Rules to Live By in the Land Business
Jack Butala: Rules to Live By in the Land Business. 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.
Steve: Jack Butala here, welcome to our Cash Flow From Land show. In this episode Jill and I talk about the rules to live by as a real estate investor. Specifically, when you're a new investor and when you become in-seasoned, like us, and you actually kind of make your own rules, or you can bend your own rules when you have enough deals under your belt, like us, I guess.
Jill: We make our own rules.
Steve: I was looking at this before we started and it's amazing how many the first, the basic, basic rules are just, you know, you start to live by them.
Jill: Mm hm (affirmative).
Steve: We'll get into that in a second. The show kind of has promise, actually. I just want to make sure it goes sideways. Let's take a call, Jill.
Jill: Okay. Alisha from Killington, Vermont called in and asked, "Can you send out offers on houses like you guys do for land? Does it work?" Awesome question.
Steve: Yes.
Jill: Steven, take it away.
Steve: That's the whole answer.
Jill: Yeah, I know. Actually, it's two parts, yes and yes.
Steve: Yeah. Just like land, you have to do it properly, get the right education.
Jill: Price it properly, don't send out something silly.
Steve: Yeah. Right, Jill.
Jill: I'll buy your mansion for $10. No, come on.
Steve: Although, now, here's a basic rule with houses, first of all, you want to send it to people who have no mortgage. You have to have the right data set for that. Oh, wait, we do have the right data set. We're a licensed provider of it.
Jill: That's true.
Steve: You want to make sure that you have rational offers with houses. You can send irrational offers with land and get away with it a lot of times, but houses, you want to price yourself around 40 or maybe up to $40,000 less than you think the finished retail value is, so ...
Jill: Maybe a percentage, like how about a percentage?
Steve: ... I like dollar amounts with houses because ...
Jill: I mean, it's a huge range.
Steve: ... Think of a master plan community that's got ... I only send letters to master plan communities where all the houses are built at one time. There are only three or four styles, and they have real predictable sales values that they give at a given time. Let's say you know that whoever gets done cleaning it up, the house is going to sell for 150,000 bucks.
Jill: There we go.
Steve: You want to be, it's not a percentage, you want to be ...
Jill: I want to get an idea where the 40,000 comes in.
Steve: ... You want to just send letters out for ... I would sent letters out for 100, 110, probably, I don't know, you'd probably send a letter out for $5,000. Knowing you, someone would call you and sell the house.
Jill: Ninety. I might get it.
Steve: Yeah, like 100,000, a $100,000, so you're $50,000 shy, and in the beginning you want to take ten grand. You want to get it to a guy who's is a known flipper or renovator in that area, and then he's going to help pay the, you know, he'll buy it from you for $10,000 more than you bought it, or he'll just take the deal off your hands and hand you $10,000, which is if you're new, is what you should do so it doesn't cost you any money to get into the business.
Then, make sure that whoever that guy is that you're dealing with, or the three people that you choose in your A-list, they make more money than you do because it's a lot easier for you to find deals, deal after deal after deal. You want to keep those people happy. It's a lot harder for them to renovate. It's a lot of work and a lot of time. They will beg you. They will call you begging you. Trust me.