3 Steps to Becoming a Property Investor
Jack Butala: 3 Steps to Becoming a Property Investor. Every Single month we give away a property for free. It's super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don't even have to read it. Thanks for listening.
Jack Butala:
Jack Butala here from Land Academy. Welcome to our Cash Flow from Land show. In this episode Jill and I talk about the three steps it takes to become a property investor: education, experience, and independent success. Jill, great show today. Let's tell it like it is as we always do. before we do, let's take a question from a caller.
Jill DeWit:
I'm excited about this show. I've got to tell you, it comes up a lot. I hear people doing it the wrong way and then just making all the mistakes. I'm really excited to have this topic.
Jack Butala:
Me too. It's fun to put together short little lists and this show is great for that, just giving an overview.
Jill DeWit:
It is. All right, here's our question. Belinda from Phoenix called in and asked, "How do you define market value?" I love this. "I know some investors, including myself, define it as the price the property will sell for on the open market in its current condition regardless of what condition it is, and I know an investor should define it ..." this is a long one, "and I know an investor should define it as the price it will sell for on the open market after repairs or a full renovation." This is good because what we do is so many types of properties. That's why I want to include this question because when you decide, improvements, when you say repairs or renovation it's any kind of improvement.
Jack Butala:
Right.
Jill DeWit:
I like this question.
Jack Butala:
This is a tougher question to answer than it really it sounds like. Market value is an interesting reason. It depends on the market type first of all. There's two or three ways to value property in the universe of real estate. There's the income approach. This is like the technical answer. The income approach, that's how you value, with capitalization rates, that's how you value an apartment building or an office building that's producing income. There's the emotional approach, which that's how you value a house that you're going to live in. I can't remember what the third one is.
Jill DeWit:
How about comps?
Jack Butala:
Yeah, probably comparison value. That's one of it. It's been so many years that I just pulled that from the way back part of my brain.
Jill DeWit:
How far back was that?
Jack Butala:
It's as far back as it goes.
Jill DeWit:
Is it dusty back there? Is there other scary things back there?
Jack Butala:
Yes. It's not pretty.
Jill DeWit:
Oh, I don't want to go back there.
Jack Butala:
Not a pretty place to go.
Jill DeWit:
Yeah. Sorry. Belinda, this was not a good question. I picked wrong. Just kidding.
Jack Butala:
With land I tend to start with what I know I can sell it for, which is probably close to half of what the cheapest like kind property out there is listed for, and then I go down from there. That's how I value it up when I'm buying it, but market value is I think purely just what somebody's willing to pay.
Jill DeWit:
That's what I think too.
Jack Butala:
That's a round about way to answer that. I'm glad this came out. We don't, in our organization, and I really try to explain this to our Land Academy members. Please don't try to maximize value. It goes against your human being intuition. We want to buy it as cheap as we can and we want to sell it for as much as possible. That takes a lot of time. Wouldn't you rather just double your money?
Jill DeWit:
Yes.
Jack Butala:
If somebody has a business model where they constantly double their money, constantly, I'd love to hear about it.