Disconnect Between Seasoned Real Estate Professionals and Blind Offers (LA 1297)
Disconnect Between Seasoned Real Estate Professionals and Blind Offers (LA 1297)
Transcript:
Steven Jack Butala:
Steven, Jill here.
Jill DeWit:
Hey.
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 the sunny Northern California still.
Steven Jack Butala:
Today jill and I talk about the disconnect between seasoned real estate professionals and sending out blind offers. If you listened to the show yesterday, I kind of alluded to this fact. There are a lot of seasoned real estate people that have their way of doing things, which involves locating properties in the MLS, talking, talking, talking, talking, talking, talking, negotiating, talking, talking, talking, convincing, sending old bottles of whiskey, and all kinds of old school stuff. When you explain it and then they’ve had success at that. When you explain, “Oh no, we should send out 15,000 offers and…”
Jill DeWit:
Finding out somebody passed someone, getting to build relationships. That’s some of my favorite.
Steven Jack Butala:
When you say, “Oh, we’re going to send out 15,000 offers and buy five pieces of property and make $50,000 each,” that just makes their head spin and makes them a little angry.
Jill DeWit:
It is a little angry.
Steven Jack Butala:
What they’re angry about is the fact that they don’t know anything about computers and data.
Jill DeWit:
They don’t know how to do it.
Steven Jack Butala:
They’re not upset with the concept or anything. It’s passed them by. I get that. Not really. Before we get into it though, let’s take a question posted by one of our members on thelandacademy.landinvestors-
Jill DeWit:
Thank you.
Steven Jack Butala:
… .com online community. It’s free.
Jill DeWit:
Thank you very much. Mohad wrote, “Hello. I am new in land investment. I’m not sure what measurement/calculation I need to do… I need to put price in my blank offer. Any advice, please? Did I read that right? Is that what you-
Steven Jack Butala:
He’s asking, and I think a lot of people who listen to this show and aren’t part of this group have this question. What he’s asking is, “How do I calculate what to offer? You guys are constantly talking about sending out blind offers. I get it. How do I calculate it?” And here’s what you do. You take a look at a property that you have deemed is worth $100,000 retail. You’re going to sell it for 70 to $80,000 wholesale because you want to sell it fast. You need to purchase that property for half of that. So $80,000, you offer 40 which ends up being between 20 and 40% of what the property is worth retail. Your first rule of order in a spreadsheet full of pieces of real estate is to establish in every single line item what you think that land is worth. There’s easier ways and there’s hard ways to do it.
If this intrigues you, what I’m talking about, you’re a Land Academy member candidate. If you’re listening to this and you’re already a member, you’ve since long passed this. And you probably started down this path with us because you were interested in this. This is a very root, basic 101 question. “Hey, how do I price an offer?”
Jill DeWit:
Hey, wait. How many for the third option, which is, “And if you hear this and this makes absolutely no sense, or sounds like absolutely just too much darn work, this might not be for you.”
Steven Jack Butala:
Yeah. Good. Well said, Jill. I have a lot to say about that.
Jill DeWit:
I had to get the third one out there.
Steven Jack Butala:
I have a lot to say about that, necessary it’s so foreign to me.
Jill DeWit:
I know. It’s okay.
Steven Jack Butala:
What do you think that’s all about?
Jill DeWit:
It makes their head hurt. They can’t. You know why? I think they see it as one, big overwhelming project instead of sitting back and going, “Okay, let me break this into chunks. Okay, so I have to first pick a county and I got to make sure it checks this box, this box, this box, this box. Okay, got that done. Now I need to get the data. Okay. Where do… Okay, got that. Now I have the data. Now I guess scrub the data. What’s needed to involve there? Okay, now I’m finally at pricing. My, I didn’t even get to that yet.” And then getting them out there. People think of the whole big thing like sending out blind offers. There’s no easy button. You have to break it up.
Steven Jack Butala:
Our group’s packed full of former executives, mechanical engineers, all types of great engineers.
Jill DeWit:
Smart people.
Steven Jack Butala:
Accountants. Actually a lot of salespeople people. People that can deconstruct something like this and put it into tiny, little moving parts.
Jill DeWit:
Steps.
Steven Jack Butala:
Or steps and put it all back together and make something out of it. A lot of years ago, I asked somebody… A woman was working for me. This is way before Jill, when the company was tiny. It was like two or three people including me. She said, “Look, my daughter’s pregnant and she needs a job really bad. She’s great at this, this, this, and this. Can we hire for a while?”
And I said, “Sure.”
She was pregnant with her second kid, so that her daughter could bring the first kid in as a toddler. It was actually a refreshing change. For whatever reason, one day I asked the daughter, “So you’ve been here for a while. What do you think of this?” And this is way before Land Academy. There was just buying and selling land and how we do it and stuff she was responsible for.
And she said this: “I don’t think most people think this far ahead.”
Jill DeWit:
It’s true.
Steven Jack Butala:
That kind of [inaudible 00:05:39]. That’s obviously always stuck with me. Like I think there’s a lot of people just like I’m going to go to work today. I’m going to get a paycheck on Wednesday and that’s about it and I’m good with that.
Jill DeWit:
Maybe thinking with an ear, maybe thinking of the next vacation. Thinking about just next week and buying school clothes or whatever it is. I get that.
Steven Jack Butala:
Jill and I watched a movie in her hotel room last night. It was all about leading up to a wedding. That is so foreign to me and nothing that I want to be in. And that’s not marriage that I’m against at all. Jill and I have the greatest marriage-like relationship I’ve ever had and probably ever will have, hopefully. But the wedding part of it-
Jill DeWit:
Oh, definitely will be the best ever.
Steven Jack Butala:
I just don’t get that wedding mentality.
Jill DeWit:
It’s true.
Steven Jack Butala:
I think like there’s probably a podcast out there for wedding planners.
Jill DeWit:
I’m sure there is.
Steven Jack Butala:
That’s just like this.
Jill DeWit:
I hope there is.
Steven Jack Butala:
There’s two people that are probably business partners-
Jill DeWit:
Or should be.
Steven Jack Butala:
… that are the best wedding planners there ever was and they probably deconstruct it right down to there’s a cake, there’s the dresses, there’s whatever. And that makes me want to vomit. All of it. Every single part of it. Like if someone said, “Hey man, you could be a wedding planner and you’re probably going to make a million bucks a month at it because you can do this and you’re smart about it and you can deconstruct it.”
I would say, “Go pound sand.”
Jill DeWit:
You know what? I’m here to tell you, I’ve actually virtually… I’ve planned a couple of weddings and they were called Land Academy live events. You think I’m kidding?
Steven Jack Butala:
No, I know you’re not.
Jill DeWit:
Yeah. They were a couple of day things. It was more than just one day. It was like three day things and four day things and back-to-back stuff and different locations and yeah. Been there, done that.
Steven Jack Butala:
Today’s topic: the disconnect between the seasoned real estate professional and the blind offer campaigns. This is why you’re listening. As I said earlier, there’s a lot of people that have done really well in real estate without sending blind offer campaigns. I think personally the ones who’ve done incredible well is all surrounded with the concept of improvement. You know, I was explaining to some very seasoned real estate professional recently, which is the inspiration for the show, that there’s only two ways to create equity in real estate. You either take a property and improve it. Or like you take an old car and improve it and sell it and create some equity. You take a vacant piece of land, put an apartment building on, lease it out and sell it. Create some equity for yourself. Or you buy it cheaper in the beginning or resell it to somebody who’s going to improve it. You buy the classic car for way cheaper than it is worth in its current state and resell it to the renovator. Same thing with the land and houses. That’s who we are. We’re the acquisition people is what it comes down to.
Jill DeWit:
Who buy it for less than it’s worth today and don’t do anything.
Steven Jack Butala:
This person that I was speaking with is actually in a pretty fun, social situation, because all of us have so much time now, social time. You know? When I explained it that way to him, he said, “Oh, I got it. You’re the guy I should be buying this property from.”
I said, “Yeah, and you’re the guy who should be renovating it, because I’m sure as hell not going to do it.” Then it all clicked, because he was throwing [inaudible 00:09:03] at me. I’ve done all that. I came back to this, what I call… He’s on the dark side. I came back to this because I’m not interested in building a building ever.
There were other people listening to this conversation in completely different fields and they understood it. That’s what prompted this. So if you ever find yourself explaining what you’re doing to your father or your grandfather who’s done well in real estate explain it like that. There’s two ways to create equity. Buying it for cheap and selling it for more, or improving it.
Jill DeWit:
My funny little add on is a couple years ago… I haven’t talked about this in a while. I just remembered the topic. I was in an elevator and there were two guys talking about properties and talking about… It was so funny. They were talking about trying to get to know people. They were doing it the old school way, right? “Did you hear so and so’s mom might be selling. Might be…” You know, that’s the long way. Could you imagine?
Steven Jack Butala:
No.
Jill DeWit:
It’s like changing deals. Basically they were perfectly describing to each other their latest tips and tricks to chase and find deals. Everything from waking up in the morning and being right on the MLS to see what hit. Not kidding.
Steven Jack Butala:
That’s tragic.
Jill DeWit:
To getting to know someone’s family because so and so is sick and she might have this property that might come available and all of this stuff. I’m just sitting there. I’m in the elevator and I’m going do I say it? Do I say I’m talking to myself?
Steven Jack Butala:
What did you do? What did you do?
Jill DeWit:
It was the funniest thing. I’m like, “Do I help them? Do I not help them?” My natural state is to help them, but I don’t know how well it’s going to be received, right? They don’t know who I am. They don’t know who they’re in the elevator with. I’d probably just look like… it was in the library too, of all places. They’re probably just like, what the heck?
Anyway, so I couldn’t help it. I had to get it out there. I said, “Hey, you guys,” as the doors were opening, I give them a 15 second little thing.
Steven Jack Butala:
You gave them a literal elevator pitch.
Jill DeWit:
I did. I did. I said, “Hey guys, there’s a better way. Get the data, send out some blind offers, and buy some properties.” And they’re looking at me. They’re like… and one guy says something to the effect of, “You know, my assistant was actually looking at getting some assessor data, something like that.”
I said, “She’s on the right path.”
And they’re looking at me like, “But that can’t possibly work.” It was so quick.
And I said, “Well, you know what?” And it was two years ago. I said, “You know what? You’re right. I’ve only 16,000 deals this way. What do I know?” And I walked off. That was it and the doors closed.
Steven Jack Butala:
[crosstalk 00:12:00].
Jill DeWit:
Exactly that.
Steven Jack Butala:
That’s hilarious, Jill.
Jill DeWit:
And I’m sure they’re like, “Oh, wait a minute.” And then I was gone. I was leaving and I was getting out. It was so funny. I’m like, if they were smart they were searching the parking lot trying to find me and ask me more questions. I don’t know. But anyway, I just had places to go and stuff, but I had to get that out there. But it’s true. I mean, so many people are taught one way and they just get these blinders on and they don’t even pause to realize there could be a better way. You know, oh, but that can’t work. It can! Well now I’m 17,000 deals, you know closing in on that. What do we know? And that’s usually what I say. If we’re ever out and we’re in these situations like you’re talking… I wasn’t at that last event that you were. That last dinner party, we’ll call it that, that you were at that I was at. But there was a dinner party where there was no dinner. Anyway.
Steven Jack Butala:
Yeah, it was a kegger.
Jill DeWit:
Yeah, that’s right. If I remember in that situation sometimes I’m like, “Oh, I don’t even want to go there.” Because it opens up such a can of worms and people-
Steven Jack Butala:
That’s what it is.
Jill DeWit:
… really want to pick your brain. It’s like if they believe you, which they have no reason not to, then they corner me for two hours and I don’t want that and you don’t want that either. But so many people can’t fathom there’s a better way. It’s like come on everybody. Remember the phone on the wall? Now we carry a phone in our pocket. You adapted to that one. Why can’t you adapt to this?
Steven Jack Butala:
So here’s what happened. I went to a party. I don’t know what Jill was doing that night. There was a woman there who owns a building, owns a property in Torrance, California that’s like 80 units. 60, 70, or 80 units. She inherited it. She has a property manager and every quarter she gets a distribution, a very substantial distribution because her parents, her father, bought this property back in the ’70s. Doesn’t matter. Then there’s another real estate guy there who’s saying, “Wow, that’s so lucky. Isn’t she lucky? She’s got the privilege.” He didn’t say that, but that’s what…
Jill DeWit:
That’s what he’s thinking.
Steven Jack Butala:
You hear that phrase in the media a lot. These people have this privilege over here. We don’t have anything. And there’s another guy, who’s a business partner of mine on some other stuff, and what he does is he buys five or eight, 10 unit apartment buildings, cleans them up, kicks everybody out, and re-rents them for the cap rate or he calls it a gross rent multiplier, and makes a couple hundred thousand bucks and 1031s his way into another property.
So I said, “Hey, what do you say we 1031 our way, starting with very little money if that, up to a 50, 60, 70 class A building, unit class A building.”
And he said, “Sounds good. When do you want to get together?”
I said, “I’m going on vacation. I’ll let you know when I come back.”
There’s a bunch of Hollywood people there looking at us like we just shoved a shovel in the ground and picked up a two pound piece of gold. To he and I, his name’s Frank, to Frank and I it’s just a natural thing to do. We know exactly what to do. I know how many offers I have to send out. I know what to do. And what I said on top of that is, “Frank, what do you say on the rest of these? We don’t renovate them at all. We just sell them on the potential cap rate. Probably make another couple hundred thousand dollars a unit, maybe 100,000 and let the other person do all the work? Just lay out the financial foundation of what’s possible.”
He said, “Yeah, that’d be great.” [inaudible 00:15:33] faster and easier.
Then we went back to sipping our cocktails and talking about other stuff. These people were just floored. Including the person that owns that building. She had no idea how to start from zero in something like that-
Jill DeWit:
[crosstalk 00:15:49] it.
Steven Jack Butala:
… and end of five years own a class A building in California.
Jill DeWit:
And you can.
Steven Jack Butala:
And not pay any taxes on it. No way. That’s what this show’s about.
Jill DeWit:
Thank you. Happy you could join us today. Five days a week, Monday through Friday can find us right here on The Land Academy Show.
Steven Jack Butala:
[inaudible 00:16:07] episode on The Land Academy Show, I’m happy to say is our five year anniversary episode. The show’s going to air on tomorrow’s July 31st and that is our, to the day, we launched Land Academy in 2015, July 31.
Jill DeWit:
Yeah. The Land Academy Show remains commercial free for you, our loyal listeners. So wherever you’re watching, wherever you’re listening, please subscribe and rate us there. We are Steve and Jill.
Steven Jack Butala:
We are Steve and Jill. Information-
Jill DeWit:
And inspiration.
Steven Jack Butala:
To buy undervalued property.
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