Recessions Weed Out Unnecessary Businesses (LA 1310)
Transcript:
Steven Butala:
Steve and Jill here.
Jill DeWit:
Hello.
Steven Butala:
Welcome to the Land Academy Show, Entertaining Land Investment talk. I'm Steven Jack Butala.
Jill DeWit:
And I'm Jill DeWitt, broadcasting from sunny, Southern California.
Steven Butala:
Today, Jill and I talk about how recessions weed out unnecessary businesses. And if you listened to yesterday's show, we will resolve the mystery apparently. The mystery in this title.
Jill DeWit:
Don't worry, it's not you. We don't mean you are unnecessary or your business is unnecessary. It's a bigger thing.
Steven Butala:
Before we get into it, though, let's take a question posted by one of our members on the landinvestors.com online community. It's free.
Jill DeWit:
I hope you we play more truth time. It's your turn to do truth time.
Steven Butala:
Okay.
Jill DeWit:
Okay.
Steven Butala:
I mean, don't hold back on that. I love the truth time concept.
Jill DeWit:
That's funny. Okay, Lucas wrote, "Hi, folks. I'm scrubbing my data on accounting, and I was looking at historical sales prices. There is a pretty wide range from $300 all the way up to $800,000. I was thinking of cutting out all the properties with historical sales prices above a certain threshold. $30,000 as an upper limit, for example. Many of the properties don't have historical sales prices in the data, so I'll leave those alone. Does this make sense? Am I missing out on big cash opportunities by omitting these properties? Or is it practical to assume that they won't be good offers? My gut tells me to delete them from the data. Thanks." This is all you.
Steven Butala:
This is really, really important. And Lucas is relatively new, I think. He's pretty vocal in land investors, and I appreciate that. This is a huge issue. The issue is this, the underlying... What he's saying is this, if I go into a zip code in a rural County, specifically in a rural County, and I look at all the property that's there, all the land, big Atlanta. And I look at all the historical prices and I narrow it down to, let's say, a zip code. Because the more narrow you can get, geography wise, theoretically, the more accurate the pricing is going to be, because if you look at any County or any zip code, there's expensive areas, there's cheaper areas. There's waterfront property, there's property that's on a County road and on and on and on. There's things that make properties more expensive based on attributes or less expensive.
So it's hard to do that when you're staring at data in a spreadsheet, it's hard to get a real average, is what I mean. And so he's asking about this decision. What, should I cut off the tip top? Should I cut off the bottom? Kind of go with that centered, bell curve average and get it all out there, or should I just start really surgically cutting out properties, which leads me to the two theories. There are two theories about pricing mail campaigns, the shotgun approach, and the rifle approach. We exclusively use the rifle approach for sending out mail to houses because houses, we have all these algorithms from Redfin and Truly, and all these other places that say, the house is worth 120, 130, 140, 99, and you average those out and you've got a real good offer price, and then you take some money off of that. Real simple stuff when you send out a mailer.
You can try to do that, which he's alluding to here, for land. But here's the problem, we just don't have enough data for land. You just don't, because it's not an active market. Properties, people aren't buying and selling properties the way that they do houses. It's just, the velocity of the whole industry is a lot slower. So here's the answer. He's asking, do you delete the top and the bottom? And the answer is yes, but not seriously. You take the top two or three, because there are anomaly, weird things like $25 million in a rural. Come on. There's a clerical error.
Jill DeWit: