steven Jack But…: Tomorrow, the episode on the Land Academy Show is I actually interview Dan and Emily [inaudible].
Jill DeWit: Land Academy members.
Steven Jack But…: Land Academy members. I was shocked, because he brought… It’s a husband and wife team like Jill and I, and I didn’t know Emily was going to even be on.
Jill DeWit: That’s so cool.
Steven Jack But…: She just sat down right after all the cameras were running and really told us why her husband failed at a bunch of stuff.
Jill DeWit: And how she saved it.
Steven Jack But…: Yes, that was the whole show.
Jill DeWit: Exactly.
Steven Jack But…: And he’s like, he nodded his head a lot and said, “Yeah, that’s what happened.”
Jill DeWit: Yeah. Yeah. She fixed that. She took the phone away from me.
Steven Jack But…: All of that.
Jill DeWit: Yeah, I got it. Very familiar with this whole thing.
Steven Jack But…: Yeah. I sat there with my jaw on the desk going, “Yeah, that’s pretty much my story too.”
Jill DeWit: That’s good.
Steven Jack But…: You are not alone in your real estate ambition.
Jill DeWit: I have one little thing to say, by the way. It is Tuesday now, and coming up very soon, we are reopening an enrollment with a bang. Check your email, watch our site, watch on social media, get on our ebook email list, and then you’ll be notified, because it’s going to be good and special. I know a lot of people have been wanting to join Land Academy and we had to say, “Sorry, it’s closed right now”, but we’re about to reopen and it’s going to be awesome.
Steven Jack But…: We are Jack and Jill.
Jill DeWit: We are Jack and Jill.
Steven Jack But…: Information.
Jill DeWit: And inspiration.
Steven Jack But…: To buy undervalued property.
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