Land vs Houses (JJ 657)
Land vs Houses
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hi.
Jack Butala: Welcome to the Jack Jill Show, entertaining real estate investment talk. I’m Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny Southern California.
Jack Butala: Today, Jill and I talk about land versus houses. Which one’s better for you? I have so much to say about this topic, too.
Jill DeWit: I do too. I mean, there-
Jack Butala: You were madly scribbling your notes before the show.
Jill DeWit: I was, I know. They’re different.
Jack Butala: So different, aren’t they?
Jill DeWit: But they’re, I love ’em, but they’re both valuable. They’re both great. I have positive things to say about both. They’re not hard. It sounds like it’s hard. It sounds like one’s harder than the other. I swear there’s two camps. I don’t know if you’ve noticed. The house people think, “Oh, I couldn’t get involved in the land,” and the land people think, “Oh, I don’t know about the houses.”
Jack Butala: Yeah.
Jill DeWit: But it’s not that crazy.
Jack Butala: Exactly.
Jill DeWit: Thank you.
Jack Butala: Before we get into Jill’s banter, let’s take a question posted by one of our members on the jackjill.com online community. It’s free.
Jill DeWit: Okay. Luke says, “I was just noticing in my accounting software that the number of properties bought crossed over 1,000 since I started. It doesn’t seem like that many, but I wholesaled a bunch off along the way and I never even put in the accounting system too.” Oh my God.
Jack Butala: He means this is more than a 1,000.
Jill DeWit: Exactly. The phone keeps ringing. 2000s coming right up.
Jack Butala: There’s a saying in Hollywood and I wondered what it meant until I was successful in Real Estate. “Fame sneaks up on you.”
Jill DeWit: Oh.
Jack Butala: And when people say that what I think they’re really saying is, “You know, I’ve been doing this, exactly what I do, for ten years now but it seems like in the last year ever since X, like I got on a TV show or something and now it’s like, “Wow this all caught up with me.”
Jill DeWit: Yeah.
Jack Butala: In professional baseball they say, they call the Big Leagues, the show. And if you ask, a, you know let’s try to make it to the show, if you ask somebody in the minor leagues they just they’ve been playing baseball the same way their whole life and all of a sudden now there’s a stadium of people watching.
Jill DeWit: Exactly.
Jack Butala: I think that’s really healthy.
Jill DeWit: I think that’s cool. It’s like, I tell you I like your celebrity run and I was thinking how it sneaks up on you. It’s like I never used to be able to get a table, now I can get a table everywhere I go.
Jack Butala: Here’s a few things you don’t want to sneak up on you like that at all.
Jill DeWit: Oh no.
Jack Butala: You don’t want to look at a calendar and say, “Oh my God, I’m 75 years old. Where did that go?”
Jill DeWit: Right? Or look in the mirror.
Jack Butala: Or look in your drawer and say, “Oh man I should have changed all of my undergarment stuff, they got to go.”
Jill DeWit: Or I should have spent a little more time with that kid. Too late now. No.
Jack Butala: Is that kid’s hair always been that color?
Jill DeWit: Or my spouse.
Jack Butala: Can you smell junior?
Jill DeWit: Where is Junior?
Jack Butala: Has he always smelled that way?
Jill DeWit: Did we have a third kid?
Jack Butala: Topics for another show.
Jill DeWit: Yes.
Jack Butala: Today’s topic though, land versus houses. This is the meat of the show. Which one do you prefer Jill?
Jill DeWit: Oh my gosh, I have pros and-
Jack Butala: You can’t answer it can you?
Jill DeWit: I can’t.
Jack Butala: I can’t either.
Jill DeWit: Gosh.
Jack Butala: I can’t either. They both have huge benefits, which I scribbled down on earlier before.
Jill DeWit: Totally.
Jack Butala: Before we started this mess.
Jill DeWit: Right.
Jack Butala: You go first.
Jill DeWit: Okay. Well here’s my, I’ll tell you my land list and I’ll tell you my house list.
Jack Butala: Excellent.
Jill DeWit: Okay. My land list, I put easy. I don’t have to do anything with them. There’s nothing that they need. I don’t need an inspection, talk about easy. I don’t have to babysit them. If there’s a fire on them, fantastic cause its burn the brush off. If there was any, you know what I mean? Kind of thing sometimes.
Jack Butala: We’re gonna get some calls on that.
Jill DeWit: I know. I’m sorry. I don’t mean it like that but-
Jack Butala: Wildfire and real estate are not good.
Jill DeWit: Exactly. I know-
Jack Butala: I’m going on the record and saying that.
Jill DeWit: Sorry. Alright well that was just, you know, anyway, but it’s easy.
Jack Butala: Can you guys stop promoting burning your own land on. Thank you.
Jill DeWit: Okay got it. Alright. Few details, you know it’s like does it have, I don’t need to know that much. Does it have access? Is there an attribute? You know the size, that kind of thing. I’m not getting into what condition is the pool in and the roof and the, you know, is there asbestos? Kind of thing. I don’t have to think about those kind of details on land. Easy close. You know, it’s usually a lot of the properties, we’re doing them ourselves, I mean literally just making our own deeds. Collecting the money, sending them out, getting them recording, done.
And incredibly profitable. I mean you can do the same, you can make a $100,000 on a land deal like you can make a $100,000 on a house deal. So, that’s not crazy.
Jack Butala: So here’s, I’m going to paraphrase Jill, cause mine are basically the same but I have a few to add or subtract. Land from a physical asset standpoint, I think what Jill is saying, the real estate asset part of this piece, physical plant let’s call it, is way, way, way, way easier with land. And that’s pretty obvious. You’re just buying a piece of dirt somewhere, nothings, you’re not gonna improve it or, nothing really is going to happen to it. You’re just really hoping to buy it for cheaper than you’re going to resell it. But here’s a downside.
The market for land, the resell market, is microscopic. It’s microscopic, I said it it twice for a reason. Compared to the house buying crowd. There’s an element of, “I’m going to buy this piece of land and let’s just see what happens here.”
Jill DeWit: Right.
Jack Butala: To land that you do not have with houses. You know exactly what’s going to happen with the house, we’re removing all the risk, in my opinion. So for that, so for in exchange for removing risk, you remove some profitability. And I can say all this because I’m not the one in my organization buying and selling.
Jill DeWit: Nice. Nice.
Jack Butala: Alright so anyway, so what do you like about houses then?
Jill DeWit: Okay, house. I put down fast. Talk about fast [inaudible 00:06:12]. I mean the minutes it’s, the way these house transaction deal go, is I’m holding off on contacting the buyers, until the contract is done and the house is in escrow because I need to have that detail before I’m comfortable sharing the details. So I’m sitting there with a handful of buyers ready to go and I can’t give them all the information yet. So it’s that fast.
Jack Butala: Every house deal I’ve ever done, everybody involved is like, they’re breaking down the barricade at The Who concert. They can’t get it sold fast enough, purchase fast enough, all of it.
Jill DeWit: Yep.
Jack Butala: I’ve never done a deal like that. [inaudible 00:06:51] In land.
Jill DeWit: Exactly.
Jack Butala: And here’s why, because we buy so cheap.
Jill DeWit: Right it’s a no brainer.
Jack Butala: And we find the right sellers. The sellers want the money the really bad, the buyers want to get in there and clean it all up and rent it out.
Jill DeWit: Right. Everybody want’s it to be fast.
Jack Butala: Cause we’re doing it rather, yeah.
Jill DeWit: Exactly.
Jack Butala: We’re fortunate to have the people that actually do our house deals, they have the same attitude.
Jill DeWit: Right.
Jack Butala: They push us.
Jill DeWit: Exactly.
Jack Butala: And that’s really good.
Jill DeWit: Yep. Now, I did say two, the second thing I put down with houses are there are more details. But it’s not a problem. For me anyway, cause I’m not dealing with them. Just kidding.
Jack Butala: Here’s [inaudible 00:07:23] here’s why everybody, some people buy a house and sell it, or rent it, or renovate it and then never do it again. Here’s why, in my opinion. Real estate agents suck. They wreck everything. They’re all up in your grill about everything and all the advice they’re giving is wrong. Lenders, suck. They’re just there to make the fees and that’s it. They don’t care if you get a good loan or a bad loan or how fast it’s, they just want money. Like a used car dealer, it’s that bad.
Jill and I we remove both of those. We never use any real estate agents in fact if there’s a real estate agent involved we just walk away.
Jill DeWit: Right.
Jack Butala: Lot of times you send letters out and the seller calls back and says, “You know that’s, I would love to sell it. I’m going to have my agent call you.” So that they, thank you, see you, bye.
Jill DeWit: Exactly.
Jack Butala: And lenders it’s awful. Here’s who really, if you have a good escrow agent, keep that person forever. They will make or break your real estate career.
Jill DeWit: Yep.
Jack Butala: They need to have some experience. Anyway, Jill go ahead.
Jill DeWit: Anyway, so my third thing under houses is, boy are they an easier close. And the reason why is, I’m not doing it myself. I mean, every time we’re bringing in and doing it the right way and we’ve negotiated great prices, with the right people, so they are fast closes. They know how we work. So, I like that part with houses, I like better than land. You don’t agree?
Jack Butala: No I absolutely agree.
Jill DeWit: Oh okay.
Jack Butala: Absolutely agree.
Jill DeWit: Okay.
Jack Butala: Here’s a few examples of the houses that we got in the last 48 hours. Purchase price is 359. We are selling it to the investor, the renovator for 400, it’s worth about 450 to 480 in the present condition.
Jill DeWit: Okay.
Jack Butala: So we’re going to clear 40,000 bucks that’s our whole goal. The other ones are very very similar and knock it down to $180,000 price and mark it up 40. And on, and on, and on, so everybody’s clambering to get those deals done. That’s a perfect example. Is there any chance, on a day like that, that you’re going to hit a home run? Nope. We know exactly what’s going to happen. Down to the cent before we get into it.
With land, a couple days ago somebody’s hitting home run. We had one of the questions, bought it for 6,000 in Austin, they’re going to sell it for a couple 100,000. That’s a home run.
Jill DeWit: It’s true. You’re right.
Jack Butala: So you have no chance of hitting a home run with houses in my opinion.
Jill DeWit: There’s a trade off.
Jack Butala: Right.
Jill DeWit: But we could have consistent. It’s consistent and it’s fast.
Jack Butala: So which one would you rather have? Consistency? Or fireworks?
Jill DeWit: Oh I don’t know. I get high on buying undervalued assets. I know you do too.
Jack Butala: I get high on consistency.
Jill DeWit: Oh.
Jack Butala: Maybe it’s my age.
Jill DeWit: Maybe it is.
Jack Butala: Because I’ll tell you, if I bought, a $6,000 property in Austin, like the caller, not the caller the questioner asker two or three days ago. I would have sold it for 12,000 bucks-
Jill DeWit: And moved on?
Jack Butala: Yep.
Jill DeWit: Yeah you’re right that’s true. That’s your thing. And I’m like, yeah, I guess I do both. But I like those home runs. I guess I like hearing about them.
Jack Butala: We have an investor who tells a story and he’s been with us for about 6 or 8 months and they’re not buying houses with us as investors and he knocked it out of the park with two land deals.
Jill DeWit: Yep.
Jack Butala: I mean he made quarter of a million bucks in about six months.
Jill DeWit: You know what, cause I understand and I get that, you’re right Jack. Cause, you know, then we don’t have inventory sitting around. Could we have sold it for more? Heck yeah, but we didn’t want to hang out. Double your money, move on. That’s your thing and it’s always been that and I appreciate it. On the land stuff.
Jack Butala: Great thing about land, is that, there’s a lot of good things about land, but one of them as the cheapest entry point on the planet. So, we literally have properties listed on our website, on land pen.
Jill DeWit: Yeah.
Jack Butala: It’s our groups website, everybody in land academy has access to it. For 500 bucks. So you could pack, it would be very simple, to buy property from us, right on the internet, for 5, and I’m not plugging our stuff.
Jill DeWit: People have done that.
Jack Butala: And then sell it for $1,500 on Craigslist on their own market.
Jill DeWit: Exactly.
Jack Butala: So, you know, anybody can do that. Anyone.
Jill DeWit: Right.
Jack Butala: And you’re buying for cash and your selling for cash.
Jill DeWit: Exactly.
Jack Butala: So it takes out all the malarkey out of it.
Jill DeWit: Yep. Brilliant.
Jack Butala: I’m trying think if there, what’s there, I mean land it’s just so hard to lose with land.
Jill DeWit: Well, I don’t even think with houses too.
Jack Butala: How could you lose with land?
Jill DeWit: Well you know what else too, lists, I want to back up and say one thing about the houses. This is not every market and one of the things about why I think we’re so successful is you eat with land and houses. More so with houses right now and that’s our focus. You really strategically get in there and you’re looking, I mean you set me up so there is no way to fail. When you’re hitting these markets where, the average days on market are under 30 days and we’re buying them at 40%-
Jack Butala: There’s no way to fail.
Jill DeWit: Or whatever under the retail. You can’t go wrong.
Jack Butala: Here’s what I do. I take all the zip codes in an MSA-
Jill DeWit: What’s an MSA?
Jack Butala: It’s a Metro Statistical Area, defined by the census.
Jill DeWit: Thank you.
Jack Butala: So let’s say there’s 50 zip code, I don’t know, let’s just say there’s ten. There’s usually a lot more than that. And I run the analysis for several things, number one, days on market and zip code x, how many days on market? Some days on market are 30, 40, 50, some of them are wealthy areas. There’s 200 days on market almost a year. Do you want to invest in that?
Jill DeWit: Right.
Jack Butala: Do you want to spend money and mark it up $40,000 or wait a year or do you want to wait 30 days? Pretty simple stuff.
Jill DeWit: Exactly.
Jack Butala: Then I look at how many properties are listed on the MLS right now, that’s the existing inventory. How many properties were sold last month and how many new listings came up in that month and then all that needs to be less than one point zero. More properties need to have sold than got listed. That means markets moving fast, to me anyway. And then finally, what’s on inventory? As a percentage of, what’s the inventory that’s listed? So it has to be less than like half of one percent. So there’s 10,000 SFR’s in our market the number of properties that are for sale. I don’t think, ML’s, have to be less than, like less than half of one percent.
Now, I’m getting serious about that zip code. That doesn’t mean I’m going to run out and [inaudible 00:13:45] Now I’m going to get serious. Then to price that I’ve identified that now as a zip code in MSA that I think looks attractive, then I look at, the first thing I look at is the average price, sale price. If it’s around 200 or 250, that makes me really happy. Two working people in regular jobs can afford a $250,000 house pretty easily. Should I keep going?
Jill DeWit: You know what I was going to say, I mean, are we going to cover this? You know what you’re doing right now? You are just right now describing house academy and I think it’s awesome.
Jack Butala: I know.
Jill DeWit: I’m sitting here going, if I were a listener right now, I would be frantically writing this down.
Jack Butala: Oh really?
Jill DeWit: Yes, I would. I would’ve pulled over at this moment.
Jack Butala: [crosstalk 00:14:27] sense.
Jill DeWit: You know, you think that Jack, cause it comes easy to you. If I were brand new right now-
Jack Butala: It was about eight minutes tops.
Jill DeWit: And I found you, seriously, I would’ve pulled over and I would be writing this down.
Jack Butala: I mean, so then you got to price the asset which requires going to to the census track because a lot of stuff can mess with those statistics so you want to smoke that up before you spend the money on the mill.
Jill DeWit: It’s true.
Jack Butala: Or the staff that are going to answer the phone and all that. That’s what I like to do. I don’t want to talk with any sellers.
Jill DeWit: It’s true. See this is why you’re, you’re good at this. It’s awesome. Thank you.
Jack Butala: This is why you’re good at it so I don’t have to talk to the seller they just call you.
Jill DeWit: Thank you.
Jack Butala: Wow where are we?
Jill DeWit: Well you’ve done it again. You’ve wasted another 15 minutes that you can’t get back. Listening to the Jack and Jill show.
Jack Butala: It’s so much nicer when you say it.
Jill DeWit: Thank you. Join us tomorrow where we discuss how we are-
Jack Butala: Teaching our trade.
Jill DeWit: That’s right.
Jack Butala: How to teach your trade.
Jill DeWit: Yep.
Jack Butala: Hey, Jill and I do it all the time. It’s way harder than it sounds.
Jill DeWit: This is very true.
Jack Butala: You have to get organized and stuff.
Jill DeWit: You do. And we answer your questions should you have one. Post it on the jackjill.com online community. Go there and find it. It’s free.
Jack Butala: You are not alone in your real estate ambition. I went off [inaudible 00:15:41]
Jill DeWit: That was good. You did, you were just going down, well you’re where you’re at right now. This is what you’re working on right now.
Jack Butala: So at the end of the day.
Jill DeWit: Tell me.
Jack Butala: Would you rather, if you had 10,000, lets say $100,000 would you buy a house or buy land.
Jill DeWit: Land.
Jack Butala: Wow. That was fast.
Jill DeWit: Yeah. It’s just-
Jack Butala: I would too.
Jill DeWit: I love the house stuff and how fast it all happens, but at the end of the day I love the easiness. You know?
Jack Butala: Yeah. I would too.
Jill DeWit: And I really think-
Jack Butala: Especially in [inaudible 00:16:12]
Jill DeWit: And they’re both successful. People worry that, you know, you’re going to be stuck with this land but I’m not. You buy it right it’s not an issue it’s so easy. You know?
Jack Butala: Yeah.
Jill DeWit: And the houses, we buy them right, we have, it’s, the markets moving it’s a no brainer. You know? It’s two phone calls if that. And it’s sold.
Jack Butala: Right.
Jill DeWit: So, there you go. Hey, share the fun by subscribing at Itunes or wherever you’re listening and while you’re at it rate us there.
Jack Butala: We are Jack and Jill.
Jill DeWit: We are Jack and Jill.
Jack Butala: Information.
Jill DeWit: And inspiration.
Jack Butala: To buy undervalued property.
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