Tune in to The Land Academy Show with Steven Jack Butala and Jill K DeWit for episode 2003! Discover the four pivotal changes in the land-flipping business you need to thrive in the 2024 economic downturn. With their extensive real estate expertise, Steven and Jill share game-changing insights and strategies to secure your success during these challenging times. Don’t miss this must-listen episode to stay ahead in the ever-evolving real estate landscape!

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4 Land Flipping Business Changes To Capitalize During A 2024 Economic Decline (LA 2003)

Introduction

This is episode 2003. We are calling it Four Land Flipping Business Changes to Capitalize on 2024 Economic Downturn. Here’s the gist. There’s an economic downturn, and it’s going to affect real estate. It’s already pretty dramatically affecting commercial real estate. We want to make sure that you, when you’re buying and selling land, capitalize on this and you’re not a victim to it. That’s what the show is about. We watched some of our friends/competitors back in the day not recover. I’m watching it already start to happen. I’m watching people leave. They’re not getting it. They’re not making adjustments. They’re not ready for it. Since you have done this a couple of times, I’ve done this more than one time with you, or one time with you, why you’re here, you’re reading this because we’re not new to this. We’re not brand new. It’s our real gray hair. This is my third real estate recession or real recession in my professional life. My fourth in my actual life. I’ve learned a lot and I love to share it with you because you can avoid a lot of pain. Jill, before we start, do you have some news? It’s fascinating to me.

Current Real Estate Market Concerns

Instead of asking a question, I wanted to take a few minutes and talk about something different. I was reading our local little newspaper, and you’re going to love this as I hold this up. You’re like, “What? Jill, it’s 2024. Why are you holding a piece of paper in your hands? Do you get the paper?” No, I do not. I have to tell you, I don’t order the paper. I don’t think it’s fufu. I like the paper, but I don’t get the newspaper, but because where we happen to live and the median age in our area is about 80 or 90. There is still a sweet little pretty in-depth local newspaper that we get for free every week in our mailbox. I read the paper because there’s some good information in there. I’m reading this article done by a local resident. He is in real estate, doing houses. He got connected with a guy in England and he wrote a neat article with a top performer in England, an agent over there. He was sharing the differences in how real estate is done in England versus the United States. I loved it this comes right at a perfect time because we all are watching and hearing about the NAR and this big fine, “Are they going to take away sellers’ agents or buyer agents? Are they going to change the commissions? What’s going to happen and how’s this going to go?” I wanted to shed some light on this too because it’s interesting to me how they do things versus how we do things. I’m going to argue I like theirs better. Me, too. Let me tell you why. There are twenty things. I’m not going to read all 20, but I’ll get close to 20 because they are interesting. 1) The commissions in England. Think about our commissions, 3% and 6%. That’s what we’re all used to. We do land deals, sometimes it’s 10%. Commissions there are typically 1% to 1.5%. I love it. It’s payable by the seller to the estate agent who advertises the property. By the way, the better the agent, the higher the commission, generally speaking. I think that’s brilliant. I love it. The buyer is usually unrepresented. But there are a few, special buying agents. Sometimes there are people who have buying agents, and it’s only when they’re very rich and they need to find a certain property. I totally understand that. That makes sense. I can’t go out and see it myself. It’s optional if I want to get my own agent. I live in Monaco. I do my own thing. This is one thing I love too. Caveat EmpTOR applies here. Sellers in England, unlike here, aren’t there under no obligation to reveal defects in the property. How interesting that most of them are honest like what we do. I’m honest. If I know it, I share it, but there’s no law against that. There are no title companies and no title insurance. How amazing is that? There’s no MLS. That’s amazing too. That’s a lot of what these fees go for. What pays for MLS? The ads? No, the National Association of Realtors Estate Fees. It’s their association dues. Parties can back out anytime until they exchange the actual contracts, which are usually done about a week before they close. I thought that was interesting. Both the buyer and the seller come to the table with their own attorneys to close a deal because there are no title agents and no escrow agents. They do it all, each one has their own solicitor. They represent each person individually, and I love it. Each solicitor has a fiduciary responsibility and duty to each individual client. I think that’s the greatest thing. It’s interesting when you think about how we do deals here, where you might have one agent who is representing the seller, and then also representing a buyer. How can they have a duty to each other? They can’t. It’s not possible. This is a huge one for me. Estate agents in England have no required education and are not licensed. Anyone can wake up and decide on their estate agent by calling themselves one. I think that’s awesome. No formal contracts are required. Often these offers are made by phone calls. It is a huge one for us because we do deals flipping fast. Deals over there typically take 3 to 5 months. A lot of things fall apart because, in that time, they find out things and they get out of it. I’m like, “I get it.” They have no fixed-rate mortgages for more than five years. Most of their mortgages are variable rates, which is wild. They might have a fixed rate for a short period of five years. That’s it. We had 30 years fixed. That’s not a thing over there. There are no government guarantees on these loans, nothing like FHA, VA, Fannie Mae, or Freddie Mac. Down payments are high. They usually pay 10% to 25%. That’s it. My takeaway from this whole thing is that you have a lot more choices as a buyer and a seller of real estate in England than you do here. I have to ask myself in general, in life, when are less choices better? We always want more choices and more freedom. This whole country was founded on that. For whatever reason, over the years, probably since the 1950s, the National Association of Realtors realized correctly that there’s a lot of money in real estate. They want a piece of it. The contracts have grown to a point now where you’re interested in buying a piece of real estate and you start signing your name to things, the more signatures you sign, the more pieces of paper you sign, the further down that tunnel you go into making a commitment to buy it regardless of the outcome. I can’t think of another business where that happens. Isn’t that awful? It’s like, “I changed my mind. What do you mean?” I picked up something in the store and I put it back down, “It’s yours.” “You touched it.” “What the heck? I changed my mind.” I can’t think of another business where that’s appropriate. Now what we’re seeing if you’re up on the news is some landmark rulings from the Supreme Court saying, “We start down the path of undoing this because people need to be individually represented. Buyers and sellers and real estate agents make too much money.” “It’s not fair that I have to do all this stuff. I don’t want to.” I could go on and on.

4 Land Flipping Business Changes

The name of the show is Four Land Flipping Business Changes To Capitalize During A 2024 Economic Downturn. We want to share with you our pretty in-depth experience being experts at buying and selling land for many years now, how we have dealt with and what I think you should do to deal with the economic downturn that’s here now and probably going to affect real estate more for the next three years. Here’s the good news. This business model that Jill and I have put together over the last many years is all set up to thrive in a downturn market anyway. Our regular business model during the best, good or bad times is to buy a piece of property, a piece of land for 20% to 25% of its retail value and sell it between 40% to 50% of its retail value. That’s the goal. You got a $100,000 piece of property, the person doesn’t want it anymore. You send a ton of offers out. You buy it for $20,000 or $25,000 and sell it for $50,000 to $60,000, and the person who buys it from you walks away, shaking their head about how great of a deal it was. It’s a garage sale model. You are buying a piece of property or a bunch of stuff that’s way undervalued out of convenience for the seller. It happens very consistently. Jill and I did a ton of deals and started Land Academy. Our Land Academy members do. You’re set up for this. That’s the good news. I can tell you from experience that all recessions have one thing in common. They all end. I can, as a younger person, the second recession around 2009, I was convinced it was over. I hear younger people in our group and our children say, “We missed it. The market’s gone. The properties all rose.” All recessions have one thing in common. They all end. Share on X “I can never afford to buy a house.” “I couldn’t do it, so it’s over.” That’s not the case. This is all going to happen again. Interest rates are going to go back down. A lot of people will drop out of the market because of these recessions. These recessions are cleansing, so to speak. That’s good. They’re cleansing for people that are set up to stick around and weather the storm. They will end. This will end. The key is what do you do while it’s happening to capitalize on it, which is what the show is about. Here are the four points on how to survive this thing, and I’ll go into detail on it. 1) Batten down the hatches to weather the storm. I’m going to tell you what’s going to happen here within reason or in general, and what we do to change our lives and our businesses so that we can manage this, we can weather the storm and ultimately thrive during it. 2) You need to change the type of land that you buy and what you’re willing to pay. We’ll cover that change. 3) Change the message you are delivering to potential buyers. It’s not just about location and quality right now. You have to seriously deliver a message that my loss is your gain, even though that’s not the case. Then 4) Perhaps the most important, in my opinion, is you need to have somebody in your corner, professionally or personally like Jill, that is standing shoulder to shoulder through this thing. You’re not banging heads with that person because it’s going to get tough. You’re on the bow of a boat during a storm. That’s no time to argue with the person that’s trying to hold on for life like you are.

The Cause Of Recession

Here’s what’s happening. Why is this recession happening? Why do recessions happen? All kinds of stuff is going on. Inflation went nuts. If you haven’t been to the grocery store lately, inflation has gone nuts. That’s inflation in general, in my opinion. It happens because governments print a ton of money to hedge off inflation and then it catches up. That’s what happened. The last two administrations printed a ton of money and it made the value of the dollar less. Other stuff increased in value because the purchasing power of that same dollar is less. That’s my summary of what happens in inflation. That happened when we were in an election year. I don’t care which side you’re on. Nobody likes to get all involved in that and the polarization of it. That’s not good for business. It’s not fun. Very specifically, and this is unique to this recession and imperative in my opinion, we’ve had a long stretch of 3%-ish mortgage rates. Many people bought real estate because of COVID. COVID threw this incredible demand for real estate. That was coupled with 3% mortgages. People were buying second homes, buying land and when they could finance it moving because they didn’t have to go to work anymore. This is a strange, perfect storm of 3 or 4 things that happened. A lot of lenders were leery of and rightfully so doing 15-year and 30-year fixed mortgages. Instead, they did 3 and 5-year adjustable rate mortgages, which simply means your interest rate on your mortgage is 3 or 5 years. At the end of that period, it became a variable rate mortgage and she alluded to this in England, to adjust to the actual rate. You have a 3% mortgage for three years, and now it’s 7%, 6% or whatever the terms of the agreement are. Here’s the math on that. For a $300,000 mortgage every month, you’re paying at 3%, $750 of your payment goes to interest. When your mortgage moves from 3% to 6%, that $1,700 becomes $1,500. In the simplest terms, your payment might be $1,200 in the beginning because you’ve got insurance in there and real estate taxes, PITI or principal. Interest, taxes, and insurance. That $1,200 payment. The interest portion of that’s going to double. $1,200 becomes $1,900. That’s a lot to chew. You’re going along in life and you’re paying $1,200 in one month because people don’t read their mortgages. They don’t know this stuff’s going to happen. Nobody gets a phone call and says, “Your mortgage is going up.” It happened that month. Your salary didn’t change. Your life didn’t change at all. In fact, during these downtimes, you’re wondering if your job’s secure. That’s enough to push a lot of people over to say, “I’m going to sell. We’re going to go move back into our parents’ house,” or whatever ends up happening there in those life events which we preach at Land Academy, life events trigger people to choose to sell their real estate. Huge life events are going to happen for the next 24 to 36 months. This is one of the big ones. That’s why this recession is happening. It’s causing people to choose to sell. Interest rates are real high, which are not making new buyers real excited about buying property. all of this turmoil spells thriving for us. When we did our weekly member call, we were looking at some statistics about how sellers are accepting less money, probably on their home sales too, to account for these interest rates. That’s a bummer too. Banks have been through this too. The last thing a bank wants to do, strangely enough, is take back a house for lack of payment. “I’m going to sell my house.” Could you imagine they can’t qualify this? I rocket to this so they can qualify. With our interest rates now they can afford to live there. That was the only way I could sell my house. That’s happening.

Cash Management

Now we know why we’re here in general. Why do recessions in general happen? It’s 4 or 5 things that all happen at once. Plus, we had many years of an amazing thriving economy. It’s the longest that I’ve ever experienced. I don’t know what the stats are in that, but it’s huge. It’s usually not that long. To survive an economic change like this, cash management is the absolute whole key to winning. This is in your personal life and in your professional life and a little anecdote. I walked into a Finance class during undergrad, this is a million years ago. On the board when they had chalkboards and when they had classes, this sentence was written, “Cash kills companies.” Three words. I never forgot it. Obviously, I’m talking about it now. Cash kills everything. Lack of cash is a real huge problem, then lack of access to cash causes even bigger problems. You have to take a look at what your current cash position is, and that leads me to number one. You need to batten down the hatches to weather this storm. This is the 1st of 4 land flipping business changes to capitalize on this economic downturn. Before we get into the real estate part of it, let’s talk about you and your life and your company. Take a look at how much cash you have in the bank, and then take a look at what your equity position is in all of your assets. If you were like us during this last recession, we had a lot of land. We had a lot of paid-for land that we paid for. We didn’t have any debt associated with it. Jill and I were lucky enough to have a paid-for townhouse that we lived in and it wasn’t our primary residence. The primary residence we had to end up short selling because of lack of cash flow, but we were lucky we had a place to live that was paid for and ended up being a lot of fun. We still have it. We look back on those times and I think those are something I know obvious times. Take a look at how much cash you have and tighten your belt on where you’re spending it. Not everybody is as fortunate to be in a situation where you can move yourself around or move jobs and all of that. Look at your cash position and look at the equity you have in land or in any type of real estate that’s free and clear so you can sell it for less than you paid if you have to. We’re in a world now where if you find a good real estate deal, in Land Academy, people are packed. They’re ready to fund your deal. We didn’t have access to capital back then like that. We were forced to sell assets for not what we wanted to sell them. It wasn’t a hit. It was more like, “I bought it for $25. I thought I’d sell it for $80. Now I’m selling it for $60.” Big deal. Maybe even $50 or $40. What if it went crazy? It was still fine. That’s how we roll. That’s the whole point. Finally, review your deposition. We were very fortunate. All the debt that we had, and it wasn’t a lot, was directly tied to assets that we underpaid for. In a couple of cases, we had to renegotiate with the lender to deal with that. One specific was an office building that Jill had nothing to do with. I would’ve never done that deal if she was around, but we got out of it okay. You need to review for a single point of failure. I don’t like to say this out loud, but a W2 job is a single point of failure. Recessions are what I’ve learned the most about the stuff that I’m screwing up in a good way and it’s a hard lesson to learn. You need to have multiple streams of income and manage your cash position and your equity and debt position. The perfect scenario is you have a ton of assets. They generate a bunch of money, you have no debt at all, and you’re standing next to somebody like Jill where everybody’s patting themselves on the back saying, “We finally learned something from the last time.” This is your first recession and you’re getting pounded. Please don’t beat yourself up over it. Learn.

Changing The Type Of Land To Buy

It’s going to happen again many years from now. We’re going to come out of this. There’s a bunch of real estate you can buy which we’re going to talk about in a second. Just learn from it. Don’t look in the mirror and call yourself an idiot because you’re not. There’s no class at any level of education called Surviving A Downturn that I’m aware of. There should be. Batting the hatches down because you can weather this. 2) Change the type of land you buy and what you’re willing to pay. This is for 2 and 3, I want you to put yourself in the shoes of people who buy assets during a recession. What do you think the profile is of somebody who’s scrounging around to buy undervalued stock and undervalued dirt? “Pick me.” They’re loaded and they have a lot of cash. They’re not smart. They have the perception, not the reality, the perception that there are amazing bargains to be had during a recession. Sometimes there are. Yes, but they’re not on the MLS in general. You need to change the type of land that you buy and what you’re willing to pay based on who you’re going to sell it to. We love rural vacant land here. We love out-of-the-way properties that are cheap that we can buy in a group, 50 or 40 acres for $20,000, $30,000, or $40,000, and sell for $80,000. I don’t want you to focus on those types of properties right now. They’re not easily resalable during a recession. What I want you to focus on are properties that are urban and valuable, properties that maybe commercial property, and properties that maybe are zoned agricultural right now, but during the next uptick might be a developer’s dream. Look at what that buyer’s perception is of the dirt that you have. I’m not saying stop your rural vacant land effort. If you want to buy those and you just love it, and that’s your specialization, that’s great. It’s one of our specializations. You’ve got to buy them way cheaper than 20% of retail. If you’re deep into the Land Academy scenario, you’re staring at ten properties that are rural vacant land and you were ready to buy them. Call a seller back and say, “This needs to be cheaper.” We do that all the time. There’s nothing wrong with that. Things changed, “I thought I could pull it off, but I can’t. This is what I can pay now. If it works, great. If it doesn’t, I understand.” It works for me so often. How many times have you gone to a garage sale or looked on Facebook Marketplace and you’ve seen a posting of something, you have this thought, and then you execute on it, “I will never be able to buy,” fill in the blank, “like this ever again. This is an amazing opportunity. It’s probably 20%, 30, or 40% of what I would pay during a regular time. I’ve always wanted it.” That’s what you want someone to say about your real estate listing. It needs to be, “I got to buy this right now.” Whatever type of land translates to where you’re buying and selling land and adjust what you’re willing to pay so that the outcome is when you go to sell it, that person’s thinking that. By the way, this applies to a classic car, a boat, all kinds of stuff like the nuttos that have a bunch of money. I’ve always wanted a yacht. Am I a nut? You pointed to me like I’m one of the nuttos.

Changing Marketing Messages

No, you described what kinds of people buy this stuff. It’s a nut that wanted to buy a yacht and can buy now for half the price. 3) Change the message you’re delivering to potential buyers. I alluded to this in the previous one. My loss is your gain. Jill and I have had a lot of success having that be the title of a land posting. My loss is your gain, 40 acres for $60,000. A few years ago this would’ve been $320,000. There’s a huge success rate on things like that in working with the real estate agents that list our stuff, “My loss is your gain. We are in liquidation mode.” Now is the time to sell on price. In every financial class I’ve ever had about building a business or an entrepreneurial class, people who sell on price get in a price war scenario like grocery stores do, never win, and that’s true, except in a recession like this where price just matters so much, both on the buy side and the sell side and be loud about it. Now’s not the time to be coy. You need to jump up and down in your real estate listing or wherever you’re selling property and say, “Here’s the message. I’m going to lose money on this,” and you’re not. You just bought it cheaper. It is what we do, but now we’re even doing it even better. That’s normally what we do. We talk about this off. I’m not here to reset the market now. I’m not here to reset the market. You want your buyers to be jumping up and down for this great deal, and that’s what you’re going to tell them. It’s our same narrative, but we’re just more vocal about it, is the big thing like, “We all know this is worth way more than I’m selling it for.” I used to teach college-level Entrepreneurial class. One of the things that I taught specifically is, “Nothing lasts forever. There are ups and downs in everything. This can be an up or a down for you depending on how you deal with it and how you’re managing everything. When things go sideways, they always do. In every relationship and every financial scenario that you’re involved in, stuff always goes sideways. The first thing that you need to do is to get back to grassroots, whatever your business is about, buy a piece of property for cheap and sell for more.” That is our most grassroots scenario. “That’s great. How do you do that?” Jill and I have spent many years explaining that. One of the things that has to happen or will happen and is happening in an environment like this is as hard as sell land. Your buyer pool is a lot smaller. You got to go out there and get your customers. It’s fair just like the old days. The extreme examples of that are, “It doesn’t happen anymore,” but when we were kids you could get a summer job selling encyclopedias by knocking on people’s doors, that whole cliché about going down a block and knocking on people’s doors because the wife is at home and the husband is at work. We’re not that young, in selling vacuum cleaners, you could do well if you could sell. I’m not saying do that. I can’t stand that sales and I don’t condone that then or now. The people who are going to buy your real estate, especially if it’s priced correctly, already own real estate in the immediate area. They need to be directly contacted by you. Maybe you text them. We already advocate sending neighbor letters every time you buy a piece of property. Send a letter that says, “My loss is your gain.” If you’re like me, you have a good agent who knows this stuff is doing it. One of the things that’s happening now too, and we talk about this a lot within our Land Academy community, is that we’re already seeing agents leave. I feel bad for them, but I’ll tell you what happens. The good ones survive. The good agents are still out there and they’re doing okay. They are hustling. I’ve got some great ones that are hustling. That’s what it takes. Change the message that you’re delivering to potential buyers. That’s number three. We covered that pretty well. Change how you’re looking at getting buyers. Try a little harder, is what I’m saying. Have that grassroots thought. How did I sell the first twenty properties that I sold? What’s a real basic business model here? It’s buy for this, sell for that. Who’s going to buy my property? If you look back at who buys your real estate, I bet you $1 a lot of it, your dirt got sold to people in the immediate area.

Having Support

I would love your input on this because it’s important. 4) Have somebody in your corner. You don’t want to go through this alone. You don’t want to go through happy times alone or bad times alone if you’re like most people. Like I said earlier, you’re weathering a storm here. If you’re on the bow of the boat, hanging on for life. You don’t want to do that alone. You want to do it with somebody you don’t need somebody in your life, that’s criticizing you every step of the way you go. If you're on the bow of the boat hanging on for life, you don't want to do that alone. You need someone who’s not criticizing you every step of the way. Share on X This is something we talk about. I talk to people when they’re coming into Land Academy. It doesn’t mean you have to have a partner like we do and be all in it like each other. I would not recommend that, but one of the things that I say when I talk to people and they want to come down, I’m like, “What does your significant other think about this? You’re about to start a new business. You’re about to spend all day on the computer. You’re about to go into the cave of your office doing data all day. If they’re not on board, this isn’t going to work. You need someone who understands it and gets it. They’re supportive of you. They’re going to take care of the kids today and they’re going to bring you a sandwich when you need it because they know what you’re doing is hard work and you’re trying to make it better for your family.” That’s what I think of being on the same page. Jill and I joined forces during the tail end, or let’s say the middle of the last recession. You don’t know what the middle of a recession is. You don’t know when that’s going to end, but she got frustrated with how I was selling. She said, and I’m paraphrasing, “Just give me the phone.” I pretty much said that. She went out there. She just got tough. I’m tough about a lot of other stuff, data and all kinds of things, but when it comes to just saying, “We’re selling these properties this week,” then Jill gets it done. You need somebody in your life like that. You don’t need somebody saying, “I told you this land thing wouldn’t work.” It made me think of the support. We were joking on our member call. I don’t remember who said it, but it was something about, “I just lost a whole Sunday.” She was lovingly joking about losing a whole Sunday, testing her mailer for a reason before it went out. We’re like, “That’s a good way to spend a Sunday,” and she said, “You’re right.” I said, “In the lists of extremely wealthy people, there’s a lot of lost Sundays until you get wealthy and you pull up in a nice sports car and everybody’s like, ‘That guy’s lucky. I wish I was that lucky.’ How many Sundays of luck does it take?” Even looking at Land Academy when we think back, we are in episode 2003. Think how many days and nights we were up early at our computers and desks, creating content, doing your own this, doing your own that, “This is broke. We had to fix it.” Here we are. Jill and I have been shoulder to shoulder for many years and whatever comes, it comes. We don’t blame each other. I’m not saying it’s peaches and cream because it’s not. In fact, never work with your spouse ever, but she doesn’t blame me for stuff and I don’t blame her. The infrastructure should be there or everything’s a lot harder. Most of you know exactly what we’re talking about here. It’s got to be a team effort. It’s such good advice. Thank you.

Conclusion

Four things. Take in what your cash position is. Cash management is absolutely key to surviving this and thriving. The same is true with cash. If you are short on cash now, continue to find great real estate deals. Send out mail, deal. Do what you’re doing and get onto our Land Academy Discord and find yourself a great land funder. Go to LandFunding.com. Put the deal in there. Go to LandAcademy.com. Check it out. We’re included. We’re at the top of the list. I know it’s going to happen here. We have money allocated for all of this. I’m ready. We’re as ready as we can be. I never want to assume, but we’ve been through enough. You’ve been through enough and you are smart enough to make sure we are in a great position. I know this is not our first one and I know there are a lot of people in Land Academy because of this reason, because we’ve weathered the storm. We’ve done more than 100 deals. I’ve been more than one year into this fill-in-the-blank. Even though some other people have done well, we have. If you can put your head down, give up a Sunday, do all these things we talked about, put yourself in that position and stay focused. Stay on track. Try not to get discouraged by little things because they’re going to happen. To stay the course, you will pop up for air and be right there with us. Sadly, there will be a lot fewer people, but we’ll all still be here. Don’t get discouraged by little things. They happen. Just stay the course. Share on X Join us next for another interesting episode. You are not alone in your real estate ambition. We are Jack and Jill, information and inspiration to buy undervalued property.

Important Links

• LandFunding.com