This is episode number 2029 and we’re going to talk about why it’s better to use a partner to fund land or house flip deals versus taking on debt. Point two, wildly different things but they’re often very confusing. We’re going to take this entire week and talk about how to fund your acquisition deals. Your job in life is to find great real estate deals and not to worry about how they’re going to get structured financially or any of that. That’s why you’re in a group like Land Academy.

The last time I checked, if you have a great deal, the money will be there, whether it’s mine or somebody else’s. If it’s that great of a deal you’re staring at and you’re going, “I’m going to sell my car” or “I’m going to come up with somebody to fund this,” I’m sure someone will jump in and help you.

Jill and I have been doing this for almost ten years. I’ve said this over the years. You have one simple job in this business. That is to find undervalued real estate and get it under contract. If you do that right and correctly and do it with your soul, everything else will fall into place very well if you’re in a group like Land Academy.

It’s Land Academy for ten years. We’ve been in the business together for fifteen years, and then you’re doing deals for 30 years. Sorry, I had to say that.

No, I don’t care.

I don’t want you to feel bad, but you’ve been doing it that long. It’s a positive thing.

I’ve never met a guy in my entire life, I’m trying to think if there are any exceptions, who has been upset about getting older.

Women don’t feel that way. We feel the exact opposite.

It’s got to be biology. This is the happiest I’ve ever been. Our kids are out of the house. They’re all doing well. You and I are having a blast.

Most days.

The money thing is done. Being older has massive advantages.

I don’t I don’t disagree. I enjoy being older. I hate getting old.

What is it that you hate? Is it waking up with aches and pains?

No. I don’t have any of that.

Is your skin not tight enough?

Yes.

Your skin is tight enough.

I don’t like it, but anyway. This is not what this is about.

This about money.

Our theme, I’m going to read them off here. It’s everything you need to know about funding your land or house flip deal. We’re talking about whether to use a partner and the differences between that, a partner versus debt like a loan. On Tuesday, we’re going to talk about land funding by the numbers.

What’s possible. How much money can you make.

On Wednesday, we’re going to talked about all the hundreds of land deals that we have done and how it works in real life. It’s a step-by-step process. Thursday, we’re going to talk about the difference between land and house flip deals because there are variances when you get into it. On Friday, we’re just going to do some highlights about some of the partners, maybe the partnerships we’ve done, and some great stories

Pricing Offers

Highlights of what we talked about the entire week. Each day on the show, we answer a question from a Land Academy member on our Discord forum and take a deep dive into land related topics by your request. Let’s take a look at a question.

Mike wrote, “Hi, guys. I hope you are all well. I started Land Academy mid-year of 2023, but at the end of the year, I had to put the business aside due to the demand of my other business. I have since sold my previous business and will be focusing fully on land. I am refamiliarizing myself again with the processes. I know since 2023, a few things are different. Forgive me if I ask a silly or redundant question, but this is a way to get them answered. In the modules, Jack is at 25% as an average to send out offers. Are we still at 25%? Is there a different better method to scrub other than WebHarvey?”

What he means is we price our offer campaigns by default at 20% now. We brought it on a little bit to adjust for among other things with the economy. He’s asking, is it still the average? Is that still the number? Do we still use WebHarvey to scrape for sold and active listings, like time listing’s comparison values, to determine what the price breaker is? The answer is yes to all of that.

However, we have been trying to drive this point home since 2023, and probably in the future. You have to run. It’s imperative that you run a test for reason at the end. You are going to find there are variances and types of property and a zip code. If you think about where you live right now and what’s going on a block over, the pricing is different in two blocks over and three blocks over. You must test for reason.

I spend hours and hours before our offers go out, testing for reason to make sure we’re not wasting time and money. This environment is too difficult to talk about testing for reason, but you pick and choose several random offers that you’re sending out. You test them for reason as if they came back signed and you’re ready to do the deal.

Partner Vs. Debt

If you’re jumping up and down because you’re test for reason work, then that’s mission accomplished. If you’re saying, “That price is too high,” then you’re going to have to start to adjust. I go through it all in the modules. Today’s topic is why it is better to use a partner to fund a land or a house deal versus taking on debt. Let’s look at a brief example of each of those things.

I’m going to go buy a piece of property for $10,000 and I’m going to sell it for $50,000. I don’t have any money. That’s perfectly okay. I used to feel bad about that. I wish I had all the money that I could do this. Forget it. No one is expecting you especially if you’re new in this business to have money or access some money. That’s not what you’re here for.

I’m going to buy it for $10,000 and sell for $50,000, a common spread for Land Academy transaction. There’s about $40,000 worth of profit in there theoretically if you did everything right. I have a couple of choices. I can call my business partner Jill and I can say, “Buy for $10,000 and sell for $50,000. Please take a look.” She calls me back and says, “We should do this deal quickly and fast.”

Tell me where to wire it.

In fact, she might even say, “$50,000 is light. Maybe let’s buy for $10,000 and sell for $70,000.” What we do is we travel down the path together as partners. She’s the funder. I don’t have $10,000, so she spends all of it. She spends not only $10,000 but all the costs and everything that gets the deal done. I don’t have any money.

You do the mail.

I can’t fund for it.

Everything up into that point, you paid for and now you’re staring at the deal. I come in and I’m paying for the acquisition price, everything that needs to get it closed.

At the bitter end, we’d agree on a percentage. If I’m new, it’s usually 50/50 of the profits. Buy for $10,000 and sell for $50,000 or $60,000. Let’s say there’s $50,000 worth of profit. At the end of the deal, I get $25,000 because I found the deal. She gets $25,000 because she funded it and applied her expertise and help and all that stuff. That’s it. That’s what a partnership agreement is like.

Now, I am $25,000 richer for spending nothing at all. In a debt scenario, I would have to go get probably a hard money lender situation. Possibly go to a bank and explain an inch-thick worth of paperwork and explain to somebody who has no idea the difference between a land acquisition and buying an apartment building because they’re young people out of bank and they’re not experience. It’s been a ton of time and energy. Probably, in the end, I fail getting a mortgage because they don’t understand it.

What percentage am I looking at to do this too?

Let’s say it’s between 6% and 10% annually. The reality is I’m doing that so I could exercise. You’re never going to get funding like that.

They don’t get because they don’t get it.

There are no boxes on a computer screen for them to click.

Its unimproved and I’m not going to do anything to it. It is hard.

You might find a hard money lender who’s going to charge it 10% upfront. They’re going to take an application for you. Probably a fixed price of around $1,500 just to apply.

What if I sign a personal guarantee, would somebody do that?

It wouldn’t matter. In fact, anything. You would sign a personal guarantee. That’s a great point. Any of the debt products that we’re talking about will come with at a personal guarantee meaning if you default on a loan, you are still on the hook. You’re credit score and all that. With a funder, none of that happens. If Jill and I do a deal and it goes sideways. She paid for it. She’s stuck with her property and I go about my way.

She has to deal with that. There’s no credit score exchange or any of that. It’s a one-page document that we say. We are all agreeing that we’re going to split the profit and you’re going to make your buy. I’m going to make my best effort to sell the property. If within certain amount of time, usually six months or a year, it’s not sold then Jill will probably take the whole thing over. This happens once in a while. It’s a no-lose situation for you to do partnerships when you buy and sell land.

There’s a couple things that are immediate win. That’s one of them. You have an expertise like when people come to me with deals. I know part of it is, they’re like, “I’ve been doing them so long.” They love having an extra pair of eyes on it and making sure we’re making a good decision because now I’m putting my money down. I’m making sure it’s a good decision. You’re like, “Good. I picked a good one.” If it’s not a good decision, I tell you, there’s plenty that I reject. I tell why. “Here’s what’s going on. Did you see this? Call on this. What about this? It’s too much.”

All those things. I let you know. I give you solid feedback. If I don’t do the right deal and its current condition, why? What you touched on I forgot about which is the upfront speed. When you have somebody who’s ready to sign off on a $10,000 sale that is worth more and they’re just happy to get their $10,000 and be done with it, you don’t want to give anybody any chance to change their mind. You want to open escrow and lock it in and go. People can call me and in minutes, I can look at it on the phone and go, “Let’s do it.” They can call the person right back and say we’re opening escrow.

Financial Academics

Financial academics will criticize this all day. Financial academics are my word for they haven’t done anything. They just have a Finance degree and they all know about the theories. One of the theories in finance, not to bore you, is what’s your cost to capital? Everybody is hung up on that, especially right out of college.

The cost of capital in doing a partnership scenario is 50%. It costs 50%. For a regular cost of capital if you went to a bank would cost 10%. Every academic will say, “Why would you ever chose 50% over 10%?” It’s because we live in the real world. You want to buy the property soon as you can, especially if Jill signed off on it because she’s done thousands of deals. She likes it and knows how it’s going to act. If something goes sideways, she’s going to help you within reason.

There’s all kinds of things that don’t have to do with the cost of capital. I’ve been doing this for 30-plus years. I’ve never taken on debt to do a deal or for any other reason ever in my entire life. I have taken on many partners. Jill and I still have many partners, especially with houses. A typical house deal for us would be buy for $300,000 and sell for $375,000 or $400,000 quickly. Do I want to go get a mortgage? That’s going to take 30 to 60 days to get that done. The seller is going to say, “Buzz off.” They’re not going to wait around for me to go get some mortgage, but I can go to our Land Academy group and say, “I need $300,000 and I’ll you pay a 10% within 60 days on that.” They say yes.

Think about this one. How many people out there want to sell their homes? We all know there’s a lot of inventory out as we’re doing this in the middle of September. In the buyer’s market, when you come to the table all cash because you have a partner that’s all cash. You could get this deal closed up fast for these people that want to sell their homes now and be like, “Done. Let’s go.” I’m getting more deals because of that too.

There's a lot of inventory out there. It's kind of a buyers’ market. When you come to the table all cash because you have a partner that's all cash, you could get this deal closed up fast. Share on X

Raising Capital

Turn to raise capital is the easiest part of this entire business. I thought it was the hardest many decades ago. It’s not. I didn’t have anybody saying it thousand times in my ear. All you got to do is find a great deal. It’s very clear. If you’re brand new at this, your takeaway should be this. You don’t need any money to do this. Find some great deals. If you are midway through your career and you’re saying, “If I did those last deals with equity financing, I am not sure that would have been,” but think about how fast. If you are great at doing deals, think about how fast it is. If you’ve been in this for a long time, you already know that having funding partners and all types of operational partners is why you survive. Partnerships are the reason that Jill and I are still here.

Thank you.

We’ll continue.

I thought it was love.

Love does not enter my financial acquisition decisions. Does it for you?

Doesn’t love keep you warm at night?

Where does that come from? Is that a real thing?

I don’t know. I just made that up.

Please don’t let love or emotion enter your decision-making process while purchasing it on a real estate.

Please don't let love or emotion enter your decision-making process while purchasing real estate. Share on X

That’ll be a Saturday show which will never air.

Join us on Saturday.

Where we talk about put all the emotions you got into it. Let’s talk about deals.

Your emotional real estate transaction by Jill DeWit.

That’s great. How to win emotionally in real estate? How to do that?

Join us again where we’re going to do land deal funding by the numbers. How much money can you make? You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration to buy undervalued property.

Also, entertainment.