Land Investors Take Their Foot Off the Gas (CFFL 0191)
Land Investors Take Their Foot Off the Gas
Jack Butala: Land Investors Take Their Foot Off the Gas. Every Single month we give away a property for free. It’s super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.
Jack Butala:
Jack Butala for Land Academy. Welcome to our Cash Flow From Land Show. We show you how to buy property for half of what it’s worth and resell it the next day. Great information from me, that’s Jack …
Jill DeWit:
… And inspiration from me, that’s Jill. I just totally copied you.
Jack Butala:
Here’s some funny stuff that happened to us recently.
Jill DeWit:
That was funny, what just happened to us recently.
Jack Butala:
It really was.
Jill DeWit:
I like that.
Jack Butala:
You guys can’t speak, but apparently you can buy some real estate.
Jill DeWit:
Yeah, here we go. I didn’t know this happened and I’m sure you do. This, I think, is hilarious. I just learned that some of the properties in Detroit are so goofed-up situations that you can actually buy a property for less than what’s owed on the water bill.
Jack Butala:
Yeah, yeah. That’s been going on for a long time.
Jill DeWit:
I did not … I had no idea. Please explain this to me because I think that is absolutely hilarious. The person said, “I’m buying properties that are less than the water bill.” What?
Jack Butala:
This has been going more than a decade. This has nothing to do with the country, world-wide recession that we just went through, and hopefully we’re out of it. Maybe we’re not, I don’t know. It has nothing to do with that. It has to do with just everybody wants to move out of Detroit. The real critical problem there … This is just my opinion because I’m from there, I’m not bashing Detroit, is that in a city block where there used to be 25 houses, there’s now 12. That provides a pretty serious, dangerous situation. They’re vacant or they’re torn down, so the utility companies still gotta run utilities and water and the whole thing, but now they’re only servicing half of their customers and there used to be twice the customers. Nobody can operate on 50 percent of revenue with pretty much the same basic cost. That, and it’s just … There’s no reason to live there. That’s a big problem.
Jill DeWit:
Wait, there’s people that like to live there.
Jack Butala:
So I was talking about this with my buddy recently, and this isn’t the meat of the show at all, and he said, “One thing that Michigan’s got that may be valuable here pretty soon, is water.” That might change everything. We’ll see. It’s got lead in it if you’re in Flint, but it does have water. You can buy some crazy real estate super cheap there. I’m not sure what you’ll do with it.
Jill DeWit:
Right.
Jack Butala:
It’s not just about buying cheap dirt and cheap real estate.
Jill DeWit:
No, I just think that was so funny. I did not know that.
Jack Butala:
isn’t that funny?
Jill DeWit:
That’s hilarious, yeah.
Jack Butala:
All these years, everybody says something like this, “Why the heck do you want to buy property way out there?”
Jill DeWit:
Right.
Jack Butala:
Well, it turns out we can resell it for a lot more, pretty quickly.
Jill DeWit:
Turns out.
Jack Butala:
Try to resell that house in Detroit really quickly.
Jill DeWit:
Man, you know, there are so many shows and things coming up to, talking about people going off the grid, living out there, just moving out of the city. Like that whole big thing right now that’s going on with the whole San Francisco. I don’t know if it was a poll or survey or what, there was this whole big thing that we were talking about with some people that a large percentage of people who live in downtown San Francisco are tired of it and they want to move out and they want to do their jobs from their homes and live on some land. Hmm, go figure. Gee.
Jack Butala:
Isn’t that cool when the whole world catches up with you?
Jill DeWit:
I know. We’re how many years ahead of everybody? I think it’s the greatest thing.
Jack Butala:
Silicone Valley’s been that … I’m surprised it took this long.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
It’s pretty funny because this actually happens to me. This is a reason, this is what led us to going back and forth to Los Angeles. For a month now I’ve been sitting at this desk, staring in front of my computer. I could do this on the North Pole.
Jill DeWit:
Mm-hmm (affirmative), exactly.
Jack Butala:
Yeah, I think that whole city specifically is set up just like that.
Jill DeWit:
Yep.
Jack Butala:
In this episode Jill and I talk about land investors taking their foot off the gas. Yeah. When you get to that point … Anyway, Jill, great show today. Before we start let’s take a question posted by one of our members on SuccessPlant.com, our free online community.
Jill DeWit:
Okay. Kelly wrote: “Currently, I’m in the process of evaluating 2 quarter acre lots in a small downtown low-income area of town. I have offered to pay their back taxes of 70 dollars and 300 dollars respectively to acquire their land.” Good job, I do that too. “As I look at these properties in depth, the comps that have sold are between 11,000 and 26,000 for approximately 800 square foot single family homes.” They’re looking at … Okay, they’re trying to compare the lots to the homes, okay. “My question is as follows: If the cost-” This is actually a good question because this can be confusing. Okay. “If the cost per square foot for a single family home in this area is around 20 dollars, am I wasting my time acquiring these properties, even if they’re as cheap as 70 dollars a parcel? If I resell the property to a builder, I’m assuming it’s near impossible to build a house of this size and make a profit. Does anyone have any insight or a similar situation? I greatly appreciate it.”
Okay, I get it. That could be confusing.
Jack Butala:
Yeah, so here’s the thing: Kelly, please, please, please listen to me because this is a huge hang up for people in the beginning. It really helped one of our members, JP with this early on and now he’s cash flowing very well. You have to have an acquisition criteria. What I want you to do is sit down, however it makes sense to you, in front of a blank computer screen or a yellow pad and decide what you want to do. Do you want to buy 40 acre parcels in the western part of the country for 3 or 4 thousand dollars and sell them for 8 on the internet? Do you want to go to this small town where you just described and buy infill lots for 100 dollars and sell them for 300, because I’m confident you could do that. You have to have an acquisition criteria. It’s through no fault of new people in real estate investment, or REI. It’s easy to get sidetracked with what possibly could happen.
I just received an email very similar to this from a person who’s [inaudible 00:06:17], one of our members who’s pretty successful there. They’re on their way up for sure. They’re asking all the right questions, and they asked me to analyze a mine, a former mine because they … That’s the kind of thing, if I got a mine … Well, I did. Somebody contacted me about a mine. The first ting I did was say no. I didn’t even look at it because it’s not within our acquisition criteria.
The name of the game here is to get a bunch of letters out in the mail and then offers out in the mail and then when they come back, look through them and choose the best ones. If it’s not what you hope for, which almost never happens, send some more mail out or adjust your criteria, but don’t go off on some tangent that’s not within your acquisition criteria and not within the developing expertise that you’re going after.
You know what? I’m going to answer your question directly. I wouldn’t. At 20 dollars a foot … This is Detroit, or something like that. It’s in the rust belt for sure. Probably Oklahoma or something. Replacement cost for a single family house without the land is, rock bottom in my opinion, people debate about this all the time, 60 to 80 to build a new one, and that’s without counter tops and stuff. If you put anything within reason in it, it’s geared at 100 to 125 dollars a foot. That’s to the seller, that’s not the contractor’s actual cost. At 20 bucks a foot, that’s a huge red flag for me, aside from the acquisition problem I just said. Please revamp your acquisition criteria and then stick to it.
Jill DeWit:
You’re right, Jack, it is easy to get distracted a little bit and go, “Oh, look at this over here. Oh, look at this over here, maybe I should do this, do that.” Next thing you know, you’re not doing anything because you’re analyzing 6 different models and you got nowhere.
Jack Butala:
Great time, Jill and I, to REI talk, a real estate investors club talk, we’re doing more and more and more of them here in Phoenix and in Los Angeles. When it’s over, the people who are serious about this business come up to us and inevitably they say, they can’t wait to get it out of their mouth, “Hey, I got a deal where this guy …” I just tell them, “Stop,” because you have to have an acquisition criteria first. That may be the greatest deal in the world. Maybe it’s the biggest mistake that you ever make, not to do this deal, but I’m telling you, in the long run, if you want to make a career out of this, you gotta have a criteria.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
You’ve gotta know your buyers. You’re building a career. You’re not trying to do a home run.
Jill DeWit:
You don’t have to decide … I don’t want to say, like a freshman in college where you change your major 6 times, but you can change this. When you start off with your criteria, whatever it is, as you grow you can say, “You know what? I’ve just decided I’m really good at the large acreage properties. This is my thing, I really like it,” and you didn’t start out that way but you kind of grew into it. That’s okay. Whatever it is, or like you just said, Jack, the infill lots, because we have people that do that. Maybe you’re going to just kind of find your way, or it’s going to find you, however you want to call it, and that’s your thing. You can kind of tack, because I love that term that you use, Jack.
Jack Butala:
Tacking for sailing [inaudible 00:09:33].
Jill DeWit:
Exactly. You can tack as you go and modify your criteria, that’s good, but you don’t want to have a criteria of 100 different models. That doesn’t work.
Jack Butala:
Nobody knows this more than commercial real estate agents and brokers. Let me give you an example. If you’re a commercial real estate agent or broker, you do the same thing that we do, but you contact, let’s say, all the owners of apartment buildings and you say, “Hey, I got this guy over here, he’s my client, and he buys apartment buildings and I would like to know if yours is for sale,” and every single call he makes the seller says, “Well heck yes it’s for sale,” and new brokers get really excited and then they ask the owner to fill out the whole thing, how many 2 bedrooms is it, how many 3 bedrooms, what’s the price per door, and on and on and on, and they get all excited because their buyer said, “That’s exactly what I want.”
Well, when it gets all presented, what ends up happening is some version of this: Their client, the buyer, says, “You know, this is out of my acquisition criteria.” What the heck do you mean? You told me you wanted this and this and this. “No, no, no. I only want 3 bedroom apartments. This thing’s perfect but it’s got 50 percent of them are 2 bedrooms and that’s just not what we do.” Pros in this business know exactly what their acquisition criteria is and they will shell out tons of cash if you hit it on the nose. It’s super important. We don’t talk about this enough.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
Clearly. Or maybe we talk about it too much. I don’t know, Jill, what do you think?
Jill DeWit:
No, I think it’s great. No, I think it’s great and you’re right. I just got a little distracted because I thought, “Is this the topic of the thing?”
Jack Butala:
No, because I went off.
Jill DeWit:
We haven’t even gotten into … This should be the topic.
Jack Butala:
It sort of is. Well, it’s the technical [tense 00:11:19].
Jill DeWit:
I got a little sidetracked.
Jack Butala:
Let’s get back on track. Hey, if you have a question, or you want to be on the show, call 800-725-8816. Today’s topic is: Land investors take their foot off the gas. Why? Why would someone take the foot off their gas and not just barrel through it, Jill?
Jill DeWit:
Because they can.
Jack Butala:
Because they can?
Jill DeWit:
Yeah. What? What do you mean? Are you talking … I can go both directions. I can say it is a good thing or I can say it is a not good thing. Which are you referring to, Jack? I’m not sure.
Jack Butala:
We, as land investors, have taken our foot off the gas from a mailer standpoint because there’s so many deals coming in.
Jill DeWit:
Again, because we can.
Jack Butala:
Yeah, well you didn’t … Explain it please. You know what I mean.
Jill DeWit:
Yeah. You’re either doing something right, that’s what I’m saying. You can take your foot off the gas because you’ve done something right in a very, very, very good way. That you’re not out there having to kill it, you’ve got it into a system maybe. Everything’s going smooth, you’re hitting your numbers, however you want to call it, I’m okay with that. That’s what I mean when I say you can.
Jack Butala:
I see, okay.
Jill DeWit:
What do you mean?
Jack Butala:
No, I think that at some point, and some of our members are just about at that point, several are, the ones that we don’t hear from anymore because they’re so successful, are now picking and choosing exactly which deals that they want and throwing the other away. Or throwing them back down to everybody in the group. I think it’s a great sign, where it’s like the wave is cresting and you’re standing up on a board for the first time, where you can kind of just enjoy it a little bit and pick and choose. It means you established a great deal flow and you’re picking and choosing the best ones because you know exactly who’s going to buy it. You did everything right. That’s a celebration moment. I don’t mean close your doors for a month, I just mean it’s a great feeling when a property comes in and you can say, “Oh my gosh, I’ve done everything right, I know exactly who’s going to buy this.” We’ve been there for years and years, but it’s hard to communicate that to someone brand new. That’s really what this show is about.
Jill DeWit:
You know what’s a great feeling for me? When you obviously miss the beach and you have a surfing analogy.
Jack Butala:
Yeah, not a car analogy.
Jill DeWit:
Not a car analogy. Not a car analogy, not a motorcycle analogy, not a Michigan analogy. That was a surfing analogy. I think that was great. That’s really …
Jack Butala:
An analogy that doesn’t involve motor oil.
Jill DeWit:
That’s right.
Jack Butala:
Or baseball.
Jill DeWit:
Or baseball or something. That’s really good. I like that.
Jack Butala:
Thank you.
Jill DeWit:
So good.
Jack Butala:
This is the technical 10. It’s 10 minutes of property investment advice from our 15 year, 15 thousand deal experience. This is the topic: Without an acquisition criteria you will delay success. Hmm.
Jill DeWit:
Oh.
Jack Butala:
Where did I hear that before.
Jill DeWit:
You did say this is a technical 10. This should probably teaching the technical 2 because we already did the technical 8.
Jack Butala:
That’s what I mean. That’s exactly what I mean.
Jill DeWit:
How do you want to add onto that?
Jack Butala:
This is what I would suggest, because this is the technical 10, I would literally write down your acquisition criteria, literally, and stick it on your monitor on a sticky note, or whatever you do. This month we’re only buying 5 acre properties in Navajo County, Arizona. Next month we’re only buying infill lots in some small town in XYZ, Oklahoma.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
Those are not accidental by the way, those are our past acquisition criteria. Now my acquisition criteria is this: I don’t suggest as a new person that you do this at all. We only sell property that we know we can double our money on, by canning someone literally in [APN 00:15:11], someone that we know and have done business with.
Jill DeWit:
Yes.
Jack Butala:
Almost all the time.
Jill DeWit:
It’s the best.
Jack Butala:
We said in a prior show, sometimes we don’t lead by example. That is absolutely what you should not do.
Jill DeWit:
You can’t start out that way, you gotta build up your list and your people and they know you and all of that.
Jack Butala:
That’s my acquisition criteria now. It has to be purchased … Before we buy it, we have to know who’s going to … Before we buy it, we have to know who’s going to buy it from us and it has to be at least twice the money.
Jill DeWit:
Mm-hmm (affirmative). Talk about a good goal though.
Jack Butala:
Yeah.
Jill DeWit:
If I were just starting out I would be like, “Wow.” I think that’s a good goal.
Jack Butala:
The other thing I look at all the time that we don’t ever talk about anymore, Jill … I love when we stop talking about stuff because we know it’s just solved and done.
Jill DeWit:
Mm-hmm (affirmative) .
Jack Butala:
The number of new people that opt in to our buyer list, all the companies exceed, I don’t know, between 10 and probably 25 a day.
Jill DeWit:
Yes.
Jack Butala:
That’s why I just don’t look at it anymore. We’re not trying to find new buyers, they’re finding us.
Jill DeWit:
So we kind of took our foot off the gas.
Jack Butala:
That’s why I referenced that. Exactly.
Jill DeWit:
Awesome.
Jack Butala:
[inaudible 00:16:19].
Jill DeWit:
Thank you.
Jack Butala:
Hey, if you have some questions or you want to be on the show, please call 800-725-8816. I bet Jill has some inspiration for us.
Jill DeWit:
How many entrepreneurs became entrepreneurs to solve a problem for a company? I was just kind of thinking about that and doing some research and I noticed that a common denominator, and I also even thought about us. One of our side businesses was to solve our own problem, and I’m talking about data.
Jack Butala:
You nailed it.
Jill DeWit:
Isn’t that interesting? I was just kind of looking at people that are successful in other worlds and other environments, and so many of those people … This is kind of a, probably an overused example, but think about Facebook. He sat down to create this environment, meeting people and all that good stuff, and I think he was kind of solving a problem. Jack, what can you think of? Do you have some examples?
Jack Butala:
Yeah, I do. I just read a … I’m glad you brought … Jill and I keep a bunch of stuff from each other before we do this show so there is some element of surprise. I just read a thing on this, probably less than a year ago. You ever hear about people walking around their house and they’re like, “Oh, man, I should make a better toaster because the toast came out bad.” That’s one way to do it but I don’t believe in that. The best companies, the single best new companies are derived from solving your already existing customers problems. One of the problems that our customers had, or not problems, but they’re telling us about it, was, “Hey, the data source that you’re supplying lacks X,” and so what do we do? We went out and solved it.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
We included another source that solves that problem and gives GPS coordinates for every single property. We haven’t rolled it out yet but it’s coming within days, and we’re not raising our prices. It comes with the subscription, so we’re going to solve that problem.
Jill DeWit:
The mailer problem.
Jack Butala:
Yeah.
Jill DeWit:
Not that it was a problem, but like you said, the data existed but not with this. It wasn’t perfect.
Jack Butala:
They weren’t together.
Jill DeWit:
No, and we combined it and made it a better, less expensive for everybody, in every way, option.
Jack Butala:
You can have the greatest database in the world but if you don’t have and efficient way to mail it and get it in front, or deliver it, let’s say, whatever method is possible, deliver it to the property owners that you’ve chosen out of that data, it’s useless.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
We combined them and now they’re used in a super efficient way.
Jill DeWit:
Exactly.
Jack Butala:
Those are all examples of solving customers problems. The next one we’re solving, and it’s in production right now, is this flood of questions that I’m getting from house flippers about how does this apply.
Jill DeWit:
Exactly.
Jack Butala:
Jill and I don’t talk about it at all, but we wholesale houses all the time.
Jill DeWit:
Yep.
Jack Butala:
We probably don’t do it right, but it makes a lot of money.
Jill DeWit:
I got to tell you something funny about that too, by the way. There was a guy that actually unsubscribed from one of my things the other day and his comment was, “I don’t deal with that, I deal with single family homes,” and I’m like, “Oh, just wait.” I haven’t emailed him back yet but I was going to send him a nice email like, “Hold on a moment. Wait til you see what’s coming.” It’s awesome.
Jack Butala:
I never told you this, but I have a … I saw that too. I didn’t tell you this but I really pay attention, for a lot of reasons, to people who unsubscribe and why.
Jill DeWit:
Yeah, me too.
Jack Butala:
I never pay attention to who subscribes because I know why.
Jill DeWit:
Right.
Jack Butala:
That tripped my radar too and I contacted that person.
Jill DeWit:
Oh you already did?
Jack Butala:
Yeah.
Jill DeWit:
Oh, cool. Good. That’s so funny, we’re both on the same page. Love it.
Jack Butala:
Join us in another episode where Jack and Jill discuss how to use information, that’s me …
Jill DeWit:
… And inspiration, that’s me …
Jack Butala:
… To get just about anything you want. We use it every day to buy property for half of what it’s worth and sell it immediately.
Jill DeWit:
Get there first.
Jack Butala:
Nice recovery, Jill.
Jill DeWit:
Thank you. Hey, did you really reach out to that guy?
Jack Butala:
Yeah.
Jill DeWit:
Oh that’s funny.
Jack Butala:
I don’t know if he sent anything back. I said, “Hey, it’s funny that you mention that because we’re doing this thing …”
Jill DeWit:
That’s hilarious.
Jack Butala:
We’re in production.
Jill DeWit:
It is too. He’s about to get an email from me. That’s really good.
Jack Butala:
You know what I found out about single family residential, we call them SFR people here, they’re really just flippers. Flippers or renovators or whatever. The people that are finding us and reaching out to us for whatever reason are pretty experienced at this already, but their sources of finding cheap property are drying up. I’m not sure why this is. I think maybe it’s part of a recession recovery thing, and so they’re trying to find other ways to buy property and I think we’re tripping their radar.
Jill DeWit:
Mm-hmm (affirmative).
Jack Butala:
There are a lot more experienced. They don’t need the formal education or they don’t think they do, they just want access to the data …
Jill DeWit:
Right.
Jack Butala:
… And the printing and the whole thing.
Jill DeWit:
Happy to help.
Jack Butala:
Yeah.
Jill DeWit:
I think it’s great. I love it. I love that they’re reaching out to us. They’re getting it, you know? That’s what we’re doing right now, spread the word.
Jack Butala:
Yep.
Jill DeWit:
Let everybody know that we can help with all of that.
Jack Butala:
Exactly.
Jill DeWit:
Let’s go buy some property for half price.
Jack Butala:
Let’s sell some property for double. Jack and Jill, information and inspiration.
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