Why Land Investment is Misunderstood (LA 1843)
Why Land Investment is Misunderstood (LA 1843)
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:
I’m Jill Dewitt, broadcasting from the Valley of the Sun, for a few more minutes.
Steven Jack Butala:
Today, Jill and I talk about why land investment is so misunderstood among real estate professionals, seasoned real estate professionals.
Jill K DeWit:
I love it. I think it’s the greatest thing ever. When I talk to people… maybe they’re commercial brokers, fill in the blank, and I talk about what I do and their eyes gloss over. They’re like, “Yeah, that can’t possibly work.” I’m like, “Okay, see ya.”
Steven Jack Butala:
I can tell [inaudible 00:00:41]
Jill K DeWit:
Not my competition. Awesome.
Steven Jack Butala:
I’ve been in real estate my entire life. I started in commercial real estate. I can tell you very clearly why this is, but we’ll do it in a second here.
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. I hope you know by now-
Jill K DeWit:
Oh, I’m so excited.
Steven Jack Butala:
… that Jill and I instruct a handful of new and existing Land Academy members in a live class, called Career Path. If buying and selling land is your career or you want it to be, check it out. LandAcademy.com/CareerPath.
Jill K DeWit:
We are filling up right now. Career Path five starts October 13th, just a reminder. If you are thinking about this, do definitely send a note to our team. Did you say the email address? Support@LandAcademy.com. Sorry.
Steven Jack Butala:
Yeah, go ahead. This is filling up faster than any of the career paths that we’ve done.
Jill K DeWit:
Yeah. Word’s getting out.
Steven Jack Butala:
Yeah. That’s what it is. It’s catching on.
Jill K DeWit:
You know what it is? Word’s getting out. If there’s anybody in our land space that does it, what we do, they charge 50, 80, a hundred thousand dollars, if they even do it. We undercharge. I’m just going to say that.
Things are going to change at the end of this year, but we’ll get to that. That’s a whole nother thing.
Steven Jack Butala:
That’s absolutely right.
Jill K DeWit:
Peter wrote, “For those of you who have experience with six-digit deals, here’s a newbie question.”
Steven Jack Butala:
Here, one second, before you read this. I went into… before pre-producing all these shows today, the five that we record today, into Discord, to look for questions, as I always do.
Jill K DeWit:
Of course.
Steven Jack Butala:
Because there’s a lot of new people, there’s a lot of new questions, a lot of fresh new content. So if you join last week, during Jill’s promo, at the time this airs, welcome.
Jill K DeWit:
Yay. Yay.
Steven Jack Butala:
We’re happy you’re here. It’s great to see new people’s perspective.
Jill K DeWit:
Fresh stuff.
Steven Jack Butala:
Usually, people join because they’ve been listening to our podcast for a while, and so you have these pent up questions. I love to see it all just coming out in our-
Jill K DeWit:
Brain dump.
Steven Jack Butala:
… environments. Yeah.
Jill K DeWit:
Call it a brain dump.
Steven Jack Butala:
So, anyway.
Jill K DeWit:
Good. Okay. So Peter wrote, “Newbie question. My understanding with these bigger deals, is you’re not necessarily trying to double your money.” Oh, hold on Peter. Oh, wait.
“I heard Steven and Jill mention that at some point, they would be happy to buy something a hundred thousand, they could sell for 150. So let’s say we’re talking about a property with a market value of $300,000. What would be a solid acquisition price, $200,000? Does the percentage you would be willing to acquire the property for change, if you wish to get deal funding? Maybe you prefer greater margins if you’re working with someone else’s money.
I have a few leads from prospects or from properties that are in an area on the edge of my mailer, that are in a hot market and worth a lot more than my pricing was targeted. I’m hoping to get a better sense of what I should be trying to acquire them for. Thanks for your thoughts.”
You know what? We’re talking land, so it doesn’t change. I’m sure you read the same thing I read, about the guy in our group that just had a serious conversation with the home builder and what he’s trying to do, as far as InfoLaunch. Did you read that?
Steven Jack Butala:
Well, that’s in here. Later this week, that’s a question.
Jill K DeWit:
Okay. Sorry. Thank you. All the signs point to, just get it cheaper.
Steven Jack Butala:
I’ll directly answer the question when Jill’s done.
Jill K DeWit:
Thank you. Hold on, I’m not done.
Steven Jack Butala:
She’s got some philosophy.
Jill K DeWit:
I’m not done yet. Exactly.
Steven Jack Butala:
Land philosophy by Jill.
Jill K DeWit:
With land thing, I still want to double my money and get out with meat on the bone, for my buyer. That is still my goal, number one.
Number two, and I use the term, well, if it all went sideways. What if I did something really, really wrong, and I bought it for 100, thinking it’s worth 300, and I sell it for 150? Is it going to break my heart? No. That’s where I try to use those numbers.
Then to answer the other question, Peter, if you buy something for a hundred and we think we’re selling it for 300, and then we only sell it for 150, am I going to be a little not happy? Yeah, because think about it.
At those numbers, we got broker commissions and all that stuff. You and I thought we were going to split $150,000, and now we’re splitting $32,000. That’s not as great. So, I want more meat.
Steven Jack Butala:
Yeah. So it all comes down to exactly what Jill said in the beginning, buying super cheap for its current value, because stuff goes wrong.
I disagree a little bit, with Jill. You buy it for a hundred, sell for 150, wow, we got out of that okay. We thought it was worth 400, but we missed something.
But everybody, all of us have sat down or consumed content on the internet. Let’s say it’s just YouTube. Watch a couple of shows on YouTube. You sit there and think, well, that’s not that hard. I should do that.
You don’t sit down and try to get members on YouTube. What you do is, do provide amazing, unique content and maybe some mild level of marketing. So, you can gain members that have a legitimate interest in what you’re providing and the content that you’re providing.
If it works, you’ve got tons and tons of members that have legitimate interest in what you’re doing. Then you decide how you’re going to monetize it. It might be getting a sponsor. It might be having a membership group.
Jill K DeWit:
Where we going with this?
Steven Jack Butala:
Because when you send a mailer out, here’s the tie-in-
Jill K DeWit:
I’m a little confused.
Steven Jack Butala:
When you send a mailer out, you shouldn’t be concerned with all of this other stuff. Can I get money for it? Can I sell it for 150, 300?
You need to look at all that stuff and follow the Land Academy program. But in the end, if you buy a great piece of real estate that’s really undervalued, you’re going to smash it out of the park.
Jill K DeWit:
Okay.
Steven Jack Butala:
You’ve got to really concentrate on that one thing. So in the YouTube example, it’s providing great, unique content. In our world, it’s making sure you buy property that’s really undervalued. It’s really comes down to one thing.
Jill K DeWit:
I feel like that was a staff meeting for one, because you lost me.
Steven Jack Butala:
If you understood what I said, awesome, good for you. If you don’t, call Jill. Here’s her cell number.
Jill K DeWit:
Oh, thanks. You went somewhere else. You kind of tied in a conversation we had earlier today.
Steven Jack Butala:
There’s nothing wrong, nothing wrong…
Jill K DeWit:
No, I know. That’s true.
Steven Jack Butala:
… with buying a piece of property for a hundred thousand bucks and selling it for 150. This is a huge topic. Everybody had something to say on Discord, about this.
Jill K DeWit:
Is it my favorite thing to do though? No, I really don’t want it. If I’m going to sell it for 150, I want to buy it for 70.
Steven Jack Butala:
Well, let’s say you find five great deals at a hundred thousand bucks. You get them all funded, deal funding or other people in the group. So, you’ve got $500,000 of…
Well, this is a real life situation. So, now you’ve got $500,000 placed. One deal does exactly what it’s supposed to do. You generate 300. One deal, you do fantastic on it. Buy for a hundred, sell for 500. And the rest of them, buy for a hundred, sell for 25, buy for a hundred, 175 and on and on and on.
So, the whole point is, get a bunch of deals that are great. Get them placed, and then let’s see what happens.
Jill K DeWit:
We’re going to disagree today.
Steven Jack Butala:
When you’re new, you want to plan everything out, because you’re smart. You joined Land Academy.
Jill K DeWit:
Right.
Steven Jack Butala:
Today’s topic, why land investment is misunderstood. This is the meat of the show. Here’s the old school concept of real estate that I was exposed to when I got involved in commercial real estate, in the very early nineties.
Buy a piece of property, usually off of the MLS. Really in the end, with commercial real estate, it’s because some broker called you and said, “Hey. Hey. Hey. Hey. Hey, I got this. It’s not listed. It’s a great deal. I know this guy. He’s retiring. He’s got this apartment building over here. He hasn’t raised the rents for a lot of years. It’s undervalued. I can get it for you for 1,500,000. Want to buy it? Want to buy it? Want to buy it? Want to buy it?,” until you buy it.
Then the concept is, you take that theoretically undervalued property at 1,500,000, maybe kick everybody out, maybe put new appliances in or basically clean up all the units, rerent it out for more and then sell it.
That’s an incredible way to leverage money and property. It’s an old school way. And there’s a lot of overweight old men, sitting around smoking a cigar and sipping a scotch somewhere, discussing all the ways that, oh, these young kids don’t understand how to… because I used to do this.
There’s nothing wrong with that, but that’s the traditional old way. So that, when you say to them, “Well, yeah, but I’ve just bought this hundred-acre piece of property for $180,000 and sold it for 400,” and they scoff at that because there’s no leverage in it.
They have all kinds of questions like, well, how did you know that was going to happen? Because they don’t understand data.
So, that’s the difference. That’s the disconnect between old school cap rate buyers, is that we are so buying property under its value, that they’re not familiar with that. Their innate reaction, their first reaction, is something wrong? Why is the property flawed?
When in reality, we all know. We bought it because somebody didn’t want it anymore. Maybe they never wanted it.
Jill K DeWit:
Know what’s funny? It’s almost sounds like, you know how men… You know who you are. I’m talking to you.
Steven Jack Butala:
I’m going to talk to women in a second.
Jill K DeWit:
Okay.
Steven Jack Butala:
This show’s going to get canceled on iTunes.
Jill K DeWit:
But you know what this sounds like? You know when your wife says, “But I just have a feeling”? Your wife, girlfriend, fill in the blank, we all just say, “But this just doesn’t feel right to me.”
Or on the other side, “We got to do this. I just have a feeling it’s going to work out.” You shake your head, going, “Well, I don’t get it, but I do know that the last 10 times you came to me with this, we’re batting 10 for 10. So I don’t get it, but okay.”
Steven Jack Butala:
No woman’s ever said that.
Jill K DeWit:
I said that to you.
Steven Jack Butala:
Well, except you.
Jill K DeWit:
Okay. Wait a minute. I do that.
Steven Jack Butala:
You actually have said that to me.
Jill K DeWit:
I have said that to you.
Steven Jack Butala:
All right, go ahead. Now I like this.
Jill K DeWit:
Okay, thank you. My point here is, this is almost like that. It’s a man version of telling an older or someone in a different world, like you just described, the cap rate guy, “Trust me, I have a feeling.”
But we do kind of know. It’s a little bit of a feeling and it’s a little bit of, well, look it, every other property in the last 12 months that was priced this way, between 15 and 20 acres has flown off the shelf. Pretty sure this other one here, which is better than these six I just looked at and priced cheaper than those…
It’s going to happen to you. That’s really what we’re saying. When I don’t have empirical data, like I know the rents are going to go up to this, I know the rents are going to be that and fill in the blank.
Steven Jack Butala:
Let’s really quickly look at the anatomy of those two deals. You’ve got the old, fat, cigar guy deal, where he buys that property for 1,500,000.
He’s got to get a contractor. There’s all kinds of stuff that happens before his exit. He has to improve the property, get permits.
Jill K DeWit:
Pick out cabinets.
Steven Jack Butala:
In 1978, that was maybe easier. I doubt it. I would argue it’s probably harder, because there’s no data.
Jill K DeWit:
I agree. I bet it is harder. Yeah.
Steven Jack Butala:
Then your exit happens a year and a half, two years later. We just bought a piece of property with a partner, that we bought. I think we bought it and closed it in four or five days and resold it in a week. That’s my exit.
So there’s all kinds of arguments that these guys, while they’re taking a hit on that cigar, will make on why.
“Yeah, but you can’t leverage your way up. You pay taxes. I don’t. I 1031 exchange this.” They can have them. The fact is, I don’t know, geez, we do… now these days, 50 to 80 deals a year. Many of our members do more than that and do very, very well financially, with no stress.
Jill K DeWit:
I wonder how many we really are doing. I think it’s more than that. Sure feels like it. You know who you are.
Steven Jack Butala:
Yeah. She means deal funding deals, at the source of our deal stress, not the-
Jill K DeWit:
Oh, we’ll talk about that on Friday.
Steven Jack Butala:
The deals that we do, it’s happy.
Jill K DeWit:
Exactly. Did you cover what you want to cover?
Steven Jack Butala:
Mm-hmm.
Jill K DeWit:
Thank you. Happy you could join us today. Five days a week, you can find us here on the Land Academy Show.
Steven Jack Butala:
Tomorrow, the episode on the Land Academy Show is called, How Many Blind Offers You Send is Directly Tied to Your Success.
You are not alone in your real estate ambition. This is one of those things where, do we really need to talk about it?
Jill K DeWit:
Well, back to today, I would like to hear your women. What was going to be your woman?
Steven Jack Butala:
Oh, I don’t know.
Jill K DeWit:
Okay.
Steven Jack Butala:
There’s regular women, who are very leery of any risk and just don’t want to rock the boat and want to just sail through life, which is 98% of women.
Jill K DeWit:
Knowing that they get a 5% raise every year.
Steven Jack Butala:
Yeah.
Jill K DeWit:
I understand.
Steven Jack Butala:
Then there’s Jill. So, find yourself a Jill. That’s my recommendation.
Jill K DeWit:
Aww. Thank you very much. Thank you for tuning in. By the way, I know it’s been here for a few months, but I just want to make sure that you know, we revamped everything this year. We called it Land Academy 3.0.
Those of you that just joined this week, I hope you are happily watching that. That’s where you want to start. If you talked to me on the phone, we talked about that. Start with Land Academy 3.0 for 2022. It’s everything that we’re doing right now, today.
Then, when you come up for our air from that, you can go back and watch all the other programs that you have.
Is it five hours? For some reason I thought it was more hours. Okay. So five hours, again, feels like more.
Steven Jack Butala:
The first one was 18 hours.
Jill K DeWit:
Oh, yeah. Yeah.
Steven Jack Butala:
That’s why five’s better.
Jill K DeWit:
That’s true.
Steven Jack Butala:
I mean, for the consumer, not for us.
Jill K DeWit:
Exactly. Exactly. Yeah, that’s one of the changes that we made in the 3.0.
Steven Jack Butala:
Yeah.
Jill K DeWit:
We don’t make it so painful.
Steven Jack Butala:
Just get to the point, geez. Can you two please just get to the point and show us how to buy cheap land?
Jill K DeWit:
Exactly. It was funny. I got a message from somebody today, that just joined yesterday. They’re already on module seven. I’m like, hold on a moment. I know what you’ve been doing last night and today.
Steven Jack Butala:
They stayed up all night, then.
Jill K DeWit:
I know. I’m like, good for you. I appreciate that, Sid. Anyway.
Steven Jack Butala:
Is that their name, really?
Jill K DeWit:
Yeah. So, really cool.
Steven Jack Butala:
We are Jack and Jill.
Jill K DeWit:
We are Jack and Jill.
Steven Jack Butala:
Information…
Jill K DeWit:
And inspiration…
Steven Jack Butala:
… to buy undervalued property.
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