Jack Thursday – Where to Start in Real Estate (LA 1826)
Jack Thursday – Where to Start in Real Estate (LA 1826)
Transcript:
Steven Jack Butala:
Steve and 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 am Jill DeWit, broadcasting from the Valley of the Sun.
Steven Jack Butala:
Today’s Jack Thursday. I’m going to talk about where to start in real estate. And honestly, where not to start. Why?
Jill K DeWit:
It’s going to be more about where not to start.
Steven Jack Butala:
Why do I know about where not to start in real estate? Because that’s where I started.
Jill K DeWit:
Yeah. Oh yeah. We can tell you all this … You know what? I swear, this is why you’re here and listening, I hope. And I know for many of you, this is why you’re in Land Academy.
Steven Jack Butala:
Besides the fact that you have-
Jill K DeWit:
I’d rather pay you guys and not do it, and hear all about the stuff that you failed on and what got you here today. It’s so much faster and cheaper for me to just join and go with what you got figured out. Ding, ding. Yep.
Steven Jack Butala:
That and the fact that you have real low standards and we appreciate that.
Jill K DeWit:
Oh, silly.
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 the Land Academy YouTube channel, comment on the shows you like.
Jill K DeWit:
Daniel wrote, “Hey, everybody. I’m getting very close to finishing my first mailer and I am very excited about it. I’m hitting a little bit of a wall though when calculating my offer price per …”
Steven Jack Butala:
Acre, just say.
Jill K DeWit:
Acre?
Steven Jack Butala:
It’s supposed to be PPA, yeah.
Jill K DeWit:
Okay, got it. I’m going, “What is PPE?” Oh my God. Okay, price per acre. “After using web scraping software and plugging my numbers into the equations,” or, “plugging the numbers into my equations, the results are a bit wild. Upon further inspection it seems that the reason is because the MLS in this area is responsible for less than 40% of all the listings here for land on Zillow, and they’re not accurately representing the listings.”
Steven Jack Butala:
Welcome to my world.
Jill K DeWit:
This is true. “For example, 0.002 acres is going for 30,000, while another seven acres is listed for $1,000, and so on. Nearly all of them are mislabeled.” Sorry. This happens. “And without elaboration in the descriptions.” Yeah, yeah. “Does anyone know a way to efficiently circumvent this dud data? For what it’s worth, I have both WebHarvy and Octoparse as my web scrubbing apps. Sorry for the wall of text.” That’s so funny.
Steven Jack Butala:
Daniel, you are going to be amazingly successful in your real estate career.
Jill K DeWit:
Yeah.
Steven Jack Butala:
I put this on Jack Thursday for a reason. This is absolutely the norm for scraping data, the way that we teach it, and coming up with the offer prices. What you’re experiencing, it’s not the exception, it’s the norm. You scrape all the active and sold properties in a zip code. And what you’re stalling for is a retail price per acre, from which you can submit offers to all the owners in the area at a much discounted price.
So if everything’s $1,000 an acre, you solve for this. What you’re processing is $1,000 an acre. Then you’re going to write offers for $250 an acre and few people are going to sign them, and you’re going to buy the properties and sell it for $1,000 an acre, hopefully, or some number like that. That’s the overview.
But follow me here, let’s just do a little bit of math. In his 0.002 acre example for $30,000, that price per acre is crazy, astronomical. It’s going to throw your data off. Us data people call that an exception. And so if you think of it as a bell curve, the stuff that’s on each side of that bell, you got to get rid of it. And we teach this in the program, or you can use Concierge Data and we’ll do it for you. So in every data set, I don’t care what type of data you’re analyzing, there are exceptions. In our cases, with those exceptions, we remove them to get a realistic price per acre.
“Well, Jack, what happens when there’s only one or two examples per zip code for sold?” And then you have to guess, you have to make an educated guess. “Well, that sounds like a lot of work and probably a lot of potential for error, and I want a better answer.” Go buy and sell stock then. Get an E-Trade account, it takes about 30 seconds, and then buy some stock and resell it. But here’s the thing, you can’t buy $100 share of stock for $25, and which is what we do. We buy a $100,000 piece of land for $25,000 and then go sell it for 100 grand. What he’s talking about, what David’s talking about here, it’s hard. Keeps a ton of people out of this business.
Jill K DeWit:
That’s what I was going to add. That was my last thing, that’s why-
Steven Jack Butala:
If you get this-
Jill K DeWit:
This is not for everyone.
Steven Jack Butala:
… if this sounds like a lot of work to you and it’s like, “Oh man, I don’t want to do that. I don’t even need to listen to the next episode of this show,” I understand.
Jill K DeWit:
Well, you know what, here’s what I was going to say. Take it a step further too. Before you send out the mail, continue on the process. And before you send out the mail, do some of what we do, like our spot-checking. What do we … Test for reason. Test for reason, and see if I sent it out at this price and it came back signed, would it make sense, would I buy it?
Then you’re staring at a real property, a real APN, and you can go look it up and go, “Oh yeah, okay. Now this one, the way it popped up, it’s over in this area. This is a great price. I did it right.”
Steven Jack Butala:
There are software designers, and some of them are former Land Academy members, who believe that you can automate everything. And you cannot automate this, I’m here to tell you, because you can’t set parameters-
Jill K DeWit:
Yeah. That stuff, that’s going to mess up right there.
Steven Jack Butala:
… for the exceptions. Very different. Zip code to zip code is very, very different. And so please don’t use these pricing tools. You will ultimately end up in every situation with an overpriced mailer. And what do you do about an overpriced mailer?
Jill K DeWit:
I hate that, it sucks. It’s always easy to add money, it sucks taking it away. Oh yeah, you had an overpriced mailer? Congratulations. Now every person calls you, you might as well have just sent out a neutral letter.
Steven Jack Butala:
And do zero deals.
Jill K DeWit:
Yeah. And just say, “Hey, I want to buy your property. Fill in your number and mail it back.”
Steven Jack Butala:
Can you imagine.
Jill K DeWit:
Exactly. I’ve seen some of those, by the way. I’ve seen people doing that. People have had, “If this price doesn’t work for you, right down what does.”
Steven Jack Butala:
Oh, please don’t do that.
Jill K DeWit:
I need to say that. And I’m like, “Who is doing that?” I’m like, “Oh.” Because it’s going to work itself out. But I don’t want to come out of the gate saying, “Eh, you know what? This is what I think, but whatever you think like …” Well, just a second.
Steven Jack Butala:
Today’s Jack Thursday, and I’m going to talk about where to start in real estate.
Jill K DeWit:
I’m just going to sit back here.
Steven Jack Butala:
This is why you’re listening. I actually think that you’re going to have a lot to say about this.
Jill K DeWit:
Okay.
Steven Jack Butala:
What do you do … I’m going to ask you, Jill.
Jill K DeWit:
Okay.
Steven Jack Butala:
What do you do when you need to know the answer to something? What do you do? You’re sitting around, watching TV and your toe hurts, and you want to figure out why. What do you do?
Jill K DeWit:
Google it. You just look it up. Try to look [inaudible 00:07:15].
Steven Jack Butala:
You Google it. What if your headlights out and you need to know how to replace it. What do you do?
Jill K DeWit:
YouTube.
Steven Jack Butala:
You go to YouTube. This is what you do before you start in real estate. Go on YouTube and start saying, “What do I do to … How do I start in real estate?” What you’re going to find is a massive amount of information about becoming a landlord. And maybe you’re familiar with becoming a landlord or what landlords are because you’re a tenant or are a tenant, just like all of us. We’re all tenants at one point, most of us, not all of us.
And you write that check and it’s the $1,500 a month or whatever. And you say, “Wow, if I was getting $1,500 a month for doing nothing, because I’ve never met my landlord. And every time I call him because the sink’s broken, he doesn’t call me back. I want to be a landlord, and I want 10 of these things.”
Jill K DeWit:
This is hilarious.
Steven Jack Butala:
“Because I want 15,000 bucks a month and then I can quit my stupid job.” This is the thought process.
Jill K DeWit:
“Yeah, I’m just going to ignore phone calls, like they did to me.”
Steven Jack Butala:
When I started there was no such thing as the internet, so I couldn’t find out that that’s stupid. Because I’m telling you, it’s stupid. If you want to be a landlord, this is how you do it really quickly. You seek out institutional funding, huge institutional funding, and you go submit offers, like we do, to 100 plus tenant-
Jill K DeWit:
Buildings.
Steven Jack Butala:
Apartment buildings or office buildings or industrial buildings or whatever, and take a small percentage for doing the whole deal. Get debt financing or equity financing. It’s never been easier to get debt or equity financing for real estate because of the internet. And now you own 5% or 10% of a massive amount of real estate, commercial real estate, where there’s a tenant manager in place and all of that. And you raise the rent over a few years and you sell it in the same cap rate you bought it, because the rent’s higher. And your debt or equity position is the same.
That’s how you make a ton of money as a landlord. You do not almost ever make any money on buying a house and renting it out. In fact, you’re going to pull your hair out and probably lose money. You know who makes money on a real estate transaction? The real estate agent.
Jill K DeWit:
Agent.
Steven Jack Butala:
The escrow agent.
Jill K DeWit:
Agent.
Steven Jack Butala:
The escrow agent, the lender.
Jill K DeWit:
Yeah, that’s true.
Steven Jack Butala:
The assessor, the-
Jill K DeWit:
Treasurer?
Steven Jack Butala:
No, no. The person who does the appraisal, appraisers make a lot of money.
Jill K DeWit:
Oh, that’s true.
Steven Jack Butala:
Everybody makes money, except you. And so now you’re into a house for a couple of $300,000. You’ve got a tenant in there who pays rent maybe a few times, whenever they want. You can’t really enforce that in a lot of states, depends on which states you’re in. And if you do, it costs a bunch of money. And so your only real hope is to make any money, is that hopefully you’re in California, where people don’t pay rent but property values go up.
Jill K DeWit:
I say don’t worry, but the state will.
Steven Jack Butala:
It defies logic, yeah.
Jill K DeWit:
Rest assured.
Steven Jack Butala:
So just trust me.
Jill K DeWit:
Sit tight.
Steven Jack Butala:
Don’t do that.
Jill K DeWit:
No.
Steven Jack Butala:
Everybody starts in real estate [inaudible 00:10:24].
Jill K DeWit:
I don’t want that stress. I’m not going to do that. Well, the biggest picture is … Can I just to say, all of those is wonderful. Let’s just say I’m in Southern California, I’m in Riverside.
Steven Jack Butala:
Excellent.
Jill K DeWit:
I bought a four bedroom house, I paid $500,000 for it. I rent out four rooms and I’m netting with my mortgage and everything like that. Maybe I’m netting two grand a month.
Steven Jack Butala:
Oh gosh, that’s the best case.
Jill K DeWit:
Right? How long is it going to take me to get back what I put in, my half million dollars, at two grand a month?
Steven Jack Butala:
Or you finance it.
Jill K DeWit:
I’m not going to do that.
Steven Jack Butala:
You finance it all, and your payment … It doesn’t work.
Jill K DeWit:
I know.
Steven Jack Butala:
The math doesn’t work.
Jill K DeWit:
Whew.
Steven Jack Butala:
The only way you make money … Believe me, I did all this. And the only way you make money is if the property goes up in value, which in many, many, most places in this country, it does not. California’s an exception. Especially right now, it all just went up. It’s not going to continue to go up forever. Now is a terrible time to buy a house to rent it out. It’s never a good time.
Every time Jill and I have started down this path, we end up selling the property a month or two into it, every single … In fact, we stopped doing it a while ago.
Jill K DeWit:
Right. And truth time-
Steven Jack Butala:
Stopped thinking about it.
Jill K DeWit:
I’ll tell you, truth time, because that’s who we are, you know this, we do have one tenant in one thing, and it’s because we want to keep it forever. It’s been long paid for. It’s because we don’t want to live there right now, but someday we will.
Steven Jack Butala:
We may. In my demented accounting way, I have to have life fallbacks. Jill’s so tired of hearing this. So if something terrible happens in life financially, that we can just call … It’s in a great location. I would happily live there for years and years and years.
Jill K DeWit:
Go back and live there. We have lived there.
Steven Jack Butala:
Right in Old Town in Scottsdale. Yeah, we’ve lived there.
Jill K DeWit:
We did lived there.
Steven Jack Butala:
We have lived there. So where do I-
Jill K DeWit:
And sometimes you might … There’s some days that I might have you moving back there.
Steven Jack Butala:
[inaudible 00:12:20]. We can finish this story. Thanks, Jill.
Jill K DeWit:
[inaudible 00:12:30].
Steven Jack Butala:
Finish that story, yeah. We have a tenant in there who’s one of Jill’s girlfriend’s sisters, and she pays rent right on time and-
Jill K DeWit:
Oh yeah. She never calls us.
Steven Jack Butala:
Jill’s girlfriend’s husband takes care of everything physical [inaudible 00:12:44].
Jill K DeWit:
It’s a little bit of a paying it forward. It works out, everybody benefits.
Steven Jack Butala:
And so in lieu of that, she has half of market price rent, which is fine.
Jill K DeWit:
Ah, okay.
Steven Jack Butala:
So wait a minute.
Jill K DeWit:
She’ll stay forever.
Steven Jack Butala:
In your story you said, the only way you make money is if the property value goes up.
Jill K DeWit:
No, we’re not making money off of it.
Steven Jack Butala:
So I got to thinking, if the only way I make money in real estate is the value goes up, even in your huge apartment complex story, you created the value to go up by capitalization rate and raising rents. So wait a second, let’s all cut to the chase. I don’t want to do that. I don’t want to wait two years. I don’t want to raise rent. I don’t want to go raise equity. All I want to do, if that’s the way you make money in real estate, is go buy a piece of real estate for a lot less than it’s worth today. I don’t want to do anything to it. In fact, I don’t even want to go visit it.
Jill K DeWit:
Correct.
Steven Jack Butala:
I just want to relist it on the internet, dress it up. Put some pretty pictures in there and a description, and resell it for its current market value.
Jill K DeWit:
Yep.
Steven Jack Butala:
“So wait, you mean I don’t have to have a real estate agent?” Nope. “I don’t have to have an escrow agent?” That’s up to you. I would recommend having one, but you don’t need to do a deal with one. “So all I have to do-”
Jill K DeWit:
“I don’t have to be licensed?”
Steven Jack Butala:
No. No, please don’t get a license.
Jill K DeWit:
Yeah, see.
Steven Jack Butala:
“All I have to do, my whole job in life now, is to buy undervalued real estate and then just go sell it for market value.” Yep.
Jill K DeWit:
Welcome to Land Academy.
Steven Jack Butala:
That’s how you get started in real estate. That’s how you pass everybody else in … Welcome to Land Academy. That’s how you catapult your financial life by … Well, how do you buy … Somebody asked me in a bar three days ago, “What do you do for a living?” I said, “I buy land, and then I resell for more.”
And that disgusts people for some reason. Try it. Next time somebody asks you what you do for living, even if you don’t, just say, “Yeah, I buy land and I sell it for more.” They just get so disgusted with that. I don’t know why.
Jill K DeWit:
It would be like, what if I work for Toyota? What do you do? I make cars and I sell them at profit. That’s not a problem.
Steven Jack Butala:
“Well, that’s great, Jack.” How do you buy undervalued real estate? By sending out a massive amount of blind offers for 25 or 30% of what the property’s actually worth. That’s how you get started in real estate.
Jill K DeWit:
Ding, ding. Thank you.
Steven Jack Butala:
Oh, that’s it?
Jill K DeWit:
Yeah.
Steven Jack Butala:
You don’t have anything to say?
Jill K DeWit:
Nope. I know what I have to say, 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 what to do if you’re not a data person. Yikes.
Jill K DeWit:
This came up from our team member. This is all week where our team said, one of the things that they’re talking about is, we got a lot of people that say they’re a Jill. And they want to be a Jill, but they don’t know what to do about this piece of it. Because we have very different talents, so I can help you with that.
Steven Jack Butala:
You are not alone in your real estate ambition. Listen, if you’re not a data person-
Jill K DeWit:
Well, don’t steal my thunder for tomorrow.
Steven Jack Butala:
… then you’re not a data person. Don’t be upset about it.
Jill K DeWit:
Right. Well, talk about it tomorrow.
Steven Jack Butala:
Don’t steal my thunder. That’s what she talks.
Jill K DeWit:
Exactly. By the way, thanks for tuning in and we hope you find our content valuable, and we really do appreciate your support. If you haven’t already, please do check out our YouTube channel. You can see the video of this right now and it’s actually comical, and hit the Subscribe button. And by the way, if you’re a member, don’t forget, get us on Discord. You better be there. We are Jack and Jill.
Steven Jack Butala:
We are Jack and Jill. Information-
Jill K DeWit:
And inspiration-
Steven Jack Butala:
To buy undervalued property.
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