JF1945: Doing 16,000 Transactions, Acquiring $0 In Debt with Jack Butala and Jill DeWit

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Our two guests today have been building a real estate investing business as partners for around 10 years. We’ll hear how they have divided up their roles and get any tips they have for forming a successful partnership. They will also tell us about some of their typical deals, and Joe will dig in to bring us some of the specifics. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“You got to get a feel for what kind of property sells more there” – Steven Jack Butala

 

Steven Jack Butala and Jill DeWit Real Estate Backgrounds:

  • They have been investing in real estate since 1999
  • Built a $24 million land resale empire, completing close to 16,000 transactions without incurring any debt or leverage
  • Based in LA, CA
  • Say hi to them at https://landacademy.com/ or www.buwit.com
  • Best Ever Book: Showing Up for Life

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today – Steven Jack Butala and Jill DeWit. How are you two doing?

Jack Butala: Excellent, Joe.

Jill DeWit: Great!

Joe Fairless: Good, I’m glad to hear that, and looking forward to our conversation. A little bit about their company – they’ve been investing in real estate since 1999, built a 24-million dollar land resale empire, completing close to 16,000 transactions without incurring any debt or leverage. Based in Los Angeles, California. With that being said, do you two wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jack Butala: Yeah, Joe, it’d be great. I cut my teeth probably 25-30 years ago as a commercial real estate broker, and quickly learned that I couldn’t stand to cold-call. So I devised this system to collect data for commercial real estate property owners, and back then – this is before the internet – I put together a system where I would fax them overnight blind offers for their property, with a pretty substantial degree of immediate success.

Fast-forward now to 2019, I got sick of doing those complicated transactions back then, and decided that buying land, and specifically unwanted land, for much lower than I could resell it for on the internet was the way to go… And here we are.

Joe Fairless: Got it, okay. And what were you doing when you started to collect data on property owners and fax them blind offers? How were you getting that information?

Jack Butala: It’s a great question. I’ve learned of my own interests – and I guess I would say now obsession – with data… And back then, the highest quality data that you could find (again, before the internet) was about healthcare-related office complexes, and nursing homes, and assisted living type facilities. For whatever reason, there was a tremendous amount of data collected on that, and with associated fax numbers.

So I literally took a phonebook-size book and input it in Excel and through some programming – I call it a form fax, but it’s really like a mail merge fax situation… So right around 2003 I learned about RealQuest Pro, which was back then the first American Title’s data arm. Since then, we’ve become license providers of that and several other data sources… But for us, it’s all about manipulating sending offers to owners, and getting the responses, and having all that traffic come back to you, and deciding what properties you wanna buy.

Joe Fairless: So how do you two divvy up responsibilities?

Jill DeWit: Good questions. I always say it’s “Make my phone ring”, whether it’s on the buy side or the sell side. When I came into this I had a very heavy sales background, and I am not afraid to pick up the phone, answer the phone, talk to people… Jack and his data – he’s not really into talking on the phone; he’s more about just getting it going, getting a response. So that’s what he does – he gets the offers out, he prices them, he makes sure it’s perfect, and then my team and I come in on the buy side, carry them all the way to completion, and then same thing on the sell side. That’s what my forte is.

Joe Fairless: Got it, okay. How long have you two been partnered up?

Jill DeWit: Gosh, going on — it’s a little over ten years now.

Joe Fairless: Tell us about a typical transaction.

Jack Butala: By the way, we buy land, we buy houses, small apartment buildings… So it’s not just limited to land any longer. But a typical land transaction for us – I have the spreadsheet  now of what we have on the table… I’ll send out (I don’t know) 10,000 offers ballpark… We own a company called Offers to Owners, which is a bulk mail printing company, and we obviously provide a huge discount to ourselves, and to our Land Academy and House Academy members.

So I’ll send out 10,000 offers, it costs probably $3,000 to $5,000. For every 300-400 mailers we send out, we end up buying a property. So a typical deal for us would be — I’ve just reviewed one right before this call… It was a 40-acre property in South-Eastern New Mexico, just on the outskirts of town, surrounded by structures and stuff like that, for about 4k-5k. In that particular case we’ll resell the property through the MLS, probably, for about 20k, maybe 22k.

Joe Fairless: 22 an acre?

Jack Butala: No, it’s 40 acres, we’re buying it for about $5,000…

Joe Fairless: Total.

Jack Butala: …and we wholesale it for about $22,000.

Joe Fairless: Got it. I need to shift my gear into New Mexico prices. [laughter] You two are in L.A. so I’m sure you had to do the same thing.

Jill DeWit: Exactly.

Joe Fairless: Alright, $22,000 for 40 acres. So how are you finding these leads? What’s that process?

Jack Butala: I very simply take the entire universe of properties in a given county… If you can imagine, there’s houses, land, all kinds of stuff that you can dream up in there, and I scrub out everything that I’m not interested in for that particular mailer. In this case it would be houses, strip malls, any commercial property, any property owned by a municipality, cemeteries, hospitals, on and on and on. There’s a massive list. We actually have built algorithms to do this for us.

So what I end up with is a good, clean scrub of property that are owned by individuals, or let’s say LLCs, and they get an offer from us. It’s kind of more art than science at  a point, where you have to price that. Our whole goal is to get them to sign the offer and send it back, or to call back and say “$5,000 doesn’t work, but $6,000 might work.” And then we go from there.

Joe Fairless: What are you scrubbing for exactly, in order to get from the initial list to the scrubbed down list?

Jack Butala: Likely sellers.

Joe Fairless: Okay.

Jack Butala: John and Sally Smith are very likely sellers. If they have a 40-acre property or a 20-acre property in the county that I’ve chosen, they are a very likely seller.

Joe Fairless: Why?

Jill DeWit: [unintelligible [00:06:56].17] We’re not trying to seek out any particular thing, it’s just that they’ve owned it… We don’t even look for how long they’ve owned it. And the whole goal here – the best part of my job is that people are calling back because our offer is in their ballpark. He takes all the work out of it. I’m not sitting here going down and cold-calling everyone in a county, saying “Do you wanna sell? Do you wanna sell? Do you wanna sell?”, or do I send out a generic offer that says “If you wanna sell, call me”, because then again, everybody will call back and they’ll all want top dollar. That’s not what we do.

We send out real strategic, professional, respectable offers to these sellers. They get them, and they open them, and they read them, and they say “You know what, Sally, I even forgot we owned this. Aren’t we still paying the taxes on it? We’re not gonna retire there. The kids don’t want it. I’m calling.” And then I get nothing but quality people. Again, he liked my price, it’s in their range, and we’re just gonna buy it and solve a problem for them, usually.

Joe Fairless: And what makes them likely sellers?

Jill DeWit: Usually because it’s paid for. That’s really what we look for. And most of the thing is rural, vacant land. It’s very hard to get a mortgage on. Most of it is paid for.

Joe Fairless: But you said that you don’t look to see how long they’ve owned it, so you don’t necessarily know if it’s paid for or not, right?

Jack Butala: What makes them a likely seller is this… Imagine this – if every single person who owns a piece of rural, vacant land that’s not developed, in a given county, with the exception of government entities, and any individuals and LLCs, let’s say, everybody gets an offer from us; every single person. And the likely sellers choose themselves. So we just blanket the whole thing with an actual offer.

So instead of us waking up in the morning to go find all these likely sellers, they find us. Jill wakes up, sits down at her desk, and there’s many envelopes literally to open that have signed offers in them, or her mailbox is full [unintelligible [00:08:51].20] to return the calls. So they find us. I blanket it.

Joe Fairless: And how do you determine how much to offer to make that a fair offer, as Jill mentioned?

Jack Butala: That’s an excellent question. It’s very different for specific product types. Three major product types that we deal in now are rural vacant land, infill lots, which are properties in an urban setting, and then houses. We buy tons of all  three.

Rural, vacant land is a little bit more tricky to price, because you have to do a lot of research about what’s on the MLS, what’s on LandAndFarm.com, what’s on LandWatch.com… We own a site called LandPin.com… You’ve gotta get a feel for what properties sell for there. We try to come in at 20% or 30% of the actual retail price, and sell it for maybe 50% of its worth.

Joe Fairless: Okay. So that is with rural and vacant land. What about infill lots and [unintelligible [00:09:42].29]

Jack Butala: Infill lots is a function of what house values are in the very immediate area. Infill lots and houses are really exciting from a data perspective, because there’s so much data available in this internet age we’re in. So if a house sells for $200,000, if you asked any homebuilder, they’ll tell you they’re very will to pay 20% to 25% for the land on a house that they build. So if it’s $200,000, 20% of that is about 40k. I try to get in at 10k or 15k and mark it up about 10k and really quickly sell it to a homebuilder.

Joe Fairless: Okay.

Jack Butala: For houses it’s even easier.

Joe Fairless: So 20% to 25% of the value of homes equals the land value, as a rule of thumb.

Jack Butala: That’s right.

Joe Fairless: Oh, interesting. Okay. How does that fluctuate, if at all, from where you live to where it sounds like Jill is originally from?

Jack Butala: Ha-ha! Well, Jill and I started the company in Arizona, and we lived in a house that was about —  I don’t know, we don’t live in very logical areas to do this in. [laughter] We live right on the Pacific Ocean, and I’m not sure that this whole model would work there. [laughter]

Joe Fairless: Right, right. But as far as that percentage though, just to estimate, would you say L.A. is still within 20% to 25% of home prices (the land equals) compared to Des Moines, Iowa, or something like that?

Jack Butala: I don’t wanna complicate this for your listeners, but…

Joe Fairless: Please, try. That’s fine.

Jack Butala: Okay. [laughter] There’s a construction cost component. In my mind, the rock bottom new construction cost is gonna be about $100/foot. If you’re really pulling out the stops, it goes to maybe $250, even $300/foot. So if you take our neighborhood, rural, vacant land goes for about 4 million bucks a lot. And when you pull out the stops and build a 3,000 sqft. house for $300/foot, that’s a million bucks. So now you’re sitting at a theoretical completed asset at 5 million dollars, that’s probably worth 7.

So you have to go in — there’s a lot of analysis upfront that I do when transactions happen in different markets. But I’ll tell you, we do really well in Phoenix, Las Vegas, Tampa… Those are the markets that are really high growth, in-bound population increase  environments, and the real estate component of cost of living is very low.

Joe Fairless: What are some markets that you have been in, but you’re not longer in?

Jack Butala: I’m from Michigan. In all of Michigan I can’t get to work with any [unintelligible [00:12:21].14] and it baffles me. I’m not sure why.

Joe Fairless: Well, I was gonna ask you that, but you don’t have any answer to it [laughter] Okay…

Jack Butala: I’m not alone. I’ve really tried to figure this out.

Joe Fairless: Yeah… Because you find some land, and then you just can’t find the buyer, or you can’t find the land, or what?

Jack Butala: The yield – I micro-manage our mailer yield, and for whatever reason our yield is just atrocious in Michigan. I can send out thousands of letters and just not really get any real responses.

Joe Fairless: Even Grand Rapids area?

Jack Butala: Yeah. Seth Williams is in our space. I don’t know if you’ve interviewed him or know him…

Joe Fairless: Yeah, of course.

Jack Butala: Seth is really a hands-on — he’s got a 616 area code phone number, and he does okay there… But we do more of a shotgun approach to all of this than a rifle approach.

Joe Fairless: Got it. And what’s a market that you weren’t in, but you have now had a lot of success in? …if there is one.

Jack Butala: Northern and Central California are on fire for us.

Jill DeWit: Yeah.

Joe Fairless: Okay. And so what’s a typical deal there look like? Or maybe a specific example would be even better…

Jack Butala: I can give you a couple of examples. We’re doing several transactions in Lassen County right now. There seems to be a lot of subdivided 20-acre properties there. We buy them for 2k-4k each, and wholesale them for 10k-12k, maybe 15k, that week.

Jill DeWit: Easy and fast. They love them. Modoc is good… And we have some other great areas up there.

Jack Butala: Yeah.

Jill DeWit: It’s [unintelligible [00:13:44].08] and it’s pretty, and people love it.

Joe Fairless: And Jill, switching gears a little bit to your area of focus – what are some typical objections that a seller has, and how do you resolve them?

Jill DeWit: Usually, it just comes down to the situation… Like, the kids will find it, and our only issues are sometimes undoing trust issues, and just kind of finding people sometimes. And then we can undo that. I have access to everything, and a lot of our deals [unintelligible [00:14:15].03] two titles, so they take care of them right there. But even before I get a two-title, I wanna make sure everybody’s alive and able to sign…

Jack Butala: There’s a huge misconception out there, Joe, about willing property to your heirs. If I own a piece of property and I pass away, and I have a will that says “I’m gonna give all my stuff to my kids” and the property remains in my name, and I pass away and the kids say “Great, I own the property”, they actually don’t. Depending on the state, there’s a huge legal component to this.

The kids learn this eventually, because maybe a potential buyer before us gets in there and they say “You know what – there’s nothing we can do on this without legal action.” So we get a lot of calls like that… And we can undo and solve a lot of those problems. Over the years we’ve become experts at that.

Joe Fairless: And how do you solve that?

Jack Butala: It’s very, very, very geographically specific. In California it tends to be a lot easier than certain states. You need a death certificate and an affidavit and you can go through it. And most title agents can do it – or will do it – for you.

In Arizona it takes a probate action. It’s almost prohibitive. You have to almost do a quiet title action to undo it. So consequently, if you go to Arizona, there’s a lot of back-tax property there, which is a whole different animal, because people just aren’t willing to go spend 2k-3k to get an asset that’s worth 2k-3k in their name. So it’s really geographically specific.

Joe Fairless: Got it. Taking a step back, based on y’all’s experience, what is your best real estate investing advice ever for investors?

Jack Butala: Go ahead, Jill.

Jill DeWit: I have to think about it… My best real estate investing advice? Learn how to use data to do the heavy-lifting, which is everything that Steven has taught me… And then everything works out. We joke about “Money solves all problems.” Man, when you buy an asset, use data, so you don’t have to do a lot of work. Smoke out the great deals, buy something really cheap. You can market it all wrong, and do very well.

Jack Butala: We just did a podcast with this title, and I answered this exact question… I like to say it like this – good acquisitions solve all problems.

Jill DeWit: Yup.

Joe Fairless: Right. It makes sense.

Jill DeWit: [unintelligible [00:16:15].29] Even though I’m the sales part of the team and I really love being in charge of all that, I get excited on the buy side. And now one of the roles that I’ve taken on is we do deal-funding for our Land Academy and House Academy members, and it kind of rolls through me… And I approve the transactions and fund the deals. And I just get excited on the buy side, because we know how it’s gonna go; you know when you bought it, “Wow, this is  a home run. Quickly, let’s close this deal. We’ve gotta own this” kind of thing, and it’s the greatest.

Joe Fairless: We’re gonna do a lightning round. Are you two ready for the Best Ever Lightning Round?

Jill DeWit: Yes!

Joe Fairless: Perfect. Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:17:02].26] to [00:17:37].14]

Joe Fairless: Best ever book you’ve recently read?

Jack Butala: The best book I’ve ever read is not a real estate book at all, it’s called Showing Up For Life. It was written by Bill Gates Sr. The Bill Gates that we know – his father.

Joe Fairless: Got it.

Jill DeWit: Wayne Dyer.

Joe Fairless: Oh, yes.

Jill DeWit: Everything Wayne Dyer. I have him around the house all the time.

Joe Fairless: Noted. What’s a mistake you’ve made on a transaction?

Jack Butala: The biggest mistake I’ve made – and this isn’t transaction-specific – is not believing in marketing, specifically internet marketing, and I got my butt handed to me around 2009 because of that. It had almost sunk the ship, but luckily we cured our ways.

Joe Fairless: And will you elaborate a little bit more on that?

Jack Butala: I had a single marketing channel. We were selling a tremendous amount of property on eBay. We were doing about 30 transactions a day on eBay, and the bottom fell out of that market and it was a classic example of a single point of failure/all your eggs in one basket… And all we had to do was just plan for a downturn and have a bunch of — now we probably have 20-30 channels of marketing through social media, on our websites, and a network of buyers, and a massive email list, and all of that.

My advice to somebody who’s brand new is to really develop those networks and start now.

Joe Fairless: What’s the best ever deal you’ve done?

Jack Butala: The best deal I ever did was a deal early on where I purchased a ton of property right at the Grand Canyon, for a very small amount of money, and resold it about six months later, and we netted over – this was really early in my career – almost $900,000.

Joe Fairless: Best ever way you like to give back to the community?

Jill DeWit: Land Academy.

Jack Butala: Yeah, we started a whole company… Jill, go ahead.

Jill DeWit: We’ve spent the last couple of years really growing, and even put our own acquisitions and things on hold a bit, to really give back and help the planet. We have hundreds of members now, several that we know, that are making more money than us every month, and that’s the greatest feeling ever. We have taught them everything that we do, and they are killing it.

Joe Fairless: And how can the Best Ever listeners learn more about what you all are doing?

Jill DeWit: Buwit.com shows all of our companies – Land Academy, House Academy, the direct mail company, how to get data, our online communities… Tons of free stuff. Or just go to LandAcademy or HouseAcademy, our podcast, and videos on YouTube, and all kinds of good stuff.

Joe Fairless: Awesome. Well, you two, thank you so much for being on the show, talking about your business model, what works, what doesn’t work, what you have in place now to make sure you’re set up, so that if one marketing channel does not go according to plan, then you’ve got many others that can pick up the slack… And also, just the overall approach for how you’re finding sellers and how you think about making offers and the type of offers that you make.

I appreciate you two being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Jack Butala: Thanks, Joe. A pleasure.

Jill DeWit: Thanks.

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