How to Buy a House Cheap (HA 0000)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
Steven Butala: Welcome to The House Academy Show, entertaining real estate investment talk. I’m Steven Jack Butala-
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny Southern California.
Steven Butala: Today, Jill and I talk about how to buy a house cheap.
Jill DeWit: This is episode zero.
Steven Butala: This is episode zero of our new House Academy Show-
Jill DeWit: I love it.
Steven Butala: And in a strange but not unplanned way, we’re about to record episode 1000 this week for our Land Academy Show.
Jill DeWit: Yes. How funny is that?
Steven Butala: When you see all those goose eggs up there… when I see them I’m like, “Are these guys brand new?”
Jill DeWit: Exactly.
Steven Butala: “Another real estate show?”
Jill DeWit: Here we go.
Steven Butala: It turns out Jill and I have combined tons and tons of experience. Since the ’90s, we’ve been buying and selling real estate. Lots of land and lots of houses and we’ve had a company called Land Academy for years, since 2015. Incredibly successful. Our members buy and sell land right alongside us. At their urging, we started this company called House Academy and, consequently, this podcast.
Jill DeWit: It’s because we’ve been buying and selling houses at the same time, people got wind of it, and now we’re here sharing that with everyone. What’s next? Who knows?
Steven Butala: Our whole approach is very different. If this is the first time you’ve ever listened to any of these shows, our approach, it’s worth listening to. Our approach is very, very, very unique and we offer a lot of tools and a lot of membership things that are quite honestly changing people’s lives.
Jill DeWit: Well, it’s access to professional-level tools that you can’t get in other places. That’s the reality. It’s like if you’re new in our world and you don’t have the connections or the money to access some of the assessor data and other things that we’ll talk about as these shows progress, it’s hard to get started and so that’s why we created House Academy so you not only have access to all of that, but then you’ve got the inside information of our years of doing it so we can help you ramp up quickly.
Steven Butala: We’re the only licensed providers of all three major assessor database data companies-
Jill DeWit: That’s true.
Steven Butala: And because we negotiated a fantastic deal with all these companies, it’s very, very [crosstalk 00:02:17] inexpensive to use them.
Jill DeWit: Exactly.
Steven Butala: We own our own mail company and there are a lot of different professional-grade tools that high-level commercial real estate acquisition people use every single day through us, so this is not a startup or a run-of-the-mill “I wonder what these schmoes have to say?” There’s none of that going on.
Jill DeWit: Who is the schmo?”
Steven Butala: “Well, I wonder what that schmo is doing with that woman? I wonder what she [crosstalk 00:02:43]-
Jill DeWit: “Why is that schmo talking like that?”
Steven Butala: Before we get into it, let’s take a question posted by one of our members in the houseacademy.com online community. It’s free.
Jill DeWit: Jeff asked, “How long does it take to find a house to buy?”
Steven Butala: How long does it take, Jill?
Jill DeWit: Days/weeks. It’s just getting the offers out.
Steven Butala: Here’s my question, Jeff.
Jill DeWit: That’s it.
Steven Butala: Do you really just want to buy one house?
Jill DeWit: That’s true.
Steven Butala: It’s all a system.
Jill DeWit: That’s true.
Steven Butala: For every 3,000 offers that we send out via direct mail, and how we do it is a very sophisticated mail merge type thing, sophisticated but not difficult, mail merge scenario, for about 3,000 if you do it correctly, you’re going to buy a house at about 70 to 75% of its current value. Not ARV. We’re going to…
Jill DeWit: We’ll have a whole week on ARV.
Steven Butala: Yeah, and why you should never even say that. In fact, I’m not going to say it again. We don’t [crosstalk 00:03:42]-
Jill DeWit: It’s so funny.
Steven Butala: We as residential real estate investors don’t presume what the people we sell it to can sell it for. We can tell with an incredible amount of accuracy, let’s say it’s worth 300,000 bucks and we want to buy it for 260, that’s the business we’re in. How long does it take to buy a house? You set the system up, you learn how to do it right, and from the time that you get the direct mail campaign… it’s an offer campaign, it’s not, “Would you like to buy this house?” It’s none of that.
Jill DeWit: Right. No postcards.
Steven Butala: It’s, “Hey, John Smith, homeowner 123 [crosstalk 00:04:22]-
Jill DeWit: Post sticky notes-
Steven Butala: “Main Street. We want to buy your house for 280,000 bucks. We can close in a couple of weeks and here’s why and how to do it. Here’s all the other properties that we’ve dealt with and here’s our whole group. This is for real. We’re real people.” It takes about two or three weeks for the offers to get right in front of that owner, and then from there it takes less than 30 days, cash in, cash out. Jill will explain when we talk about how to buy a cheap house here in the meat of the show, explain how to get financing and all that other stuff. Of all the things that you’ve ever incurred, all the issues you’ve ever incurred, bottlenecks in buying and selling real estate, we’ve seen it all.
Jill DeWit: I agree.
Steven Butala: If we haven’t, our members have and we can call them.
Jill DeWit: Thank you.
Steven Butala: Today’s topic, how to buy a cheap house.
Jill DeWit: This is why you’re listening. Seriously.
Steven Butala: It sounds a little different. We’re getting used to it, too.
Jill DeWit: Totally. You want to talk how to buy a cheap house?
Steven Butala: Well, like I alluded to in the question, it’s all in a system, and so I’m not sure why anybody would want to buy just one cheap house.
Jill DeWit: True.
Steven Butala: Maybe four-
Jill DeWit: Somebody do. Wait a minute. We have people in our world that do that, by the way.
Steven Butala: Just buy one cheap house-
Jill DeWit: Time out.
Steven Butala: And that’s it
Jill DeWit: Let me just tell you, coming from my side of the business over here where we do sales and programs and all that stuff, we really do have people that come in that they only want to use our program to buy their dream cabin or their dream ranch or their dream place to park their RV or hunt or fish or whatever. There is some of that going on, so you can use this, but what’s great about it is you can use our tools and resources and spend your time and find your three favorites and then drive your wife out there and pick the one you want to buy. That’s what some people do. Not to change your whole thing, but I’m just being honest. That’s what some people do and then you just say “thank you”.
Jill DeWit: What often happens is, which is kind of funny, we’ve had people that started down this path and the next thing you know they’re like, “You know what? Actually, that wasn’t that hard. I picked the one I want and I bought three more and now I’m just selling them because you guys taught me how to do that. Now, that’s going to pay for the one I just bought.” That can happen, too.
Steven Butala: Exactly. Here’s how you buy a cheap house step by step. If you’re a note taker, this is the time to take notes. You always laugh when I say that.
Jill DeWit: I don’t think anybody does. They have recorders. They do screenshots anymore. I don’t think anybody really takes note.
Steven Butala: You don’t think they take the lead of the pencil and-
Jill DeWit: No, I’m…
Steven Butala: Tap it on their tongue.
Jill DeWit: I’m very sorry to break that to you. You know it’s 2020 next year.
Steven Butala: I’m very aware of that.
Jill DeWit: Okay, thank you.
Steven Butala: You have to choose a market first, and so let’s say you choose a market like Mesa, Arizona. I’m just going to use a random example. This works in every single market that there is and here’s why. There’s 10, I just happen to know this, but there’s 10 zip codes in Mesa, Arizona, and you want to take all the zip code data from that existing market, all 10 zip codes, and look at… line it all up on a spreadsheet. Look at days on market, month-over-month days on market, new properties listed to sold.
Steven Butala: There’s a bunch of statistics that you want to look at and you want to pit these zip codes against each other. One is going to come one or five or three or some number of those 10 zip codes is going to jump out at you and it’s going to say something like this. “Well, this zip code, the average days on market last month, were 15. All the rest of these zip codes are 40, 30, 80, 70.”
Jill DeWit: Exactly.
Steven Butala: I like lower days on market. There’s several statistics you look at. How many properties are listed that month? How many properties were sold? You can take, if you’re the data crazy type person, you’re going to love this part of it. I personally love this part of it, and you’re going to see that there’s three clearly, in all these statistics you look at, three zip codes that really work. We call that The Red Green Yellow Test, or Red Yellow Green, Green Yellow Red, everybody uses a different [crosstalk 00:08:38]-
Jill DeWit: I know.
Steven Butala: When they ask in our group.
Jill DeWit: Exactly.
Steven Butala: That’s number one. Now, you’ve got three zip codes to send offers to. You pull the data and you got to make sure you get the mortgage data with it and all that, which we’ve made that incredibly simple. Step one is to pit these zip codes against each other. Step two is to pull the ownership data of all the house owners.
Jill DeWit: Which we supply.
Steven Butala: You want [crosstalk 00:09:04]-
Jill DeWit: It’s through DataTree. We use DataTree [crosstalk 00:09:04]-
Steven Butala: DataTree. Yes, we’re [crosstalk 00:09:05] licensed providers of DataTree.
Jill DeWit: It’s no secret.
Steven Butala: The assessed data, and then it’s got mortgage data and a bunch of other sources of data in it as a line item, and then you scrub that data down and take out the things that you don’t… who logically shouldn’t get an offer. One of the first things I do is scrub the data down. I remove everybody with a mortgage. That’s just how we do it. We have several members who have different concept about that and different methodologies, but it ends up taking about half the data out. Now, my strike percentage in this mailer is going to get great. It’s going to get better and better and better with each step from this point forward.
Steven Butala: You’ve already taken out the seven worst zip codes in Mesa. You’re working with the three best zip codes. Now, you’re only working with the people who don’t have a mortgage. Now, let’s take it a couple of steps further. There are people who have LLC-owned properties in that market. You can choose to just send it to them. We choose to send it to just about everybody who doesn’t have a mortgage and just kind of see what happens because the data is real cheap. We’ve made it cheap for you. Then, and here’s the key to how to buy a cheap house, you take all the algorithms and line them up in a line item for realtor.com, redfin.com-
Jill DeWit: Zillow.
Steven Butala: Zillow, Trulia, DataTree-
Jill DeWit: Redfin.
Steven Butala: RealtyTrac. There’s [crosstalk 00:10:25] five or six of them, and you literally input. There’s lots of different ways to do it. Input those fields and price with what you think that house is worth right now or what all these incredibly [crosstalk 00:10:37]-
Jill DeWit: Average-
Steven Butala: And complicated… Yeah, exactly. If Zillow and Redfin and Trulia, all those, the rest of them are coming in and you average all six of them out and it comes up with a number like $278,000, that’s what the market really believes that that property is worth right now. You have to decide what type of profit margin you’d like to price and send them an offer below that number. Arbitrarily, let’s just use $30,000 or $40,000. They’re going to get an offer for 30, 40, or $50,000 below what all of those algorithms believe that property is worth, which by the way, that’s why we take… it’s taking a big example. If you’re a statistical person, it’s a huge chance that this is going to be very, very correct,
Jill DeWit: It’s a couple thousand. Let me just make sure. It’s not 100 or 200, it’s thousands.
Steven Butala: Thousands.
Jill DeWit: Don’t worry, we’re not asking you to sit and go, “Are you proposing that I take 5,000 ownership scenarios and input six lines and look them all up?” Nope, we have a solution with that, and we’ll talk about that [crosstalk 00:11:47]-
Steven Butala: It’s very correct.
Jill DeWit: At another time.
Steven Butala: We make it… This whole thing [crosstalk 00:11:47]-
Jill DeWit: We handle that for you.
Steven Butala: Done correctly, this whole thing may be able to take you an hour if you’re really going slow. Now, you’ve got it correctly priced. You’ve got, like Jill said, there’s 5,000 logical candidates in there, and we own company called Offers 2 Owners. You get all that to them-
Jill DeWit: They do the data and put [crosstalk 00:12:07]-
Steven Butala: And they get it in the mail for you. You will buy a house, and we’ve proven it over and over and over and over again.
Jill DeWit: Let me back up on the one piece that that was just saying you know the price. What Steven was saying is, you have all this information and what you’re doing is you’re actually using that. You took their $270,000. You was like, “Hey, I’m happy to make $30,000 and get out because I want to pass it on to the next guy”, which is what you’re trying to do here. That owner is going to get a real strategic offer from you for $248,962.21 and you’re ready to close in 10 days. You’re all cash. We’ll go into that more later and that’s how it goes. That’s what you’re sending them, not a postcard, not a “Hey, whatever”, even though [crosstalk 00:12:56]-
Steven Butala: You’re sending them an offer.
Jill DeWit: You’re sending them an offer, so when they’re opening up your… it’s an offer in the mail and they know what you’re willing to spend. The key for me is, they know where you stand and you know when they reach out to you that they’re not just going to throw you a random number. “Yeah, I want to sell. I think it’s worth half a million.” We’d never want to go there. That’s what this is weeding out and that’s why this is so important.
Steven Butala: It’s really efficient. Our ways are very [crosstalk 00:13:25]-
Jill DeWit: Very efficient.
Steven Butala: Very efficient.
Jill DeWit: You got to have [crosstalk 00:13:27]-
Steven Butala: What you never want to do [crosstalk 00:13:27]-
Jill DeWit: Data cheap, and you got to have all the… you got to get all the information cheap. You have to have cheap mail, and we have all of that figured out, so that’s why this works.
Steven Butala: In my opinion, what you never want to do is send a letter of interest, which is really why I think there’s a lot of confusion out there about direct mail, why some people have not experienced the success that we have using direct mail because I think they send letters of interest. “Hey, I’m really interested in buying your property located at 123 Main Street. Why don’t you give me [crosstalk 00:13:56] a call?”
Jill DeWit: Some just say, “Hey, dear customer, I’m interested [crosstalk 00:13:58] in buying-
Steven Butala: Dear resident.
Jill DeWit: Or homeowner [crosstalk 00:14:02]-
Steven Butala: Postcards or all that stuff, so if you’ve had a bad experience with direct mail or you’ve heard somebody talk about it that way, these are direct offer campaigns. It’s different than direct mail.
Jill DeWit: Exactly.
Steven Butala: From there, here’s a great new suit. You bought a [inaudible 00:14:18], it’s real inexpensive. The three best zip codes in Mesa. Everyone who owns a house in an LLC or owns multiple properties or is got a dumpster in front of their house, which we’ll talk about in a couple of episodes, those are the people that are going to buy the house. There’s not this mystery of let’s see what’s going to happen.
Jill DeWit: I love it. I think we explain how to buy it cheap. Coming up in a few shows, we’ll talk about what to do with it, how to close on the deal, where your buyers are, all of that.
Steven Butala: Well said.
Jill DeWit: Thank you.
Steven Butala: Join us next time for the episode called Why Steve Butala and Jill DeWit Started House Academy. That’s us.
Jill DeWit: We answer your questions posted on our online community at houseacademy.com. It’s free. Go get an account.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Sorry, I [inaudible 00:15:13]. You were going to keep on going and I’m like, “Hey, this is only episode zero. We have a lot to say. He’s going to say, ‘Episode zero is going to be four hours long’, and we’re just going to talk about everything”, but no, we won’t. I know you’re excited and I’m glad.
Steven Butala: Exactly.
Jill DeWit: By the way, I’m excited. Wherever you’re watching, wherever you’re listening, please subscribe and rate us there. We are Steve and Jill [crosstalk 00:15:37]-
Steven Butala: We are Steve and Jill. Information-
Jill DeWit: And inspiration-
Steven Butala: To buy undervalued property.
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