Real Estate Lessons Learned From Detroit’s Apparent Comeback (LA 1864)

Transcript:

Steven Jack Butala:
Steve and Jill here.

Jill DeWit:
Hi.

Steven Jack Butala:
Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.

Jill DeWit:
And I’m Jill DeWit, broadcasting from awesome motor city, Detroit. Technically, I’m not really in Detroit right now. We’re a little bit Do North.

Steven Jack Butala:
Do North.

Jill DeWit:
… of Detroit, right along Lake St. Clair.

Steven Jack Butala:
Yeah. Good, you’re getting it.

Jill DeWit:
Thank very much. I’m getting it. Learning my way around a little bit and it’s amazing. And boy, do you people here in Detroit drive fast?

Steven Jack Butala:
This is someone from Los Angeles.

Jill DeWit:
I thought we drove nuts in LA. I was like, “I got to up my game to keep up with you all.” It’s impressive.

Steven Jack Butala:
I forgot. But yeah, it’s always been like that.

Jill DeWit:
Yeah. Man, you guys drive fast. And man, do you have a lot of cool cars around. It’s good.

Steven Jack Butala:
Today Jill and I talk about the real estate lessons we’ve learned in the short time that we’ve been here from Detroit’s apparent comeback.

Jill DeWit:
It’s amazing.

Steven Jack Butala:
I have to tell you that we’ve been in the Detroit area for two days and my opinion has done a 180 degree turn.

Jill DeWit:
Yep.

Steven Jack Butala:
I’ve been knocking on Detroit and knocking Detroit down on this show since 2015 and it’s over. I’m so impressed by what we saw over the last few days to the point where we will be attending the Lions game. One of my buddies is a nicest thing ever.

Jill DeWit:
Well, yeah, when this airs, we will have gone to the Lions game two days ago.

Steven Jack Butala:
Yeah. I was going to explain that.

Jill DeWit:
Oh, sorry.

Steven Jack Butala:
So this airs on Tuesday, but we will see this Sunday prior to Lion’s game and I hope they win. But while you’re listening to this, you will know.

Jill DeWit:
Exactly. And Jill gets to sit across and stare at Pete Carroll.

Steven Jack Butala:
Because they’re playing Seattle.

Jill DeWit:
Yeah.

Steven Jack Butala:
Anyway, to the point where when I lived here when I was a kid, it was very, very unusual or difficult for a lot of reasons to go downtown to a baseball game, and the football stadium wasn’t even located here. It was located in way northern suburb. So, I can’t wait. We were down there for dinner last night. I can’t wait to go back there again. It’s so completely redone. And in the show we’re going to talk about why and the people that we went to dinner with explained it to us and it’s a great story.
And what we can take from it is how to create equity in real estate, which we do, but with every land transaction we do.

Jill DeWit:
Yep.

Steven Jack Butala:
Before we get into it, let’s take a question posted by one of our members in the landinvestors.com, online community’s free, and I hope you know that we have a full blown commercial printing company to help you get offers to owners out in the mail. In fact, let’s call Offers the number two owners.com. We process between 500,000 and a million offers a month, and to get you, and if you’re a member or not a member of Atlantic Academy to get your offers in front of offersowners.com.

Jill DeWit:
Megan Mote. “Hey guys, quick question. We received a signed purchase agreement back and after further investigation we decided we do not want it all together. We reached out to the buyer and said, “We’re not interested at this time,” and they replied, “Then why send a purchase agreement in the first place then?” Does anyone have any suggestions on how to reply to that? I tried searching the groups for this topic [inaudible 00:03:23] I can find it if this has been spoken about already, please help me in the right direction. Thanks so much.” You know what I would do?

Steven Jack Butala:
Nothing.

Jill DeWit:
Exactly.

Steven Jack Butala:
[Inaudible 00:03:33].

Jill DeWit:
I just like, “And we’re done.” They’re not expecting a response, honestly.

Steven Jack Butala:
And then again, there’s a lot of responses in discord from other members, because this happens to all of us.

Jill DeWit:
Yeah.

Steven Jack Butala:
There are contingencies in every contract, and every good real estate purchase agreement or contract that allow for people to change their mind, but maybe it’s within a certain amount of time, maybe there’s non-refundable money, but in our case, if she used, I hope you used, Megan, the template that’s on Offers Owners, it’s the same exact one that we use and it says, “Look, we want to buy your property for $35,000.” But it’s pending our research, and pending our due diligence, and pending the confirmation of the size and the condition of the property and all that stuff. There’s three or four outs in there. And so, if they sign it and send it back, it’s not a binding contract, not for either party.
It’s a purchase agreement. And let’s just all see if it all pans out. At a certain point, it becomes an Ironclad agreement. But those are details that you don’t have to worry about this. If they call back and say, “Look, you’re on the hook, you’re going to buy the property.”

Jill DeWit:
No.

Steven Jack Butala:
That’s just not the case at all. We have story after story after story about entering into that purchase agreement with lawyers and saying, “You’re done. You’re buying this property, we’re going to sue you in the whole thing.” And nothing ever comes from it. So, don’t worry about it.

Jill DeWit:
No. So, read the bottom there. I didn’t pass my fill in the blank kind of thing. So you know what, and even if you want to, you can say, “You know what, I have all these things on there. I didn’t realize that this didn’t pan out, this didn’t pan out, and that didn’t pan out. So, here’s what I’ll do. I will buy your property, but here’s the price that I’m willing to pay.” And then let them say no. That’s another way to handle it too.

Steven Jack Butala:
Today’s topic, real estate lessons learned from Detroit’s apparent comeback. This is why you’re listening. This is the story of Detroit starting in 2013 to present so far, 2022. And it’s relationship with Quicken Loans. What’s his name?

Jill DeWit:
Gilbert.

Steven Jack Butala:
Dan Gilbert.

Jill DeWit:
Mm-hmm.

Steven Jack Butala:
Dan Gilbert and Quicken Loans have been… Quicken Loans started in Detroit and now have about 18,000 or so employees, I think. And he decided to take a personal responsibility for revitalizing downtown Detroit, which is like Woodward and it doesn’t matter, it’s the core of the retail area of downtown Detroit. So in 2013, he raised some capital…

Jill DeWit:
He announced it in 2007 that he is making that move.

Steven Jack Butala:
And so, we heard this story last night and researched it all today on the internet and it’s some version of, he decided to personally take responsibility for revitalizing a section in Detroit, and did so by helping the employees that are already here in the Detroit suburbs work and live in the downtown area. So, it resulted in an influx of relatively highly paid people moving or living or playing in the downtown area. And boy, I’ll tell you, it worked. He bought a ton of property for pennies on the dollar, which is what we’re in the business to do. And I mean, commercial buildings raised the capital to clean them all up and he’s got all kinds of class A tenants in there. Everyone from Gucci and there’s a ton of… I was just blown away last night driving through there. So, I’m formally apologizing for bashing Detroit for about seven years on this show.

Jill DeWit:
This is really amazing. I’m not sure who wrote this particular article, but just how much money that he’s been pumping into this city and all the good that’s come over it. It happened in 2007, he made the announcement to move the headquarters from Livonia to downtown Detroit. They couldn’t come to turns to construct a new building. So, they plan on moving their headquarters to the Compuware Building. And that was completed in 2010. I guess they renovated that. The building now known as One Campus Martius is the home of the Benzinga headquarters. So 2013, that’s when Detroit became the largest city, of course to declare bankruptcy, you don’t need all that details.

Steven Jack Butala:
My point is, how does this all tie into he did it and the details you can research yourself. How does this tie into what we do? There’s two ways to create equity in real estate. You can buy a piece of property for less than it’s worth and then go and sell it for what it’s worth a minute later or as soon as possible, it’s what we do. We happen to do it with land and not houses and not commercial property. But you can do the same thing with both of those. Or you can do improvements. You can tip, buy a piece of property hopefully for less than it’s worth, do a bunch of improvements to it and then decide what your exit’s going to be. Maybe you will hold it and lease it forever. Maybe you cross collateralize it with other real estate and play a financing game and get your cost of capital way down.
There’s all kinds of stuff you can do, but it all involves the improvement or the perceived improvement of property. And this is what he did. He didn’t just do it with one building. And he did it by moving his people in and moving his employees in.

Jill DeWit:
Buy a bunch of real estate.

Steven Jack Butala:
Helping them have a better life and a cheaper cost of living and a better way to live. It’s truly just amazing and impressed, but none of this would’ve happened if he didn’t have to revitalize anything. So at the root of this, he was recreating or creating equity from commercial real estate. He’s buying these huge, huge iconic buildings from Detroit’s heyday for just pennies on the dollar and cleaning them up and making them usable.

Jill DeWit:
Mm-hmm. He’s also talking other people into coming with him. He and the Steven Ross, the Miami Dolphins owner each donated $5 million to Wayne State Law School in 2016.

Steven Jack Butala:
Wayne State’s been down there forever. I actually took class at Wayne State Law School.

Jill DeWit:
That’s really cool. That’s just awesome. They’re really believing in Detroit. That’s really what’s going on.

Steven Jack Butala:
So, that’s what we can learn. It’s really an equity play in the bitter end. I do think that he’s been so successful and the people that he is with have been really successful with Rocket Mortgage and Quicken Loans from a money standpoint that there’s a big element of giving back here. They might even be structured as a nonprofit. I don’t know where he’s raising capital to do that. I don’t know. But I know for sure he’s creating a huge amount of equity by moving people in, getting tenants moved in, and…

Jill DeWit:
Getting realtors to come in.

Steven Jack Butala:
Making it a place that people want to live.

Jill DeWit:
Yeah.

Steven Jack Butala:
We have personal friends that moved down there from the suburbs that [inaudible 00:10:38].

Jill DeWit:
Yeah, they now live downtown.

Steven Jack Butala:
Yeah, we had dinner with [inaudible 00:10:43].

Jill DeWit:
Good for you guys.

Steven Jack Butala:
It’s something I never thought would’ve happened ever.

Jill DeWit:
Yeah, totally. Happy to join us today. Five days a week. You can find us here on the Land Academy Show.

Steven Jack Butala:
Tomorrow the episode in the Land Academy Show is called, How To Buy Land The Right Way and How To Buy Land The Wrong Way. You are not alone in your real estate ambition. I can’t wait to go see this football game. We’re going to stay in the Shinola Hotel. We have reservations to do that, which has been all through the downturn from Detroit, is a group of people got together as watchmakers, skilled laborers got together and created a company called Shinola, and it’s the only watches I buy for that reason. I bet it was a great way to turn something not so positive into a prosperous positive venture.

Jill DeWit:
Thank you. Exactly. Hey, thanks for tuning in. We know Jack and I are fully aware that not all of you have $100,000 or whatever it is lying around to fund your deals sometimes. Well, you know what, we do. And we’re happy to do it. By the way, there’s so many people within our community that fund other members deals as well. So to find out more, go to landinvesting.com or as always, send a note to my team and they’ll point in the right direction at supportlandacademy.com. We are Jack and Jill.

Steven Jack Butala:
We are Jack and Jill, information…

Jill DeWit:
And inspiration.

Steven Jack Butala:
It’s by undervalued property.

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