By S. Jack Butala We have been sending landowners offers to buy their land since the late 1999s. Just before I sat down to write this, I looked back to find out that we have sent about 1.2M mailers out over the years. I’m confident […]
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Live Land Tax Deed Auction Short Stories 486 parcels adjacent to the Grand Canyon for $175 each
By S. Jack Butala There was a time that our companies relied solely on in-person tax deed auctions to supply our land sales chain. I was on the road in Arizona, New Mexico and California much of the year. These are some of my stories; […]
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Setup And Scale Your Content Creation
by Jason Cochard for Land Academy Some of you know that I come from a film making background and that I’ve been working on a live-to-tape television show for a decade. The rise of online video has conveniently dovetailed my existing skill set and domain […]
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How I bought 1,100 properties for $11.00 each and sold them for $500 each ($550,000)
By Steven Butala How I bought 1,100 properties for $11.00 each and sold them for $500 each ($550,000). Just about every year most of the counties in Arizona hold what’s called a tax deed sale. The gist of it is as follows: Property owners fail […]
Read MoreWe are in for the Long Haul (JJ 668)
We are in for the Long Haul
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 am Jill DeWit broadcasting from sunny, southern California.
Jack Butala: Today Jill and I talk about how we are in it for the long haul. Those specific signs that you just know that you’ve turned the corner. You’ve done a few deals and you’re in it for the long haul.
Jill DeWit: I thought it was going to be about Jill, are you wearing the data is the new bacon t-shirt again? Because you’re just so in love with data now which I never was.
Jack Butala: That’s one of the signs.
Jill DeWit: Thank you.
Jack Butala: Did you ever hear those jokes like you might be a redneck.
Jill DeWit: Exactly. Here’s how I know. Every vacation is not really a vacation. It’s just … Every vacation is not a vacation. It’s only a new area to check out property.
Jack Butala: That’s what it is. That’s one of my signs.
Jill DeWit: We haven’t scoured this area yet. I didn’t know we’d be looking at property here Mazatlan but I guess we are.
Jack Butala: It’s just a new data set. Everything’s just a new data set.
Jill DeWit: Exactly. Hey Jill, while you’re in Seattle next week, will you please drive by these locations for me and take some pictures? Yes.
Jack Butala: You know it’s funny you bring up Seattle. It’s one of the lowest days on market environments in the country. For some reason, they can get deals done in Seattle, house deals, in six, seven, eight days.
Jill DeWit: Here it comes. I’m waiting for it. I’m going to be there.
Jack Butala: Before we get into it, let’s take a question posted by one of our members on the jackjill.com online community. It’s free.
Jill DeWit: Okay. Steven K. asks: I’m wrestling with whether to let my buyers handle the final closing documents for filing with the county. As another member, Luke, has pointed out to me, they will screw it up is a possibility. True. The transfer tax is almost 2% though and recording is $75 for the first page.
Jack Butala: Hello California.
Jill DeWit: Right. So I’m contemplating whether to send a closing documents package with instructions or biting the bullet and just paying these fees myself and interfacing with the county.
Jack Butala: Jill and I are going to agree on this.
Jill DeWit: I will need original signatures for the transferred tax document from the buyer anyways though so I’m struggling a little bit with which way to go.
For me, do you want me to answer?
Jack Butala: Yes.
Jill DeWit: For me, not a big deal. Honestly.
Jack Butala: Which way would you do it? You have your seller …
Jill DeWit: I’ve done it both ways.
Jack Butala: What he’s saying is this. You post a piece of property on the internet for sale, a $5,000, five acre property in California. And somebody says, I want to buy this property and you say, great. I’m going to send you a bill or click on the thing. Charge the credit card. Okay, great. You bought it. You send them a deed package and you sign the deed over to them. A deed is not a contract, by the way. It’s just your signature and you have two choices at that point. You have the money and you’ve conveyed the property and it needs to get recorded. That’s the final step. You have two choices. You can record it for the buyer as a courtesy.
Jill DeWit: Meaning you don’t send it to them, you’re sending it straight to the county.
Jack Butala: Or you can send it to them with the instructions. Here’s a pile of paperwork. Good luck. Figure out the transfer tax, figure out the whole … I will tell you from experience, 20% of the people that you do that with, 20-25% will never record the property.
Jill DeWit: True. They don’t even know sometimes. They get it. They look at this deed. They think it’s like a pink slip and it’s all done and they just put it in their files and they walk away. And it’s not the end of the world.
Here’s the downside of that. The guy has it. It’s in his safe. He thinks it’s all done and it’s all cool. He really has no idea. He didn’t read your letter at all. So all that’s going to happen, Steven, is you’re going to get the tax bills forever and you’re just going to shred them and throw them away, not even worry about it. Because it’s really not your responsibility. Someday, hopefully he’ll figure it out and record it like when he wants to resell it kind of thing. Or transfer it to somebody else.
Jack Butala: If you’re selling properties every week, trust me. You want to record it for your buyer. And you want to charge them for it. It’s a revenue source. We charge $400 bucks to record a deed.
Jill DeWit: That’s what I was going to say. Sorry I lost my train of thought there.
Jack Butala: So, like I said … I’m saving you.
Jill DeWit: Save me? You made me lose my train of thought.
Jack Butala: What?
Jill DeWit: It’s all good. No, okay. So you record it … Well, here’s the problem. That’s what I wanted to say. So, let me … what I was going to say was you send it to him and these tax bills are coming in. Here’s what could happen. Huh, speaking from experience here. You have staff changes. Things get moved around. These tax bills keep coming in and after three years of the same tax bill, somebody might think we might actually own it and in their best interest, your best interest, they research with the county and say, oh, this one must have fallen through the cracks and they roll it back into your inventory. We’ve done this and we caught them and so you have to make sure and check that because that could get rolled back into your inventory and until you go back and look and say, no I sold it. The guy just never did the deed. You have to be careful of that. So you might create some extra work.
So what Jack’s saying, which is true, and we on some of these, more now because we’re so good at recording and we’re just doing so many deals. It’s just too easy. I will charge an extra fee and do it for them. And just say, hey, look. I’ll make it easy for you. For $50 bucks you won’t have to think about or whatever. If the recording fees are $75, I might even work out something nice. But you know, the fact that I’m doing the work is a big deal right there but we’ll record it for them and then it’s all done.
And then, what I do though, the sellers still want to have something in their hands. I’ll help everybody here. You might say, okay, I got your money. I’m going to record it. Just watch for county. Technically, you could do this. You could say, I’ve got your money. The deed is done. I’m sending it in to be recorded or doing an online recording, however you’re doing it, today. And you will get your final notification that it’s done and recorded because it will come directly from the county to the buyer at that point. But this is hard for these buyers. In some counties, it may take weeks, even months for them to get that stuff to them depending on the county.
So I still will usually, well, we could scan it in … Well, depends on the person or we’ll send them something because they always like to have something in their hands showing that it’s done and that’s just an extra nice step and they love you.
Jack Butala: Yeah, it’s just basic consumer behavior. When you buy something, you want to get something.
Jill DeWit: Exactly. The other thing why I do that too is I want them to have something in their hands and I’ve put in there a note that says, if you have any questions, call the county. Because at that moment, technically, I’m out of it. And I don’t want this buyer calling me back like I haven’t got it back, I haven’t got it back. And I have to keep saying call the county. I try to make it real clear though. No, I’ve sent it to the county. If you have any questions, call them. Because that’s really what they should do at this point. Say hi, this was sent to you on the first. I’m just waiting for confirmation. Can you tell me if it’s been recorded? That’s really how it should go.
Jack Butala: You also could … What we do in an automated fashion is with land is when somebody clicks a button and buys a piece of property, they get a deed the next day. They get a copy of the deed PDF style so they say, here’s your deed. We’re recording it for you right now. Thanks very much. Here’s a phone number if you have any questions. That just gives a sense of … It stays off of causing concern or trust issues or any of the internet things that could possibly go on.
Jill DeWit: Right.
Jack Butala: Your job is to make the person feel as comfortable as possible. Because let’s face it, doing a real estate deal on the internet is just a little bit weird. I don’t get this question too much at cocktail parties anymore but it used to be maybe 8-10 years ago, people would look at me and say, what kind of nutcase are you that you buy and sell real estate on the internet?
Jill DeWit: And you’ve never stood there. You’ve never looked at it? What do you mean you’ve never looked at it? And then you sold it? Well, how can you do that?
Jack Butala: Exactly, Jill. So you want to do everything you can to make sure that everybody is happy and they own it and all of it.
Jill DeWit: Exactly.
Jack Butala: The struggle is a lot of these counties are real rural so it takes them a long time to do stuff. It takes them a long time to record. You don’t see it in the buyer’s name for quite some time so there’s issues that happen. But Jill’s right. You can wrap it all up in a doc prep fee. That’s what we call it. It’s $399. $399 for doc prep fee and we record the property for you. And they just build it into the price. People are used to paying extra. I don’t know where or how this happened in our country but people are used to seeing the price of something is $100 and then but it’s really $120 at the end with taxes and these destination fees and the whole thing.
Jill DeWit: Exactly.
Jack Butala: So use that to your advantage at this point.
Jill DeWit: Destination fees. Have you bought a car recently?
Jack Butala: Yes, I have.
Jill DeWit: Wonder where that came from?
Jack Butala: Today’s topic, the signs that we are in it for the long haul. Like we alluded to at the beginning of the show … Oh, this is the meat of the show. What are the signs that happen where all of a sudden you catch yourself doing something that’s not normal and it’s like man, you had that real estate itch. You have borderline issues with your career.
Jill DeWit: Well, one of them you just said. It’s like you’re at a dinner party and you’re like, what do you mean? Yeah, we do it all totally online. What’s your problem? It’s not a big deal.
Jack Butala: Jill was communicating to me recently that she was at an event where there were a lot of people talking, standing around and talking. And one person worked for Apple computer and they couldn’t wait to not work for Apple computer because they found out what she does for a living and everybody stops what they’re doing and they say, what do you mean you buy and sell houses and make money?
How many diamonds are you wearing right now?
Jill DeWit: That was actually funny when you said that. I didn’t realize what I put on that day.
Jack Butala: Everybody wants to flip houses or they think they do. I blame HGTV.
Jill DeWit: I do too.
Jack Butala: So Jill, what do you think are some of those signs that you may have an unhealthy …
Jill DeWit: Oh my gosh.
Jack Butala: The title says you’re in for the long haul. What are some of the signs? But really, I think there are some unhealthy pathological addiction that goes on to be that successful in it like we are.
Jill DeWit: Okay, one of them is you can’t drive down a street like a normal person and just look at the scenery. You know you have this problem. You know you’re in it for the long haul when you have a Redfin app constantly open and everywhere you go you’re going, hey, that just sold for 2.1. Hey, that’s this.
Jack Butala: Are you speaking from experience?
Jill DeWit: Yes. No, it’s a good thing though. I think it’s a good thing.
Jack Butala: Jill and I have not driven in a car together where I’ve actually driven in a long time. I always sit shotgun and I look at on the screen saying my gosh, there’s a pocket of potential subdivision.
Jill DeWit: It’s fun. Hey, what’s that worth?
Jack Butala: Right.
Jill DeWit: We do that. Yep, that’s just how we drive around.
Jack Butala: Look how that’s presented.
Jill DeWit: That’s true. That’s another one. You look at these … You’re on social media critiquing other sellers and buyers. I do that all the time. I’m like, okay, that was stupid. Why did you pay that? I’m constantly doing that. I see … because you and I are in social media on all these Facebook groups where there’s a lot of properties floating around and a lot of people trying to sell assets and what you’re talking about. They renovated them and they put them back out there. And I’m still not totally in agreement with their pricing on all of them. So, that’s an issue. When all of your … You used to be looking to see who’s having babies and now you’re just looking to see who’s doing deals.
Jack Butala: It’s true.
Jill DeWit: There’s a sign you’re in it for the long haul.
Jack Butala: I never went through the baby stage.
Jill DeWit: Well, yeah.
Jack Butala: Or some version.
Jill DeWit: Or who got promoted. You’re looking at your friends. Oh look who went to the show or they’re traveling. No, all my Facebook and you could easily tell too. Facebook’s made some recent changes where they’re really trying to pull up what you look at the most, they can tell. And none of mine is social. It’s all business.
Jack Butala: Oh yeah. I don’t have a social Facebook presence. It’s all real estate driven.
Jill DeWit: So funny. Yeah. Trying to think what’s another good sign?
Jack Butala: I said to myself before we started this episode. I’m not going to use the obsessed word. But it’s obsessed. If you are really … I spend every waking hour. Not every waking hour. I spend every waking work hour looking and reviewing on how to do a deal faster or looking for diamonds in the rough. Like wow, this is a good market. Or wow, this is a great townhouse/condominium complex. It’s grossly undervalued in my opinion for the location. Or essentially just finding a diamond in the rough where you can buy a piece of real estate, do nothing to it at all, market it in a different channel, and sell it for more. That is really what I look for. Everything else is an offshoot of leading back to that.
So if I say, wow, that house is really … Whoever rented that house is perfect for the environment. They did this, this, minimal cost. That’s really what I’m saying is they created some value. Or created some equity in a real estate deal. And it almost never has to do with renovation and almost always has to do with finding a pocket on a map, a pocket of property, that’s just a little bit outside the mainstream that’s half price.
Jill DeWit: Right.
Jack Butala: Like north in Los Angeles here up in the mountains. There’s all these little mountain cabin communities and if you go slightly, maybe three to four to five miles out of the ring of properties, I mean, there’s a massive, dramatic reduction in price. I mean, I’m talking about $600,000 or $700,000 cabins and then two or three miles out of that, you can buy dirt that’s buildable, that’s ready to build, for less than $10,000. That’s an easy sell. We have members that are killing it out there. For whatever reason, we haven’t chosen to purchase land in those communities yet but it’s probably because we’re having so much luck with houses right now.
Jill DeWit: I know.
Jack Butala: But that’s what I look for.
Jill DeWit: What’s another funny thing that you’re in it for the long haul. I’m trying to think. What do I do? I know what you do and you’re always thinking about it.
Jack Butala: I’ve wrecked your vacations. I know it.
Jill DeWit: That’s okay. No, it’s all good. You know what? It’s what you love to do. And me too. You know what? You know you’re in it for the long haul when you don’t think about anything else. There’s no part of me that says, you know, I think I want to do x or gosh, I’ve always wished …
Jack Butala: Like you’ve considered another career?
Jill DeWit: Yeah, that’s what I mean.
Jack Butala: Geez, I haven’t done that since I was 19.
Jill DeWit: Right.
Jack Butala: You’re right, Jill.
Jill DeWit: And you know what else? I’ve never even considered working for somebody else. There’s no way. I couldn’t go back.
Jack Butala: Yeah, why would you?
Jill DeWit: Isn’t that funny? And I’m not afraid anymore. I know a lot of people that look at us and go wow. They love the idea of being their own boss but the thought of having employees and having that responsibility is too overwhelming for them to take on. But for us, I’m like, no we got this. I am so confident in what we do that I don’t worry about our employees.
Jack Butala: I was just going to say that word.
Jill DeWit: I don’t worry about paychecks clearing. I don’t worry about the money in the bank. I don’t worry about any of that.
Jack Butala: I have deal confidence. And I remember when it happened. Because when you start out, it’s like man, I did everything that the guy said to do. I sent the letters out. They came back. I don’t know. I just don’t know and you have to get over that. I’ve gotten over it long since but that is a sign that you’re in it for the long haul.
Jill DeWit: Yeah.
Jack Butala: if you get a property back, you look … spend four minutes on the internet. You’re researching the whole thing and you say, yep, we should buy it or no, I know we offered $7,000 grand but at $4,000 grand, that’s a huge insurance policy. Bang, bang, bang. That level of deal confidence, you’re in.
Jill DeWit: Yep. And I don’t worry because what do you do? Like even our members, send out more mail.
Jack Butala: Yep.
Jill DeWit: You’re never going to run out of deals.
Jack Butala: It’s not possible.
Jill DeWit: Dude, I gotta tell you this. I was looking last night. I’m on social media, right? And this thing pops up where this guy’s selling a program.
Jack Butala: Welcome to Jill’s ambition.
Jill DeWit: This guy’s selling this program …
Jack Butala: Jill’s just turned the corner.
Jill DeWit: … and it said, here’s how to get two deals a month. What the heck. Who pays money to follow somebody’s program for two deals a month? We’re talking two deals a day.
Jack Butala: I know.
Jill DeWit: We could do more than that.
Jack Butala: My gosh.
Jill DeWit: I don’t understand what has to go so wrong that we think that’s really, really good and we’re selling this as a positive thing.
Jack Butala: I’ll answer it. Because they’re not in it for the long haul. It’s not an obsession. It’s a side business.
Jill DeWit: I just figure they don’t know what they’re doing.
Jack Butala: It’s just a side business. So you want to do two deals a month, you said.
Jill DeWit: He’s saying this is a great, I’m winning. I do two and I could teach you. What?
Jack Butala: It’s just like you said a couple episodes ago that it’s all relative. Money’s relative. Two deals a month for somebody … If they’re two house deals a month and they’re making $10,000-$20,000 bucks, that’s not so bad, Jill. $40,000 bucks a month is pretty good. But I agree with you. I think that’s a perfect example of they’re not really taking it serious like a career.
Jill DeWit: Or maybe they just don’t know what to do. That’s my other thing too. I’m here to tell you, man, if you want two deals a month or two deals a week or two deals a day, we can help you. That’s what we do. Just turn it up, turn it down. There’s no shortage of property out there everyone. Seriously. Whether it’s land, whether it’s a house. We haven’t even started to talk about apartment buildings. We’ve talked about … You and I have talked about a little bit in the past, we having been focusing on it right now but you guys, it’s out there. It’s not a problem. You want your phone to ring? Oh, we’ll make your phone ring.
Jack Butala: Exactly.
Jill DeWit: There you go.
Jack Butala: Like I’ve always said, if you can do two deals a month, you can do 200. If you can do 200 deals a month, now it’s a system situation. The deals themselves are incredibly easy to find but processing that many transactions takes a whole different talent.
Jill DeWit: That’s true.
Jack Butala: That’s another way you know you’re into this for long haul. When you’re setting up systems to set up that many deals.
Jill DeWit: That’s a good point.
Jack Butala: And guess what happens when systems are set up to process two, then 20 deals, then 200? And now, it’s 2,000. It just never stops.
Jill DeWit: Exactly.
Jack Butala: Finding the deals is easy. Maybe that’s how you know. When you say that sentence, think about Luke Smith, one of our real successful members. You think he’s in it for the long haul?
Jill DeWit: I don’t know.
Jack Butala: You think he’s got the deal confidence?
Jill DeWit: Maybe. I think he does.
Jack Butala: He does more deals than us.
Jill DeWit: Yep. I love it.
Jack Butala: Well, you’ve done it again. You’ve spent another 20 minutes with us listening to the Jack and Jill Show. Join us tomorrow where we discuss infill lots or large acre steals. Which ones are better for you?
Jill DeWit: And we answer your questions, should you have one, post it on our online community found on jackjill.com. Go there. It’s free.
Jack Butala: You are not alone in your real estate ambition.
Jill DeWit: That was good.
Jack Butala: Yeah, I think so too.
Jill DeWit: I like that. I’m trying to think of any … I’m trying to think of some other funny things that … I guess you know you’re in it for the long haul when you’re so far past it, you don’t even think about not being in it for the long haul.
Jack Butala: Right.
Jill DeWit: It’s like there is no other option so if anything crazy happens. Let’s just say anything really, really crazy catastrophic happens. The business is never going to go away. We’re just going to change how we do it.
Jack Butala: I’m going to ask you a couple of questions here in the after show.
Jill DeWit: Okay.
Jack Butala: Any previous job you’ve ever had, did you know you were going to be there forever? Did you just accept it?
Jill DeWit: No.
Jack Butala: Me either. How about a previous relationship. Did you know you were going to be there forever?
Jill DeWit: I thought.
Jack Butala: Me too.
Jill DeWit: Yeah. I tried. I wanted to.
Jack Butala: How about this relationship?
Jill DeWit: I’m trying. I want to.
Jack Butala: Jill, you’re hilarious.
Jill DeWit: In case you haven’t noticed, I’m in it for the long haul. How’s that?
Jack Butala: If you’re sitting around saying you know the only thing really stable in my life is my career.
Jill DeWit: That’s awesome. Oh wow. Okay, hey share the fun by subscribing on iTunes or wherever you are listening. And while you’re at it, hey, rate us there.
We are Jack and Jill.
Jack Butala: We are Jack and Jill.
Information …
Jill DeWit: … Inspiration.
Jack Butala: To buy undervalued property.
You know I adore you.
Jill DeWit: I know.
If you enjoyed the podcast, please review it in iTunes . Reviews are incredibly important for rankings on iTunes. My staff and I read each and every one.
If you have any questions or comments, please feel free to email me directly at jack@jackjill.com.
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I would like to think it’s entertaining and informative and in the end profitable.
And finally, don’t forget to subscribe to the show on iTunes.
Unlikely SFR Deal Killers (JJ 667)
Unlikely SFR Deal Killers
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 those unlikely SFR deal killers. Single family residential wholesaling deal killers that lurk in the background. And you may or may not be familiar with.
Jill DeWit: I can’t wait. I’m sure you have a long list. This is kind of one of yours.
Jack Butala: I do.
Jill DeWit: So I’m happy to …
Jack Butala: We’re going to talk about land killers too, and deal killers. Before we get into though let’s take a question posted by one of our members on the JackJill.com online community. It’s free.
Jill DeWit: Okay, Chris asks: Hi all, up to this point I have always used a cashier’s check to purchase my properties with no problems at all. That was until this past week I had a seller back out of a deal after he agreed to sell and all the due diligence checked out. I sent the deed and cashiers check to the notary to close the deal. The notary then contacted the seller to find out that he was not going to sign it and backed out of the deal. There are other details that I should’ve listened to before sending the envelope, but when the seller agreed I was all too happy to run to the bank.
Having the seller back out of the deal caused me to have the bank to put a stop payment on that cashier’s check.
Jack Butala: Okay hold on a second, Jill.
I didn’t know that was possible.
Jill DeWit: I did neither. You know to be honest with you, I was going to finish the question and then cover this stuff.
Jack Butala: Okay go, yeah.
Jill DeWit: So yeah.
Jack Butala: Yeah, go ahead.
Jill DeWit: Researching, after the fact. I didn’t think the bank should have granted this because now they are in a double jeopardy situation that should that check be presented they have to honor it. Well that’s kind of their problem.
None the less, I was wondering if cashier’s checks are the best option or would a business check serve me better in terms of having more control should a seller back out again? Had the bank not place a stop payment on that cashier’s check, those funds can be locked up depending on the bank indefinitely.
Obviously the sellers, having that bank guarantee, can offer them a sense of confidence that their not going to be taken advantage of. I’m sure there will be various views and I look forward to everyone’s ideas on this. Thanks, Chris.
So my first thing was, I personally, do not worry about these situations because the seller never got the money. And this is why we have the unrelated third party, AKA the notary that you hired in their city who’s handling the transaction. They have the money, they have the deed, they have everything. And they don’t hand them that envelope with the cashier’s check until they sign.
So I wouldn’t have even done any of this work. This for me was kind of a couple of extra steps.I kind of understand where you’re coming from. But for me the fastest thing is well hey notary it’s obviously not going to happen. So in that package, remember you already have a prepaid return envelope that you were going to send the deed back in. So put everything back in that envelope and overnight it to me.
Jack Butala: Yeah.
Jill DeWit: So now, say this was Monday, this all happened on Tuesday, so now Wednesday I’m holding this cashier’s check in my hand. I walk right into my bank, I deposit it, and now I have the money right back in my account. That, for me is the easiest way. So, do you have anything you want to add?
Jack Butala: No I mean, you could not have said it better. Is there a better way to do a deal from different states? Not the way Jill described, no. Cashier’s checks, I’ve always been told this about cashier’s checks. It’s like cash.
Jill DeWit: Uh huh.
Jack Butala: You take it out of your account you’re holding a piece of paper, might be a hundred dollar bill, might be a cashier’s check. If you didn’t spend the hundred dollars on whatever you thought then you go back to the bank and put it back in.
I’m really confused …
Jill DeWit: I personally I’m not comfortable, even the bank doing this and everything. I would not be comfortable with that because I know it’s out there. So until the notary overnighted it back to me in the envelope that they have in their hand, you know, and I have it in my possession. I wouldn’t feel comfortable at all.
Jack Butala: The situation that you’re describing is the reason we hire a notary local to the seller to manage that for us.
Jill DeWit: And we do cashier’s check.
Jack Butala: That’s the reason that we don’t just send a cashier’s check and a bunch of documents for a person to sign, like UPS.
Jill DeWit: Right.
Jack Butala: Because you don’t know that their going to sign, the notary ensures that. Gives you a sense of security anyway that it’s going to be signed.
Jill DeWit: And it’s easier than wiring the money because you want the seller to feel good. You want them to stand there staring at the check. If you said okay as soon as you sign a notary is going to call me and I’ll wire the money, that’s a huge pain.
Jack Butala: Right.
Jill DeWit: And that doesn’t lead a lot of, for me as a seller it depends on the situation and what you’re doing. For most of these guys if I’m just selling a couple thousand dollar property and you’re saying you’re going to wire the money and I just signed it. And I’m standing there waiting, that’s a huge pain too. I don’t want that.
Jack Butala: I can honestly say from experience. I mean Jill and I have done thousands and thousands of deals. I can’t recall a time where we lost, like the check got lost, or the documents didn’t get signed and we lost the money.
Jill DeWit: Correct.
Jack Butala: There’s lots of times where they change their minds and they send the stuff back. We redeposit and it’s over, the deal didn’t happen.
Jill DeWit: Yeah.
Jack Butala: But I can’t. Can you think of a time where …
Jill DeWit: No. No.
Jack Butala: It’s just like where it all blew up in your face. Where you lost money and didn’t get the property.
Jill DeWit: No. No. No.
Jack Butala: Neither can I.
It’s a time tested option.
Jill DeWit: Exactly. So hopefully that helps Chris, next time don’t bother with the bank. Just have them send it right back. If it happens again. Hopefully this … so … all good.
Jack Butala: Right.
Today’s topic? Unlikely Single family residential wholesaling deal killers, this is the meat of the show.
So your traveling around, along the line, doing everything your supposed to do. You get a great data set, you send a bunch of offers out, and the numbers work. You price it correctly and you send out two to three thousand offers to buy a house. And two, or three, or four, or five come back. So you start to look into the houses, just like your supposed to. And there’s things that creep up that can kill the deal that you don’t really think about before you start this. Do you have a list Jill?
Jill DeWit: Before the deal?
Jack Butala: So if somebody signs an offer, you’re staring at the offer on the desk, you’re looking at the computer. You’re looking at the actual property on the internet, on Google Earth or wherever you check it out. In this situation what I do is I try to find something wrong, right?
Jill DeWit: Right.
Jack Butala: I know the price is right, because I priced it and they signed it. I know the zip codes good, I know that’s good. I tried Zillow, Trulia, values are all good. But then sometimes we still don’t do deals.
Jill DeWit: Well before inspection and physical things? Because that’s one thing … that’s usually our first step. When the offers come back, first thing we’re going to do is a quick inspection. We can do it for under 400 dollars, including termites. And that’s what we’re doing. And then we can sign off on it, once we make sure we got nothing crazy staring at us.
Also we already checked too, let’s back up in the processes. We checked, we pull lien reports, and all that stuff. We have access to all of that, so we do our own title company which is really nice. The deal comes in my team jumps in and we’re pulling our own deal reports, lien reports, making sure everything checks out. We got the right people. They’re able to sign, yup no mortgage, everything’s cool, now let’s order. All while that’s happening we’re going to order the inspection, now I’m really staring at a good deal.
So you’re saying, right before … so those are the things that can go wrong. So I guess that’s what you’re asking. A deal killer would be the guy calls up and he really doesn’t own the house. He might be living there and it’s his uncle’s house and his uncle passed.
Jack Butala: You named it, you nailed it. The single number one deal killer that we experience, both houses and land. Is that the person that you’re talking to they don’t even know this, they can’t sign, deed this property over.
Jill DeWit: Close. Right.
Jack Butala: It’s either that or these crazy liens that you find on a house. And I don’t mean a mechanic’s liens for a guy that fixed the garage 18 years ago. I mean there’s a mortgage on the house, but the guy hasn’t been paying for it and nobody’s started a foreclosure proceeding. A this is five years old. The things that are not … the things that will kill a land or a house deal, you can’t see them. Their all in the basic, the deal structure itself.
But that’s not very fun to talk about. Let’s talk about some stuff that can kill a deal, you know two days before it’s closed.
Like the neighbor is raising 12 sled dogs. There’s no way, no way you can know that.
If you’re buying a house in a different state, unless you have some type of representation there.
Jill DeWit: That’s funny.
Jack Butala: I don’t mean representation I mean boots on the ground.
Jill DeWit: I say, let’s make it good. Sled dogs I can work with. Let’s just say their cooking the meth in the garage.
Jack Butala: You know meth comes up in our office sometimes as a joke, but …
Jill DeWit: It’s breaking bad, there’s too much breaking bad stuff because now you’re going back through the whole series. As if once wasn’t enough.
Jack Butala: I’m not sure on the air we should talk about drugs.
Jill DeWit: That’s true, I’m sorry.
But it is kind of funny, I got to say, that you have officially decided that kid number three. That this is like a life lesson, or a learning experience that he needs to go through the whole series with you.
Jack Butala: What, breaking bad?
Jill DeWit: Yes.
Jack Butala: Yeah again we’re talking about drugs.
Jill DeWit: Sorry, we’re talking about a show!
We’re talking about a show.
I guess so, alright so what else?
Jack Butala: Let’s call the deal for us recently, land or houses?
Jill DeWit: Well, I mean price? You know that’s one of the things. This is a good note that whether you’re new or your employees are new. You got to learn that not every deal, just because it comes back is close able. You know, that’s the whole thing. And I talked with our team about it recently too. Hey I think the only reason we’re all jumping up and down, trying to make this one work, is because this is the hot one right now today. Hang on a moment, tomorrow we’re going to have five more and we’re not going to care about this one. So lets all take a step back and look at this objectively. Sometimes you’re trying to make a deal happen when there’s really not a good deal. Maybe the price was off, maybe we found something else out like you just said.
Even the stuff we talked about, where the person may not be the right person who can sell the property. But okay now everyone’s scrambling to find who is the right person, oh and convince them.
Is that really the right thing to do?
Jack Butala: Yeah and we talked about on the show. You’re seeing something that’s not there.
Jill DeWit: Right.
Jack Butala: You’re not looking at the deal for what it is without any emotion. You’re just on autopilot just trying to close a deal.
Jill DeWit: Exactly.
Jack Butala: So that will kill a deal. We had a deal recently where the property the person purchased a solar panel system and they were paying it off over 30 years. If you can believe that. So that got, we think we figured that out and got that out of the way. But there’s still issues that come up. You just have to be thorough.
I would never close a house deal without title insurance. Jill is exactly right. You have to be some version of your own title, title situation.
Jill DeWit: That takes a lot of the worry out for us. I can’t imagine if we didn’t, going into this brand new, and not having these tools. What if you just said hey I’m going to … even just these brand new renovators that say, hey I’m going to be a flipper today kind of thing. Okay. They watch HGTV and they think they got this and they run out and they convince their parents and their family and everyone to help them fund this deal. And they don’t have the tools and stuff that we have going into it. That would be scary.
Jack Butala: Yeah. Here’s a deal killer, time. The longer it takes to complete a deal the more likely it won’t close. So here’s how we stretch our house deals. Letter comes back, we check all the boxes, we open escrow, this is all within one day and we order an inspection. A physical plan inspection. The inspection comes back within three days. If the inspection clears we fund the deal within five days of the inspection.
So now we’re into the whole thing for maybe two business week, ten business days or 14 calendar days. That doesn’t give the seller a lot of time to change their mind or undo the deal. It doesn’t give us … it pushes our feet to the fire to make a decision. So time can really sneak up and kill it. Kill deals.
For land because there’s usually no escrow and there’s certainly no inspection we close deals in three days sometimes if it’s a great deal.
You remember when we used to say run to the bank. Run to the bank and get the thing done, overnight it and have it sent back and record it in three days.
Jill DeWit: But even faster now with online recording.
Jack Butala: There’s no other place I can think of, except a garage sale, where you can buy an asset. You can’t do it at a garage sale but the concept is the same.
You can buy an asset for half of what it’s worth.
No other business I can think of. You can do it with cars but it’s real hard.
Buy a 100 thousand dollar piece of dirt in three days and create 100 thousand dollars additional equity.
Jill DeWit: Exactly.
Jack Butala: Sell it for 200 thousand and it’s worth way more. It’s the stuff we do all the time. It’s a real option.
Do you’re homework I guess is the whole point of this. We’re not your parents telling you to be careful.
Jill DeWit: Use protection. Hilarious.
Jack Butala: It’s not a be careful, oh my gosh you’re going to get hurt, don’t leave the house today. That’s not what we’re saying. We’re saying, you know, send a million letters out. Knock yourself out, like we do.
Jill DeWit: You know what?
Jack Butala: Just exercise some levelheaded caution. That’s really what we’re saying.
Jill DeWit: Well let me tell you what we do. Because we’re talking a lot about houses now, because that’s really what we’ve been focusing on a lot. The last few months here as we’re working on house academy. So what we started with is our own basic, we brought in a team, we’ve been doing this for a while but we’re changing up how we do it. We’re building up a team to take it to a big level, okay?
So what do we do? We start with our own basic check list. Maybe I had five things on there, which is; check ownership, let’s get the inspection, open escrow, fund, close deal, pass on to the buyer. You know, that kind of thing. Well it’s probably I got 30 items now. And this is what you should do.
So sit down, spend some time, have a plan in place of what you think are all the steps you’re going to need to do. Whether it’s land or a house, just like we do, and don’t print it out, it’s not in stone. Because you’re going to be scratching all over the thing. You know it’s going to grow, and you’re going to add, it’s through this whole process I have been building this up. I tell my team, alright to the list, okay add that to the list, we didn’t think about that one. Add that to the list. We joke about it, but this solar panel thing.
It’s not like the solar panels are a deal killing issue. This particular transaction had a weird lease on them. And they wouldn’t come and get them even if you bought them off. Even if you paid them out, which everybody was ready to pay them out in escrow. Just pay off the stupid solar panels so it comes free with the house kind of thing. And there was still the equipment on the roof issue. I mean there was all kind of little things that we were like wow.
Jack Butala: Solar panels in general are good, it’s just that this deal was really bad.
Jill DeWit: Yeah this one unfortunately, this poor seller got one of the … whoever it is not every company is out there to really help people. Surprise, surprise. They were clearly not out there to help her, because even though they were paid off they won’t come get them. They want to go out the full 20 something years and then they may come get them and in the meantime any warranty. It’s weird stuff.
Your list and your due diligence is going to grow, and you’re going to add to it. You’re going to go oh, I’ll remember that one.
I’ll tell you here’s another funny thing. This happens every month, we have a member call with all of our land academy members. And we all talk about different things and we help each other and bring stuff up. And I tell you, it’s like every week there’s one person that says yeah I forgot to check X and I won’t do that again. Like oh like back taxes. That’s a simple easy one, but if you’re brand new you might miss that.
Jack Butala: Or if there’s an HOA.
Jill DeWit: Yeah or an HOA, or some little thing like that. You’re like oh, oops, and that’s okay. That’s how you learn. We jokingly tell them, you know you won’t do that again. And you usually don’t.
So be ready, and it’s all good.
Jack Butala: A lot of it is learn from us, there’s just no replacement for doing it and kind of making a couple of mistakes and saying oh my gosh I’m never doing that again.
Jill DeWit: Right. Well that’s the best. Like you just said, learn from us. Learn from someone who’s been there and done it. You know, that’s the thing. One of our big values I know that a lot of our members find from our land academy program is that we arm them with all this stuff. So they have the list, they know what their doing. And if they forgot one of them it’s like aw shoot, I know you said it, I missed it or I forgot. Whatever. But we’re there to help all the way through.
Jack Butala: Exactly.
Jill DeWit: And here in house academy too.
Jack Butala: Well you done it again, you spent another 20 minutes with us on the Jack and Jill show. Join us tomorrow where we discuss the signs that you may see in yourself that you’re in it for the long haul. We’re obviously in it for the long haul. And we’ll tell you why.
Jill DeWit: Are we?
Jack Butala: This feels like a long time.
Jill DeWit: You know Jack, this whole period right now feels like a lifetime. Just kidding.
Jack Butala: Jill, I couldn’t agree with you more.
Jill DeWit: Alright, and we answer your questions if you have one. Post it on JackJill.com our online community, it’s free, go check it out.
Jack Butala: You are not alone in your real estate ambition.
Jill DeWit: You know those times when things are going great and you feel great and its like wow this week went by so fast this is so much fun. And there’s times you go wow has it only been a week? It feels like a month.
Jack Butala: Yeah, I know.
Jill DeWit: And like today.
Jack Butala: Today?!
Jill DeWit: Just kidding, love you Jack.
But like today. If you feel the same as I do, please share this fun by subscribing on iTunes or wherever you’re listening. And while you’re at it please rate us there.
We are Jack and Jill.
Jack Butala: We are Jack and Jill.
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Jack Butala: To buy undervalued property.
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Establishing Seller Trust (JJ 666)
Establishing Seller Trust
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hello.
Jack Butala: Welcome to the Jack and Jill Show, entertaining real estate investment talk. I’m Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting again from sunny Southern California.
Jack Butala: Today, Jill and I talk about establishing seller trust. The good, the bad, and the ugly.
Jill DeWit: I was going to say, we’re going to start with first an example of what not to do, and then we’ll fall into what you should do, yes.
Jack Butala: What if we just had a show about just doing it right all the time?
Jill DeWit: Oh that would be boring too. You’ve got to show that we even fall down a little bit too.
Jack Butala: We just pat each other on the backs all the time and say, “It’s so easy to be a real estate investor. Everything single deal.”
Jill DeWit: “Everybody should do it. You win on every deal. Oh yeah and it’s so easy, you don’t need to train people. You just hand them a phone, they’ll figure it out.”
Jack Butala: We could make cartoons like Walt Disney and make a theme park called “Real Estate Success”.
Jill DeWit: Right. Love it.
Jack Butala: What would you name the rollercoasters or the rides?
Jill DeWit: The rides in Real Estate Success?
Jack Butala: Yeah, the theme park.
Jill DeWit: Oh…”Losing My Ass”. “Drop”.
Jack Butala: “Fatal Real Estate Agent”.
Jill DeWit: “Fatal Real Estate Agent”. “Big Flub 101”. I don’t know. I don’t know.
Jack Butala: “Should I Get A College Degree?” That could be one ride.
Jill DeWit: Oh that’s a good one. That’s true too.
Jack Butala: It’s a small one.
Jill DeWit: “I Borrowed All the Money I Could Get My Hands On.”
Jack Butala: “I Over-leveraged This House”.
Jill DeWit: Yeah that’s it. Oh no. That’s good.
Jack Butala: Before we get into it, let’s take a question posted by one of our members on the jackjill.com online community, it’s free.
Jill DeWit: I over-leveraged my house, oh my god. I over-leveraged my you-know-what. Okay.
Jack Butala: Shouldn’t have married this girl.
Jill DeWit: Oh, Jack. Now.
Jack Butala: That’s a side theme park.
Jill DeWit: Okay. That’s a whole other show.
Jack Butala: Did you ever play that board game “Life” as a kid?
Jill DeWit: Yeah. I mean, I never played it as a kid, I only played it as an adult. I always thought, as a kid, it was too hard and it was stupid.
Jack Butala: It was stupid. Because life is stupid really.
Jill DeWit: As a kid I was like, “Why would you want to play this game, where you get married and have kids and there’s college and everything?” I thought that was stupid. That’s not a kids’ game.
Jack Butala: See, you’re intuition was totally correct.
Jill DeWit: It’s wrong. Don’t do that to your poor kids.
Jack Butala: Not even adults really want that.
Jill DeWit: Do you know what? The only game that was also up there was Risk. That was kind of hard for me, like, playing –
Jack Butala: To this day I don’t like Risk.
Jill DeWit: Yeah building wars and armies and doing this stuff. Yeah it’s very complicated. I like easy.
Jack Butala: That is one board game I just said, “I’m just not going to learn”. Spent a lot of time playing chess.
Jill DeWit: My favorite was Monopoly. We’d drag it out for a week. We put it away, come back the next day.
Jack Butala: [crosstalk 00:02:41]
Jill DeWit: Exactly. Yep. Good stuff.
Jack Butala: Wish I would have known you back then.
Jill DeWit: Thank you. You too.
Jack Butala: We’d be in prison right now.
Jill DeWit: Uh oh. I don’t want to know.
Okay, so Jeff asks, “I’m sure this issue has come up for many of you out there, but I can’t quite find the right answer by Googling or looking through the forum.
When you buy multiple parcels in one purchase, how do you allocate for tax purposes the purchase price across the multiple parcels?”
Jack Butala: Fantastic question Jeff.
Jill DeWit: “Or to rephrase in tax language: what basis to give to each of the several parcels? For example, let’s say you find a seller who wants to sell you ten parcels in one county, each a varying size and value, for $10,000 total. You complete the purchase (as you typically do) by sending the seller a check for $10,000. So there’s no real way to say, ‘I paid $4,000 for property X, but only $800 for property Y’, since the purchase was for the whole package rather than each property individually. If, by the end of the tax year, you’ve sold five of the ten for $12,000, do you report a $2,000 profit? If so, the following year, when you sell the remaining five parcels for, say, another $12,000, do you report all of that next $12,000 as profit? Just wondering how you all approach this as I’m sure many of you routinely face this issue.
Thanks all, Jeff.”
Jack Butala: Right about the time – this is about a master’s degree-level question, it’s great. And thank you producer for getting it into the show. I had this exact issue right about the same time where you are in your career. And I came across it, and in my situation it was very clear that one property in, what did he use here, five? Ten. One of the ten properties in my case, a lot of years ago, was right on a road. And it was a fantastically valuable property, and the other nine behind it – picture a farm, where the farmhouse is located. That’s one APN. Then all the fields and stuff, back the further you go that are up the hills or up the mountains they get less valuable theoretically. Let’s call it not valuable, let’s call it less marketable, or less desirable by a buyer.
But I’m telling you, to directly answer your question, you just divide by ten. Because you’re going to drive yourself nuts trying to figure this out. And the way that the – for tax reasons, what you’re actually really doing – this is just my opinion – we’re all in the business of creating ordinary income. So check with your tax person, but to directly answer the question, just divide equally by the number that you’re purchasing. So your cost basis is the same, and your revenue is the same. Your revenue will be different if you’re doing everything right. Some of them will sell for a lot more, some of them will sell for less. Just make sure you sell them all, that’s the other point of it.
Jill DeWit: Right.
Jack Butala: Every year Jill and I stare at a Excel sheet of property that we haven’t sold yet, and it’s like, “Oh my gosh, what the heck?”
Jill DeWit: Well it’s our fault. Because sometimes we get distracted. You need to make them known and get it out there and all that good stuff.
Jack Butala: I guess my point is – I don’t know what that Disneyland ride would be here, but no matter what you do –
Jill DeWit: “I’ve made money, I don’t know how” –
Jack Butala: There’s always leftover real estate inventory, and when you really think it would take ten steps –
Jill DeWit: I don’t know how to account for the money I’ve been making.
Jack Butala: Take ten steps back and say, like literally Jill, and I looked at it recently. We have like 280 properties in our inventory right now. And so we’re making a mad rush, all hands on deck. The staff who’s listening to this, thank you by the way. And I know you’re pulling your hair out, but thank you. We’re trying to put all these properties up for sale. I mean when you add up 280 properties, there’s some equity there.
Jill DeWit: That’s true. Exactly.
Jack Butala: So I hope that answers the question. That’s a really, really advanced, good question. And if this is – again, a case of, you can just tell who’s going to do well. If you’re asking this kind of question Jeff, you’re doing fantastic.
Jill DeWit: Awesome.
Jack Butala: Today’s topic: establishing seller trust. This is the meat of the show. It’s also one of the things that Jill is an expert at, and I’m not so much. That’s why I named it this, so I could –
Jill DeWit: Thank you. So you could just take a break?
Jack Butala: I can have a coffee right now.
Jill DeWit: Yeah, take a step back. Take a break.
Jack Butala: I’ll lead in by this. It is so important, it’s imperative, when that phone calls and the person says some version of, “I just got this letter. You know, I don’t understand. I’ve owned this property for 20 years, I think your price is a little bit low. Is this a joke? Is this a scam? Because I do want to sell it, but maybe not for this price. But who the heck are you?”
Jill DeWit: That’s easy.
Jack Butala: Educate us Jill.
Jill DeWit: Thank you.
Jack Butala: Because my answer would be, “You know what? Go, enjoy your day. I’ll talk to you later.”
Jill DeWit: So that’s a perfect example of the person that comes to us. So, here’s the thing. First I was going to lead with a what not to do example, because we just recently had one. And I’m just going to kind of point out the main things that went wrong, which was the communication was broken, and too many people were working on the deal. And even back in the day, remember Jack, there was a time where it was just you and I doing deals years ago, and even with just the two of us you think that we’d communicate everything, which we did, but we couldn’t work on the same deals together because they would go sideways.
Jack Butala: Exactly. So let’s start with maybe two or three or four bullet points of things that you want to do, and then we’ll give a couple of examples of how to do, and maybe how not to do it.
Jill DeWit: Okay. So I’ll give you an example, and you tell me how you want this to go.
Jack Butala: Okay.
Jill DeWit: So one is honesty. Being up front and honest.
Jack Butala: Understanding.
Jill DeWit: And so you need to prepare them, and tell them if you’re really going to buy it, here’s why. If you’re not going to buy it, here’s why. You need to change your price, here’s why.
Jack Butala: Here’s my version of that. “Hey seller. Yeah we are going to buy your property for $4,000. And we determine that we’re willing to pay $4,000. Not that it’s worth $4,000, but we’re willing to pay $4,000. Either you want to sell it for that or you don’t. And we are land resellers, please go see jackjill.com. And check us all out.”
So honesty is imperative. If you want to say, “I’m going to build a cabin on it and it’s going to be my dream house”, I just think keep your lies straight if you’re going to do that.
Jill DeWit: Exactly. The other thing, talk to them on their level. To them, $1,000 may be a lot of money. $10,000 may be a lot of money. Whatever transaction price you guys are discussing, you need to know for them, don’t assume anything, and talk to them, figure out where they’re coming from.
Jack Butala: Along those lines, Jill and I get calls from regularly, on a monthly basis, people who are settling their estate, settling their parents’ estate, and their stakes are very large. Substantial. And so they say some version of this, you can hear it in their voice, “I’m working my way down a list of assets that my dad owned. Can you guys just take all these properties? We don’t even really care about the value, but I need to go back to work and have my life again.” And so Jill, our staff handles that very efficiently. We’ll pay $1,000 for 10 or 15 properties all across the country.
Jill DeWit: Another thing. Communicate, talk to them, let them know what’s going on. “Hey, we’re behind on this, or I know it’s going to be this, we did receive your payment.” Actually, I’m thinking buyers. But for sellers, “Hey, I’m mailing it out today. The notary’s coming.” Whatever happened. “It’s a holiday, now it’s going to be Tuesday. We can record it, not record it. However you do it.”
Jack Butala: I personally struggle with this. How much is too much communication? How much is not enough communication? Is it purpose-specific?
Jill DeWit: I honestly think there’s never too much communication with this type of stuff.
Jack Butala: Do you call a guy five times a day?
Jill DeWit: No. I don’t. No seriously, be realistic though.
Jack Butala: That’s too much communication. I’m not putting you on the spot, because I honestly really want to know the answer to this question.
Jill DeWit: You’re not realistically going to call them, but you might call a person daily. “Hi, just checking in. How are you?” This is a seller, we don’t want them to walk, we don’t want them to change their mind. You want them to feel good about you. So yeah, you’re available. Communication works both ways. You want to be there when they call, and you want to keep them posted about what’s going on. Communication too is like, I don’t have to call you every day, but I could say, “Hey, I am working out the details, this is where we are.” Maybe it’s a big parcel and it’s going through escrow, let’s just say something like that. So, there might be three days of nothing because of escrow. So you tell that person, “Hey. I’m here if you need anything. I’ll call you in three days, I should have an answer by then, and hope that we’ll have the title policy ready to go and we can finalize our close date, whatever it is.” That’s communicating. You don’t have to call them and go, “Okay it’s day two. Okay it’s day one.” But maybe that person does need that, I don’t know. You get it.
Jack Butala: Understood.
Jill DeWit: Okay thank you. Alright. And then the last thing is – this is all just about trust, not really about deals. It’s just trust and people stuff. And the last thing is just follow through.
Jack Butala: Yeah, do what you say you’re going to do.
Jill DeWit: Exactly.
Jack Butala: We have a glaring example of a property recently where I think we lost the seller’s trust.
Jill DeWit: We did.
Jack Butala: Without intention. Here’s the whole story. It was a house.
Jill DeWit: There was two things that we did wrong. Go ahead. And I’ll say –
Jack Butala: Well here’s the back story real quick. As always, we sent a ton of offers out. And this one happened to be the first one that came back in that batch. In a zip code that Jill and I are really familiar with, so I was real excited about it. But the first day it came back, it came back signed. And she said, “Your time was perfect, I really want to sell my house.” And so we went down the path of doing that, ordered an inspection, the whole thing.
First thing when it came back that I do personally when I’m involved, is I pull it up on Zillow or Redfin or any of those, and look at the property physically and look at the property plan. And this property happened to be on a major road. A major North-South road in Arizona. And I mean major, where you can’t sleep at night noise road. And I said that immediately. And for whatever reason, the price was so attractive that we continued down the path. But both of us, Jill and I admitted to each other recently, “Man, that one deal was bugging me, that was bugging me, that was bugging me.”
Jill DeWit: Well, we talked about it. We talked about it.
Jack Butala: The price was so attractive, and the deal itself – the house was in such good shape, there’s a lot of things about the deal that would make most people buy it.
Jill DeWit: You know what’s funny though? Let me tell you though. There’s this classic dating fail. This is really what happened. It’s like, “But he’s cute. Oh, but he doesn’t have a job. But he’s cute.” This is really what was going on. There were all these red flags that came up with this property, and we ignored every one because he was cute. That was it. “He doesn’t have a job. He doesn’t have a car. He lives with his mom.” All those things we ignored. You wouldn’t do that in dating, you would have been gone. We should have been gone.
Jack Butala: Well how does it end with that cute guy?
Jill DeWit: Oh it’s painful, and everybody’s unhappy in the end. He’s like “You led me on.”
Jack Butala: Was it fun for a week?
Jill DeWit: No.
Jack Butala: Not even for a week?
Jill DeWit: No.
Jack Butala: It wasn’t worth it?
Jill DeWit: No, it wasn’t worth it. No. Because – you know.
Jack Butala: No I want to hear it.
Jill DeWit: Because you know what? It’s never fun, you were just pretending it’s fun. Every time you have to drop him off and pick him up at his mom’s house for a date, that’s really not fun. But you’re telling yourself it’s fun. You’re telling yourself, “Oh this is sweet.” No it’s not.
Jack Butala: So, you can finish the story yourself. Got contracts, went down the path, and started very diligently pulling in all the established A list buyers that we have all over the place. Every single one of them, imagine what they said.
Jill DeWit: Yeah.
Jack Butala: “Oh great house, great price, love it. It’s on the road, I’ll get back to you. It’s on the main road, I’ll get back to you.” Because investors never say, “No, no, I don’t want that at all.” They’re all deal makers. Including us. Deal makers – Jill’s middle name is “Can’t Say No”. They just can’t say no.
Jill DeWit: Right. Thank you.
Jack Butala: So, the seller finally said, “You know, this is taking too long. I’m going to take another path.”
Jill DeWit: And that’s fine.
Jack Butala: And it is. That’s it. But my point is –
Jill DeWit: And I’m glad. Because we were trying to do the right thing. You’re only supposed to be back up.
Jack Butala: She did.
Jill DeWit: We were trying to do the right thing. We were trying to follow through. You even said, “Hey, let’s for karma’s sake. If we find somebody let’s just assign it to them and walk away so at least she can move on and get this house out of her life. We’ve already lost money, we’re cool with that. We’re not hurting.”
Jack Butala: We lost a bunch of money.
Jill DeWit: We did, I know. We had five people, I counted it out, five people working on it for a couple of weeks, paid for inspections and things like that. We really were trying to do the right thing. She pulled the plug and that’s okay.
Jack Butala: Sounded major rough.
Jill DeWit: I know. That’s the thing. I knew it when we were going down the path, when we were like, “We’re on plan D now.” Trying to make this work, and it just wasn’t working. And I don’t even think that there was any magic price that would really, really work, unless it was a dollar. Any person still, at any price, they have to find a really certain person that’s okay with that location.
Jack Butala: Yeah that’s a topic for a different show. I’m writing that down. Who buys assets like that? That really, they just settle.
Jill DeWit: Isn’t it interesting?
Jack Butala: Constantly I’m driving around – because I always look at real estate, obviously, and I’m constantly saying, “Who the hell lives there?”
Jill DeWit: Who would live right here? Exactly. You’re staring at the freeway.
Jack Butala: And I think they just renovated that house. And I think they put like $1.2 million into that thing. But it’s right on the expressway.
Jill DeWit: Right. Well these are freeways out here. They don’t have expressways Jack. I don’t know what that is.
Jack Butala: I think it’s the Midwest version of a freeway.
Jill DeWit: Oh my goodness.
Jack Butala: What the hell is a freeway?
Jill DeWit: Do you call it the filling station too? Where do you go to get your gas?
Jack Butala: And the ice box? Sometimes I do.
Jill DeWit: Yes. Okay. Just checking. That makes sense now. I got it. Alright so I think we figured out –
Jack Butala: To wrap that up, what would you have done differently with that seller and –
Jill DeWit: Oh you know what I can tell you real easy.
Jack Butala: Hold on. I think you really did establish trust, that’s my version of this. I think that, in the end, it just didn’t – because I think you did a great job at establishing trust.
Jill DeWit: Right. Well as a team, we established trust.
Jack Butala: We just didn’t deliver on it.
Jill DeWit: Well here’s what happened. As a team we established trust. But at the end, we goofed up their trust because another person was working on the deal, which was me, I will be honest, and she had never talked to me before. If she had talked to me –
Jack Butala: The seller.
Jill DeWit: Yeah. If she had talked to me, and if she had spoken to me from the minute one, we would have time to build up a rapport, and it would have been great. It would have been just fine. But not only was I the new person coming in, but I’m also the new person coming in with bad news. So that’s what happened. Number one that happened. And then number two where we goofed up, we didn’t pull the deal soon enough.
Jack Butala: Yeah we didn’t just say no.
Jill DeWit: Yep.
Jack Butala: Yeah.
Jill DeWit: Saved us a lot of time, a lot of money, lots of –
Jack Butala: I’ll personally take responsibility for that. I’ll tell you though, this is a learning experience so I mean hopefully listeners won’t have to look at a property that’s right – this is the exact opposite is for land by the way.
Jill DeWit: Isn’t that funny? I was thinking about that too.
Jack Butala: When land is on a major road, you want to buy it.
Jill DeWit: You celebrate. Yeah. Talk about easy. There’s probably utilities right under that road, this is great. Talk about easy. Isn’t it funny? And before you build the house, you want to be right on the road. Once the house is built, forget it, get off the road.
Jack Butala: The raw land that we look at that’s on a road or a even on a freeway –
Jill DeWit: Oh very good.
Jack Butala: There’s a lot of uses for that. Like a filling station. You don’t want to live there.
Jill DeWit: Right? And you know what, that’s a great place to buy pop. Alright.
Jack Butala: Gosh. I’m going to think of everything in terms of a Disneyland ride now.
Jill DeWit: Awesome.
Jack Butala: Well you’ve done it again. You’ve spent another 20 minutes listening to the Jack and Jill Show. Join us tomorrow, where we discuss some unlikely SFR deal killers.
Jill DeWit: And we answer your questions. Should you have one, post it on our free online community found on jackjill.com.
Jack Butala: You are not alone in your real estate ambition.
Jill DeWit: We kind of covered a little bit – some of the stuff we talked about today will totally apply to tomorrow too. So that’s going to be really good.
Jack Butala: I just think that’s really, really, really valuable information. Seriously.
Jill DeWit: Today? Or tomorrow?
Jack Butala: If there’s any takeaway – if by some crazy accident you’re actually still listening to this, the end of this show here, don’t buy a house on a main thoroughway. That’s just all there is to it. No matter how attractive the deal is, it’s going to be in your inventory for a while.
Jill DeWit: It will. Unless you’re prepared to sit and wait.
Jack Butala: Because here’s what happens. You buy the house for half what you think it’s worth, and then you post it for – I’m just going to throw out numbers. If you buy a house for $100,000 on a major street, and it’s worth 300 like, three blocks back from a major street, and you post it for 150 or 170, the whole world’s going to say, “Well what’s wrong with it?”
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: You’re going to be stuck with that asset, I don’t care what you do, for a really long time.
Jill DeWit: You’re right.
Jack Butala: So please learn from us. As painful as it is for us to talk about it.
Jill DeWit: Exactly. Yep. Exactly. Hey share the fun by subscribing on iTunes or wherever you’re listening, and while you’re at it, please rate us there. We are Jack and Jill.
Jack Butala: (Simultaneously) We are Jack and Jill. Information.
Jill DeWit: And inspiration.
Jack Butala: To buy undervalued property.
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Real Estate Inheritance (JJ 665)
Real Estate Inheritance
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hello.
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 real estate inheritance. Like it or not, if are a real estate investor or an aspiring real estate investor, get comfortable with the fact that you’re going to buy real estate from deceased people and deceased people’s heirs. It’s just how it works.
Jill DeWit: It’s the coolest thing as an heir by the way, I think, to find out that there’s these assets sitting around and it happens all the time. You know, you joke about, it’s like finding $5,000 in your coat pocket.
Jack Butala: Yeah.
Jill DeWit: That’s what it is to these people. It’s the coolest thing, you know and it’s such a … It’s so common, I think especially rural vacant land. There’s so many people I think out there that own property, bought property, like they were going to do their dream cabin. It’s very common, it was something they planned on doing and then they never did. It’s paid for and just sitting there.
Jack Butala: Right.
Jill DeWit: And they’ve quietly been paying the taxes for years and years and years, knowing that well, it’s going to go to the kids. You and I even look at things like right now, we’re no where near, you know, this point in our lives, but we’re looking at assets now because we’re not 20 and we have kids.
Jack Butala: Mm-hmm (affirmative).
Jill DeWit: We’re actually looking at some of our assets as we take them on going you know what this would be good to have for the kids.
Jack Butala: Yeah.
Jill DeWit: Fortunately, we know the right way to set it up for the kids, so the kids know how to work with it, and I know this what we’re going to cover, part of it in this show today.
Jack Butala: Exactly, we’ll cover it all.
Jill DeWit: Thank you.
Jack Butala: We’ll just call this the Jack and Jill Mythbuster episode-
Jill DeWit: I like that.
Jack Butala: There’s lots of myths about wills and estates and all of it and trusts.
Jill DeWit: Cool.
Jack Butala: Before we get into that though, let’s take a questions posted by one of our members on the jackjill.com online community, it’s free.
Jill DeWit: Okay, Mike M. asks, “Hi All. My current business structure is a DBA for my land business.”
Jack Butala: Doing business as.
Jill DeWit: “Of an underlying LLC, all in retail.” Right. “When purchasing property, what name should I put on the deed? My own? The DBA? Or the LLC?” This is a good question. “What are the tax implications on each? I’m about to close on the sale of my first property and a property of my second, the first for this year, and I want to get things off on the right foot tax-wise. Thanks in advance, Mike.”
Jack Butala: Good question, Mike, so there are certain legal entities that can own real estate, own real property. You as an individual can own real property, a trust can own real property, an LLC can own real property, so there’s only certain entities that can own real property. There’s a few other ones, but those are the major ones. A DBA is just a “doing business as” kind of hey, state of x, I’m doing business as this, but the LLC is behind it.
Jill DeWit: Right.
Jack Butala: So DBA cannot own real estate at all. The reason that you set up an LLC is to … It’s called a limited liability company because you want to limit your liability. If something happens that’s non criminal in nature and somebody’s got some legal things to say about it, they address it with the LLC, not you specifically, and that’s what a limited liability does for you, so buying property in an LLC is the right way to do it. That’s all Jill and I do. Do you own any property in your name, Jill?
Jill DeWit: No.
Jack Butala: I don’t either.
Jill DeWit: Never have.
Jack Butala: I don’t own any property, any real estate, not even cars and stuff I don’t think for the most part.
Jill DeWit: Nope.
Jack Butala: So everything’s in an LLC to limit liability and to answer the last part of your question, that LLC files its own tax return. You can do a [inaudible 00:04:08] there’s lots of different ways, but just speaking from experience and cutting to the chase, the more stuff that you put in an LLC, the better off you’re going to be.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: Keep your personal stuff out of it, including your mortgage, including your primary residence. You really limit the problems that you could potentially have.
Jill DeWit: Yep.
Jack Butala: Tax wise, you know, I really think it makes sense, you really need to ask and make sure you have a good tax person, but having an [inaudible 00:04:45] and the LLC’s roll all up into it.
Jill DeWit: Right. I’m glad you’re thinking about this now too, Mike. You’re obviously in, you’re this far down the path.
Jack Butala: Exactly.
Jill DeWit: You’ve got, you probably have your website, you know, you know you’re doing it. Finish the thought and have your tax person now and lined up, and then by the end of the year, it’s going to be a piece of cake. You will have done it all and set it all up correctly and it’s just going to be easy for you.
Jack Butala: Exactly.
Jill DeWit: Thank you.
Jack Butala: Today’s topic. Real estate inheritance, what’s you need to know and what you can just forget about. This is the meat of the show. Like I said earlier, like it or not, you’re going to be buying property from dead people and there’s a lot of things that happen, lot of choices that people can make to set up their estate so to speak, that makes this really easy, or it makes it a big huge mess.
Here’s a perfect example of what Jill and I see every single week. An heir calls us and says, “My Dad recently passed away, and I was looking through all of his stuff at his desk, and I came across this forty acres that he owns in Arizona, and I opened the file, I didn’t know he owned it, and I opened the file and your letter’s there. It’s an offer for $8,222 that you sent over in 2008. If that offer’s still valid, I’d love to do it.”
And the first thing that we say, our staff says, or Jill says to the seller, or to the son is, “Is it in your name?” And he says, “Oh, no, no, it’s not in my name, but that doesn’t matter.”
Jill DeWit: “It’s mine. I inherited it, I know it’s mine.”
Jack Butala: “Because I have a will. My Dad willed all of his assets to me. I’m the only heir.”
Jill DeWit: Right.
Jack Butala: That’s when Jill says, ugh.
Jill DeWit: It’s not that easy.
Jack Butala: Love the real estate, I love the price, and I love that your motivation, I’m sorry, I’m going to have to take a pass.
Jill DeWit: Yeah.
Jack Butala: A will does nothing to help us at all.
Jill DeWit: Exactly. Congratulations.
Jack Butala: What dad should of done-
Jill DeWit: You can sit on your piece of property and read the will.
Jack Butala: And granted we can’t choose when we die so-
Jill DeWit: I know.
Jack Butala: A lot does happen this way, but what dad should of done is either set up a trust or he should have put Junior’s name right on the deed.
Jill DeWit: Yeah.
Jack Butala: Two people can own real estate.
Jill DeWit: JTROS.
Jack Butala: Right.
Jill DeWit: Right out of the gate.
Jack Butala: Then Jill gets excited and buys the real estate and there’s nothing to do, so can that be undone. Yeah, it can, and every state’s different. There are ways, certain states you can go through an express probate or file probate documents. There’s a lot of … Regardless of where you are, there’s a lot of stuff that has to go on. In some states, Arizona’s one of them, it’s almost impossible to get it out of that person’s name without spending a few thousand dollars and six months.
Jill DeWit: Yeah.
Jack Butala: And legal proceedings, so more often than not, we just pass.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: This is one of the major reasons, why there’s so much back tax property that comes up available for sale.
Jill DeWit: Ding, ding. Thank you.
Jack Butala: Yeah.
Jill DeWit: This is what a lot of people, we know them, that started out going, oh back taxes, I’m really going to hit those up, and then they realize, all I’m finding are these problem properties. Well, this is a beautiful example and it’s true. This is what you’re finding.
Jack Butala: Yeah.
Jill DeWit: There’s a reason why they’re in back tax situations, no one wants to deal with it.
Jack Butala: Ding, ding, she says.
Jill DeWit: It’s going to cost too much money and take too long and now it’s not worth it. And you just wasted a lot of time-
Jack Butala: Well that’s what Junior’s saying, Junior is saying, “You know what?”
Jill DeWit: I’m just going to let it go.
Jack Butala: “I have a job and a life and this $8,000, this property from my dad, it’s just not worth it.”
Jill DeWit: Right, it’s gonna cost me six months and $3,000.
Jack Butala: Yeah.
Jill DeWit: Forget it.
Jack Butala: That’s exactly right, Jill.
Jill DeWit: And that’s what happens.
Jack Butala: Now, here’s the good news, we have some members who have made it their career to undo these problems for people for free, so in Junior’s case, we have a specific member in Colorado and what she does, is she says, “You know what, I will solve this for. I’m going to pay you $100 and I’m going to pay all the fees to get this back to where it needs to be. Please sign this, guarantee me that, you’re going to sign everything that I send you, and I’m going to give you $100 and we’re going to make this whole thing go away for you. So you can make a career out of this.
Jill DeWit: Right.
Jack Butala: We have chosen not to do that for a bunch of reasons, but my whole point of the show is this, if you get to know these laws and these rules and how to undo them.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: And how to locate the people who are actually going through this and help them, you can do very, very, very well.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: There’s a whole little sub section real estate investors that make a career out this. Just like tax liens is a sub section.
Jill DeWit: Exactly.
Jack Butala: Did you have a story, before the show you were talking about a story, talking to sellers, and they’re not yet deceased.
Jill DeWit: Right.
Jack Butala: But their older sellers and they-
Jill DeWit: Right. You covered the items, but that’s what I was just thinking. This is something I do all the time when I talk to people and they’re calling in, they want to sell their … They think they want to sell their property, we’re not at the right price or whatever it is, you know, one of the things I do for them is you know say they’re 92, they always share this stuff, and I’ll say, look, you know thank you very much, nice talking to you, and she’s like, “I’m gonna keep it for the kids, it doesn’t work for me.”
But I will really at least try to help the kids and say, “Look, Mrs. Smith, please promise me you’re going to at least put it in your daughter’s name now or put it in a trust or something because you’re 92, if you don’t do it before you pass, they’re not going to be able to work with it.” I try to help the sellers and tell them that, you know that’s just me, but they need to do that, so that was my little story. I’ve done that many times trying to help people.
Jack Butala: Here’s a tip. If you have parents who have a lot of assets like this and you want to avoid all the problems, I mean, start to finish, avoid every single problem and taxation. Now you didn’t hear this from me, by the way, confirm what I’m about to say with your lawyer or accountant or whatever-
Jill DeWit: You do know that this on like iTunes and everything, right? And all over everywhere.
Jack Butala: Let’s say you have … Another thing that happens all the time is, someone passes away and the surviving spouse has no idea that they’d been collecting real estate for 42 years.
Jill DeWit: Right. Oh that is the funniest thing, that’s so true, like how are they going to do with all this?
Jack Butala: The best possible thing that you can do, if you have a bunch of real estate, and you want to pass it on to your children, is to re-deed the property in both of your names as joint tenants. So if you and Junior own 4,000 acres in Texas and you pass away, he immediately owns 100% of it, and it’s a non-taxable event. It happens at the moment of your death, he owns everything. He has to file no paperwork, join tenants with rights of survival ship.
Jill DeWit: Rights of survivors ship.
Jack Butala: JTROS. For $12 you can file a deed, that’s a service we could provide.
Jill DeWit: And you could put three people on there, four people on there, five, so what it means is, say there’s three of you on there, say it’s you, or wife, and your son. What happens is, if you one of you passes, now the other two assume the rest of it, now they own it 50/50 basically. Like Jack said, they have to do nothing. It’s really nice, so when it comes time that they decide they want to sell it, now the next person passes, and then the one person is left, same thing, he gets the whole thing. Then when he sells it, he’s the only one that needs to sign. You want to show too that … I do, show that these people passed on and all that good stuff, get a copy of all that good stuff, but-
Jack Butala: You can do it with bank accounts. You can do it with cars, any type of asset, whether it’s real or personal, real property or personal property, you simply add somebody to the title or to the deed and now you both own in and it transfers. It’s a non-taxable event. I can’t express that enough. If you just sign a will, one single piece of paper, I will everything to my son, there’s huge estate tax issues, and probate issues, and all kinds of stuff that goes one.
Jill DeWit: Exactly.
Jack Butala: Are we over simplifying, yeah, but what’s important here is that as a potential real estate investor or an existing one, if you’re an existing one, you know all about this. It’s really, really important to be aware of the fact that this is reality. What people really think especially if people pass away unexpectedly and the kids are just left to deal with the stuff and they have to go to work on Monday.
Jill DeWit: I know.
Jack Butala: They will call you with desperation.
Jill DeWit: Right.
Jack Butala: I mean we get these calls every single week.
Jill DeWit: Yeah, they don’t know what to do.
Jack Butala: Mm-hmm (affirmative).
Jill DeWit: It’s true, they’re looking for help.
Jack Butala: They just want to fix it at any price, right.
Jill DeWit: Exactly. Well you know what too, here’s another thing, they are afraid of the taxes. The property taxes. A lot of times, they really do just want to get rid of it, and get it off their plate. They don’t want it. They’ve all talked about it, nobody wants it kind of thing and they don’t know what to do with it, and they know these tax bills are going to keep coming and they’re a little scared by them, so you really are solving a problem.
Jack Butala: Ever since the down trend that we just had whatever, I think it was five years ago, in 20111 or 2012, people … A lot of sellers I’ve spoken with said, do you know what, I don’t want to get behind on my real estate taxes because I don’t want to go through a foreclosure, so they believe, and this is not true-
Jill DeWit: Yes.
Jack Butala: They believe that they will personally be harmed in some way or their credit score or whatever by the fact that you stopped paying property taxes on a mortgage free property like rural vacant land and that’s just not the case. What ends up happening, and you know I never realized this, what ends up happening when you send a bunch of mailers out, people are going to call you for legal advice.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: And they’re going to expect you to help them in exchange for the fact that you’re going to buy some undervalued property, so be prepared.
Jill DeWit: Do you know what I find so funny, they do call for legal advice all the time and it’s so funny the ones … Sometimes they’ll call, they think they’re calling the assessor, like we have something to do with it. They’re calling and they discuss their taxes, like what the heck, it’s hilarious. What I find interesting is, a lot of people don’t know this, so property taxes, it’s basically a non-event, the county’s going to take it back, it’s not going to be a ding on your whatever, it’s gonna go, but what’s funny is an HOA, they’ll take it back before the county, isn’t that interesting. If you don’t pay, if there’s HOA fees, they almost have … What is that, Jack? It’s like they’re number one, they jump in before the county and take the property.
Jack Butala: Here’s the real answer, so there’s lien positions-
Jill DeWit: Why is the HOA before the county?
Jack Butala: It’s not.
Jill DeWit: Oh.
Jack Butala: It’s after the county.
Jill DeWit: That’s why-
Jack Butala: Property taxes, they just-
Jill DeWit: They just jump in, they’re aggressive and they just do it.
Jack Butala: Yes.
Jill DeWit: Thank you. Also, I thought-
Jack Butala: HOA’s are for profit organizations and they’re usually a lot more organized than a county.
Jill DeWit: That’s true and they know how to file all the forms and just take the property.
Jack Butala: Because they know if the property takes … If the county takes it back, they’re in a secondary lien position, they’re never going to get their money.
Jill DeWit: Exactly.
Jack Butala: So they have to file first.
Jill DeWit: It’s that funny.
Jack Butala: Yeah, not really.
Jill DeWit: No, it’s not, but funny, odd, not funny ha ha. Thank you, Jack.
Jack Butala: Well, you’ve done it again, you’ve spent another 15 minutes or so listening to the Jack and Jill Show, join us tomorrow, where we discussed establishing seller trust. Oh my gosh, Jill, it’s show number 666, what the [crosstalk 00:16:39] does that mean?
Jill DeWit: That’s scary.
Jack Butala: We should’ve have skipped that one.
Jill DeWit: Whoa, we should’ve skipped that one, like the 13th floor.
Jack Butala: Yeah.
Jill DeWit: And we answer your questions should you have one, post it on the jackjill.com online community, it’s free.
Jack Butala: You are not alone in your real estate ambition.
Jill DeWit: That is scary.
Jack Butala: 666.
Jill DeWit: Thank goodness it’s not like on a Friday … wouldn’t it be funny if show 666 was Friday the 13th, thank goodness that’s not happening.
Jack Butala: It’s not. I was checking when to see it airs and it’s not, that’s good.
Jill DeWit: No, it won’t. We are good, so cool. Hey, share the fun by subscribing on iTunes or wherever you are all listening, and while you’re at it, rate us there. We are Jack and Jill.
Jack Butala: We are Jack and Jill, information-
Jill DeWit: And inspiration.
Jack Butala: To buy under valued property.
If you enjoyed the podcast, please review it in iTunes . Reviews are incredibly important for rankings on iTunes. My staff and I read each and every one.
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Real Estate Agent Egos (JJ 664)
Real Estate Agent Egos
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hello.
Jack Butala: Welcome to the Jack Jill Show, entertaining real estate investment talk. I’m Jack Butala.
Jill DeWit: I’m Jill DeWit, broadcasting from sunny southern California.
Jack Butala: Today Jill and I talk about real estate agent egos and what you should know.
Jill DeWit: I don’t know what you’re talking about Jack. I have never experienced that, not at all. I’m a little confused.
Jack Butala: We don’t … On this show, Jill and I have a lot to say about real estate agents and the whole real estate agent environment and market, and so we’re not picking on anyone specifically, but our whole point, real big picture point is, in a light-hearted way, come on everyone. It’s a little bit antiquated.
Jill DeWit: I agree.
Jack Butala: It’s a little bit out of the 50s here.
Jill DeWit: Oh my goodness.
Jack Butala: Do you pick up your phone and do you order an Uber or a Lyft, or do you go and wait, stand on the corner and try to find a taxi? You get a lift.
Jill DeWit: Exactly, right off your phone. It’s easy.
Jack Butala: We don’t have that luxury to sell our house that way, so Jill and I have chosen, in a light-hearted way, to make a little bit of fun of it.
Jill DeWit: Oh, this is going to be good.
Jack Butala: That’s all. That’s what it’s about.
Jill DeWit: Exactly.
Jack Butala: Keep the hate mail coming, I love it actually. It’s fuel.
Jill DeWit: Totally.
Jack Butala: Before we get into it, let’s take a question posted by one of our members on the JackJill.com online community. It’s free.
Jill DeWit: Okay. Joe asks, I offered $300.00 an acre in Elco County, Nevada, northeast corner of the state. I was fortunate to open my mail today from a seller who is willing to sell me two properties quite close to each other, 1.3 and 2.7 acres in the same subdivision for $2,200.00. They are five miles from Elco proper, where there is a Wal-Mart, Home Depot, etc. Both have access but not much else. Comps seem to be about $100.00 to $1,500.00 an acre, for properties that are further from town than these. It brings my acquisition price up to $500.00 an acre, and really burns most of my seed money. I’m a little confused about sitting on the properties for too long, since stuff in this part of the country seem to sit for a while. However, taking down two properties in one quick deal may be worth it. Thoughts?
Jack Butala: Well I’ll tell you, you’re asking, you did everything right. You’re asking the right questions.
Jill DeWit: Yep.
Jack Butala: You’re kind of at that moment of truth where you’re staring at the deal saying, “All right, I did everything right, be careful what I wish for,” so you’re going to have to make that decision yourself. I will tell you that this pricing, in this county specifically, and the area where you’re talking about, I’m really familiar with it. We’re intimately familiar, and it’s a little bit pricey for my taste, but do I think you can easily double your money on these deals? Yeah.
If you were priced at $300.00 an acre for a 6,000 acre ranch, I would say you’re off your rocker. That would be closer to $70.00 an acre, but these properties are small, and I think you’re pretty relatively new at this, and I think these are two really good starter deals to purchase and go through the whole process on, and learn.
Jill DeWit: You know what Joe? Don’t be afraid of … I mean $300.00 for comp that brought $1,000.00, this is all, that’s perfect. The way you originally went out of the gate was perfect. I want to say too, don’t be afraid to just stick to your guns and tell them, “Look, I love it at $300.00. I can’t do it at $500.00, and then walk. You know what? Two days later you’re going to get another letter in the mail from someone wanting to sell at your $300.00 price, number one.
Number two, if they really want to sell, give them a week. They might call you back and say, “Okay, let’s just do it,” because we’re talking … It’s not a lot of money, the big difference, and I just, I think you did it right.
Jack Butala: So do I. I’d actually probably do the deal.
Jill DeWit: At $300.00 or the $500.00? I would stick to my guns.
Jack Butala: I know you would.
Jill DeWit: If comps are $1,000.00, that’s what I want to do. I want to offer, I want to do $300.00 an acre. Let’s just be honest here, okay? Then, because by my, time I costs and I get it recorded and all that good stuff, I still want to double my money and get out, and I want it to be under everything else.
Jack Butala: Well let’s not forget, Jill, that there’s two happy ends here.
Jill DeWit: True.
Jack Butala: The hard money facts are, you know, 1.3 acres is about $700.00 at $500.00 an acre, or $600.00. That’s rock bottom for a piece of real estate, it’s $600.00.
Jill DeWit: That’s true. Well maybe he could meet him in the middle.
Jack Butala: I think he’s …
Jill DeWit: Okay.
Jack Butala: Jill is so hung up on price.
Jill DeWit: $2,000.00.
Jack Butala: She loves to negotiate.
Jill DeWit: I’m doing all the work.
Jack Butala: I would just say, “Let’s get the thing done.” He’s purchasing one of these properties for $600.00 or $700.00, for an acre. I think I would do that deal.
Jill DeWit: Okay.
Jack Butala: As long as it’s got access.
Jill DeWit: It does he said.
Jack Butala: Then, 2.7, now you’re in the what, $1,000.00 for 2.7 acres or whatever, $1,100.00, $1,200.00? I think that you’re going to do just fine, Joe. Even though Jill want’s to make it her career, to squeeze every single penny.
Jill DeWit: Well, I mean I want to do it right and if Joe doesn’t have a lot of money, let’s do it right, and then we’re going to sell them really fast.
Jack Butala: Here’s what Jill really means, $300.00 or $500.00 an acre, for these two little properties. They’re not going to say no.
Jill DeWit: Right.
Jack Butala: That’s how Jill goes into this. That’s not going to make or break this. They’ve already decided to sell it.
Jill DeWit: Correct.
Jack Butala: If you sweet talk them like Jill, you’re going to get what you want. That’s really what she’s trying to say through the microphone here.
Jill DeWit: Thank you. Bingo.
Jack Butala: Trust me, Jill gets what she wants.
Jill DeWit: That’s right.
Jack Butala: At work and elsewhere.
Jill DeWit: Thank you.
Jack Butala: Today’s topic, real estate agent egos, and what you need to know, why they’re good and maybe why they’re not so good. This is the meat of the show.
Jill DeWit: Bring it.
Jack Butala: Real estate agents, for whatever reason, like no other profession that I have ever seen, believe that they have been entitled and empowered. It’s really, really, really … It’s an interesting psyche, psychological situation to be in, where you kind of watch what they do. The more deals they do, the more empowered they feel. It’s based on nothing.
Jill DeWit: Well not even that, I say right out of the gate, there’s like, and you and I both have sat through real estate school, and gone through all the motions, and so we know what’s involved there. We know what the training is and all that good stuff. I don’t understand this mentality and the mindset though. I mean I guess I sat there with my investor hat on, so I knew what I was hoping to get, what I was there to gain.
Jack Butala: I was there to learn.
Jill DeWit: Exactly.
Jack Butala: Learn about state laws.
Jill DeWit: Well, and … Exactly.
Jack Butala: I wasn’t there to learn how to get a listing.
Jill DeWit: Right, and how to lease a car.
Jack Butala: Yeah.
Jill DeWit: What to wear. Can you imagine? I’m a little surprised that those classes were there.
Jack Butala: You know that’s the thing, they should have.
Jill DeWit: They should do that.
Jack Butala: They should say what is appropriate to wear.
Jill DeWit: Exactly.
Jack Butala: Dressing like a hooker is not appropriate.
Jill DeWit: Correct. Yeah, and the best lease rates, you know what man, that’s what Lexus and Mercedes and everybody out there should be doing. They should be going to real estate school, standing outside.
Jack Butala: Oh my gosh, you’re right. Jill, that’s brilliant.
Jill DeWit: Handing out leasing information.
Jack Butala: You know how teachers get special pricing on mortgages and stuff?
Jill DeWit: Yeah, like the credit union?
Jack Butala: Yeah, real estate agents could get sympathy pricing on stuff.
Jill DeWit: Totally.
Jack Butala: Actually, they should be charged more to offset the teachers.
Jill DeWit: Hey, you’re a new realtor. I’m going to put you in a C Class for $300.00 a month. It is new real estate special.
Jack Butala: Oh my gosh.
Jill DeWit: Sorry, I can’t help it. I’m sorry. I’m so sorry.
Jack Butala: There’s something about this profession that I, it brings out this certain type of personality.
Jill DeWit: I know.
Jack Butala: I just don’t get it.
Jill DeWit: I know.
Jack Butala: I don’t understand this empowerment, you know, after go to school for six weeks, really you don’t learn anything at all. You learn how to pass a test, is what you learn.
Jill DeWit: Right. You really do. You’re just getting the answers.
Jack Butala: That’s what they teach you. Yeah.
Jill DeWit: Yeah, you and I were really there to learn, you’re right, and all they’re doing is like blowing through it, telling you how to answer the questions.
Jack Butala: Now you have to pay, by the way, so you’ve got to pay for the class, $500.00 or $700.00, probably more now. It’s been years and years since I went through it. By the way, we never took the test. We just went there to get educated, and it’s worth it. I would advocate that you go through real estate school for sure, even if you’re an investor. Don’t take the test or get the license or anything.
Jill DeWit: Don’t get licensed.
Jack Butala: It is, for $500.00 it’s pretty, lot of education.
Jill DeWit: Yeah, it’s really, really good.
Jack Butala: You go through the whole thing, you take the test, probably take it two or three times, because it’s pretty tough, and there’s this sense of false empowerment, where you do a couple deals. You get a $3,000.00 to $4,000.00 check. All the while you’re paying, right?
Jill DeWit: Mm-hmm (affirmative)
Jack Butala: You’re not, it’s not like you get a job and you get a paycheck two weeks after the job, and you’re learning from people. You have to pay. You got to pay the National Association of Realtors.
Jill DeWit: Get your own business cards.
Jack Butala: You have to pay the broker. You have to pay for your desk. You have to pay, pay, pay.
Jill DeWit: You pay to put the signs in the yard.
Jack Butala: The designated broker is, they’re in the business of attracting as many real estate agents as they can to pay this desk fee, to go out and make them money.
Jill DeWit: Right.
Jack Butala: It’s … The system’s all cockeyed backwards.
Jill DeWit: It’s crazy. I have to point out one thing.
Jack Butala: I have a lot to say, go ahead.
Jill DeWit: Oh go ahead, I’m sorry.
Jack Butala: No, go ahead.
Jill DeWit: Well one thing about this whole six weeks thing. Six weeks, pass the test, you’re walking around with this license, and you just have … There’s this ego, that’s what we’re talking about.
Jack Butala: Yeah.
Jill DeWit: Okay, an esthetician, who waxes people, they go for six months, and they don’t have an attitude. I just, let’s all think about this.
Jack Butala: Well they go to work and they do a job, and they get a paycheck.
Jill DeWit: Exactly, but they could be freelance, they could do their own thing, but they’re licensed, and then if you really want to go and do the full cosmetology, so you could do hair, it’s two years, okay? It’s all more than these guys. I just had to throw that out there. I just thought that timing is funny.
Jack Butala: You go through school, you pay all this money, probably close to $5,000.00 these days. You’re $5,000.00 out of your pocket, and you’re sitting at a desk somewhere that’s not, that you share with everyone, and all the people that are in the brokerage office with you are in competition of each other.
Jill DeWit: Right.
Jack Butala: They’re not here, like most jobs, everybody works together, and you help.
Jill DeWit: Right.
Jack Butala: You’re competitors are sitting directly next to you, looking at what you’re doing, because they want to steal your deals.
Jill DeWit: Exactly.
Jack Butala: None of this makes any sense to me. This is what this show’s about.
Jill DeWit: I know.
Jack Butala: You forget about that because you’re smart, and you go out and you sit down with somebody who wants to sell their house because you want to get the listing. What do you do? Do you try to help them get the best price for their house? No.
Jill DeWit: Exactly.
Jack Butala: No, you don’t do that. You try to get them to list the house for as cheap as possible because you want to make a commission.
Jill DeWit: Right. Exactly.
Jack Butala: It doesn’t make any sense.
Jill DeWit: You have to get it to sell. Yep.
Jack Butala: Do you try to charge them as little as possible and help them? No, no. You charge them full price. Cheap as you can get the house listed for.
Jill DeWit: It’s true.
Jack Butala: Charge them the full six, maybe seven percent of the listing price, and because you’re motivated to get as many listing as possible, because you went to the Sweat Hogs School of Listings, there’s this thing called Sweat Hogs.
Jill DeWit: Shut up, really?
Jack Butala: Yeah. You gotta pay extra money, and you know what they say? Here, I’ll save everybody their money.
Jill DeWit: What?
Jack Butala: This is what you learn at Sweat Hogs. Get as many listings as you can. Never work with the buyer. Never put anybody in your car. It’s a waste of time, and they’re right.
Jill DeWit: Wow, just get the listing. Sit back and let it happen.
Jack Butala: This is the sweet old lady who just signed the listing agreement. It’s an exclusive agreement, by the way. If anybody comes knocking on the door because they thought about next door, their sister needs a house, they have to pay.
Jill DeWit: You still get your money, yep.
Jack Butala: There’s a bunch of stuff on little old lady’s mind, the seller, that she needs help with.
Jill DeWit: Yeah.
Jack Butala: Do you think the real estate agent is going to help her with any of that stuff?
Jill DeWit: Nope.
Jack Butala: No way, why would they? They’re not motivated to.
Jill DeWit: Call your kids, not my thing.
Jack Butala: It’s not part of the system of getting listings. What do they do? They hire a photographer. They’re $200.00, $300.00 out of that, at least, and if they’re lucky, they get the broker’s assistant to input all the stuff in their MLS, which takes like two days, by the way.
Jill DeWit: Right.
Jack Butala: It’s incredibly complicated. Now they have a listing, and it’s in the MLS, and they walk away.
Jill DeWit: Yep.
Jack Butala: They let somebody, other schmo-broker across town, who’s working with somebody, working with a buyer, to do all the work because they’re on to getting the next listing.
Jill DeWit: Yeah.
Jack Butala: Where the hell is the respect in that?
Jill DeWit: I know.
Jack Butala: How is that, there’s no respect in that.
Jill DeWit: I don’t understand the whole ego thing. I really don’t.
Jack Butala: I would rather be like a semiconductor salesman, or something.
Jill DeWit: Right.
Jack Butala: The ones who are really, really good at it are the ones who actually are pleasant, and answer the phone. I have never met a real estate agent, in my life, who answered the phone effectively. Have you?
Jill DeWit: No. No, you know, it’s …
Jack Butala: It’s impossible to get them on the phone, and it’s because of their ego.
Jill DeWit: Right.
Jack Butala: It’s because they turned a few deals, maybe made $10,000.00 this month.
Jill DeWit: I think they show up, up front …
Jack Butala: The best ones make $100,000.00.
Jill DeWit: I hate to say this, based on experience, you know they’re all excited up front. They’re your best friend up front, until you sign the paper. Then they go dark, like dating.
Jack Butala: We never talked about …
Jill DeWit: I’m not going to tell you what the sign the paper part is equivalent to because there’s an act that happens and then they disappear.
Jack Butala: It sounds like you have some experience at this, Jill.
Jill DeWit: It’s so … I heard.
Jack Butala: Jill has predatory experience.
Jill DeWit: I heard. My girlfriends were telling me. That’s so funny. Anyway, …
Jack Butala: I think that a lot of people go into this real estate agent/broker thing and they just have no idea what it really is all about.
Jill DeWit: Yeah.
Jack Butala: It’s, the system’s just set up, it’s a ridiculous system, brokers win. That’s the only person who wins at any of this is the broker, the designated broker with 100 people under them. You know who really wins? People like us.
Jill DeWit: Yeah, you know what? That’s the good part because they’re out there doing their thing, and pissing people off.
Jack Butala: We make a ridiculous amount of money, and everybody’s happy.
Jill DeWit: Yeah well I mean how many people …
Jack Butala: We don’t deal with agents at all, ever.
Jill DeWit: You know it’s interesting that …
Jack Butala: We just got a deal in. I was cracking up. I don’t even know if you knew, you realized you did it. We got a deal in, and it was priced right, from a mailer, and there’s a real estate agent involved. The seller said, “I do have it listed, and your price works for me, but I got to run it through the real estate agent because I signed the listing.” Do you remember what happened?
Jill DeWit: No.
Jack Butala: You said, “Forget it.”
Jill DeWit: Yeah, we’re out. We’re not dealing with agents.
Jack Butala: Forget that … I’m not dealing with it.
Jill DeWit: Yeah.
Jack Butala: That’s what happened. I happened to be, somebody either told me at the office, or I overheard it. I can’t remember.
Jill DeWit: I think the seller called and said they’re out, right?
Jack Butala: Your immediate reaction was, “Forget it. I don’t care if the deal’s good or not.”
Jill DeWit: Yeah. We don’t work with agents.
Jack Butala: That says it all, right there.
Jill DeWit: Yeah.
Jack Butala: You know, because we do deals, that’s what we do for a living.
Jill DeWit: Yeah.
Jack Butala: When we’re not doing this show, we’re doing real estate deals.
Jill DeWit: Yes.
Jack Butala: Nothing kills a real estate deal like a real estate agent.
Jill DeWit: Yeah.
Jack Butala: That’s been my experience.
Jill DeWit: Yeah, I don’t need that. I don’t need the headache. I don’t need the hassle, so I agree. That’s so funny. Back to the car thing, you like my car idea? I think this is funny.
Jack Butala: I think, I wonder why certain manufacturers, BMW specifically, because it’s just such a dumb car.
Jill DeWit: Oh, BMW.
Jack Butala: A dumb car company.
Jill DeWit: Yeah, that’s perfect.
Jack Butala: I think, you know, people buy BMWs the same way they buy handbags. It’s just a, kind of a, they think it’s a trophy or some kind of status thing. I think real estate agents, they should have a BMW employee in every real estate school.
Jill DeWit: I think that’s good.
Jack Butala: As a plant.
Jill DeWit: There should be, I like this. There should be, why don’t they do this? Then, yeah, you know what? The right purse people, they should be sitting outside too. There should be a Nordstrom’s rep. and a BMW rep. sitting outside of real estate graduation day, when they get their tests back, or whatever. I don’t know.
Jack Butala: I’ve never known a person who owns a BMW who’s right in the head, never.
Jill DeWit: Oh yes, that’s true.
Jack Butala: Over the years, every opportunity I get, because I’m a total car guy, I ask people who purchase BMWs or they’re driving them, “How did you come to that decision? What happened, what was the thought process in that? Is it the engine size or the features?” Every single time they get, they look, they kind of turn their head sideways a little bit, and they get this little smirk on their face, like you know what, Jack? You just don’t get it. Us BMW owners, we get it.
Jill DeWit: That’s hilarious.
Jack Butala: You, I think you need to just, some day you’ll get it. You’ll catch on some day.
Jill DeWit: That’s hilarious.
Jack Butala: It’s the funniest thing, and then they don’t work.
Jill DeWit: I’ve got to tell you something funny.
Jack Butala: Those cars don’t work.
Jill DeWit: Totally, okay, so my whole family, I can go back at least two generations and I’m talking everyone, aunts, uncles, grandparents, my parents, cousins, one person, and you know who it is, has owned a BMW.
Jack Butala: Yep, I know exactly who you’re talking about. That completely makes my point.
Jill DeWit: Only one person, so funny. Anyway, on that note …
Jack Butala: Needless to say, it’s not the ultimate driving machine.
Jill DeWit: Yeah. Is that their logo? Is that theirs?
Jack Butala: Used to be. I don’t know if it still is.
Jill DeWit: Was it?
Jack Butala: Yeah.
Jill DeWit: Oh my gosh. That’s so funny.
Jack Butala: Well you’ve done it again, wasted another 30 minutes listening to the Jack Jill Show. Join us tomorrow where we discuss what happens with real estate inheritance. It’s a little bit more complicated than you think.
Jill DeWit: Super cool, and we answer your questions, should you have one, post it on our online community found on JackJill.com. Go there, it’s free.
Jack Butala: You are not alone in your real estate ambition. Good show.
Jill DeWit: Yeah.
Jack Butala: Probably lost half of our listeners.
Jill DeWit: I know. That’s okay. It’s weed them out week. Just kidding.
Jack Butala: I wish we could do that with the kids.
Jill DeWit: Right.
Jack Butala: Weed them out week.
Jill DeWit: Weed them out week.
Jack Butala: I love weed them out week.
Jill DeWit: Yeah.
Jack Butala: Actually that applies to so much stuff.
Jill DeWit: It really does.
Jack Butala: I’m going to write that down.
Jill DeWit: Again, dating.
Jack Butala: Weed them out week.
Jill DeWit: Weed them out week. Instead of rush week or whatever week, weed them out week. Shark week …
Jack Butala: We should have an acquisition close out week, because there’s always, no matter what you do, I go into our acquisition system, and there’s just stragglers constantly. There’s constantly like 10% of those deals that come in, we’re on the fence about, so they just sit there in the system forever.
Jill DeWit: Yeah, and the people call back like, “Are you sure you don’t want it? Are you sure you don’t want it?” The more they call back, the less I want it.
Jack Butala: Yeah, why is that?
Jill DeWit: Isn’t that funny?
Jack Butala: We should just have no emotion about it at all.
Jill DeWit: I’m like, “Oh.”
Jack Butala: Numbers make sense or they don’t.
Jill DeWit: Well you know, it’s like, you need to make a decision and move on too, I think, so if we say no, then the answer’s no. You know what, that’s a good point. I need to probably get better with the staff of saying, “The answer’s no unless A, B, C and D are done.”
Jack Butala: Right.
Jill DeWit: Unless they do all A, B, C, D we don’t want to talk to them.
Jack Butala: Well, I mean we have, this is how I know our staff is doing their job because they don’t want to kill a deal. They’ll do anything to make the deal happen.
Jill DeWit: I know.
Jack Butala: I think that’s really a great place for us to be, and if they’re complacent, and they’re like, “Eh, I’ll just wait til you guys decide, whatever.”
Jill DeWit: It’s true.
Jack Butala: That would be bad.
Jill DeWit: Yeah, they do want to make the deals.
Jack Butala: Yeah.
Jill DeWit: I get it. That’s really, really good. Hey, share the fun by subscribing at iTunes or wherever you’re listening, and while you’re at it, rate us there please.
Jack Butala: We are Jack and Jill. Information …
Jill DeWit: And inspiration.
Jack Butala: To buy under-valued property.
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