Wholesaling a House with Confidence (HA 65)

House Academy Member Webinar

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, podcasting from sunny Southern California.
Steven Butala: Today, Jill and I talk about wholesaling a house with confidence. Where did this come up, Jill?
Jill DeWit: Somebody in our group was asking about this like, “Gosh, I wish I had the confidence that you guys do. You’ve done all these…” I’m like, “You know, you could start out with more confidence with a few little tips,” that I’m going to share in a few minutes.
Steven Butala: I had a conversation a really long time ago. This is an appropriate setup for this.
Jill DeWit: Okay.
Steven Butala: It was at a house party, and this is a long, long time ago, when I was in real estate and we were just, me and my partner, were just beginning to successfully buy and sell property. It was to the point where I could buy a house, and it was successful enough, and it was good.
Steven Butala: This person was asking me, she kept saying, “I mean, it’s great that you guys can buy these houses and buy this land, but how do you know?” I’m like, “What do you mean, how do you know?” So, I did all the math, that the properties on each side of it sold for $150,000. I’m buying it for $85,000, we cleaned it up a little bit. Back in those days, it was all real vacant land, but it applies to everything, and this is the House Academy Show.
Steven Butala: She kept saying that, “How do you know that it’s okay to buy this?” “Well, I think I just told you. There are comps over here, there’s data over here, this is how you do it, and then it’s just become second nature where I know it’s a good deal.” So, I gather enough data so that I know. Now, it’s not even a matter of confidence. It’s like, “I have to do this deal.” “I know all that, but how do you know?”
Steven Butala: So, what she was really asking me is I need to have a feeling, and I think, I hope Jill’s going to cover that with confidence because it didn’t end. There wasn’t anything that I could say that would satisfy and give her the answer she wanted.
Jill DeWit: That’s kind of funny. Okay, I love it.
Steven Butala: She’s a nurse now, and I know, she’s exactly-
Jill DeWit: Maybe that’s better for a lot of people for a lot of reasons.
Steven Butala: I just remember that forever, “How do you know? How do you know it’s okay to do this?”
Jill DeWit: Oh, my gosh.
Steven Butala: My whole family was like that.
Jill DeWit: Okay.
Steven Butala: They just never got to the point where they were like, “This is a great deal, I’m doing it.”
Jill DeWit: That’s hilarious.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the houseacademy.com online community. It’s free.
Jill DeWit: Mabel asks, “How do you know when you’re buying a house for the right price so you can make money on it when you sell?”
Steven Butala: So, same question, same basic question like, “How do you know?” That’s interesting.
Jill DeWit: You buy it for a lot less.
Steven Butala: That’s the end of the show.
Jill DeWit: Ding ding. Are all of the other three bedroom, two baths in the neighborhood going for $200,000? Well, you buy it for $150,000. Next.
Steven Butala: I mean, I don’t know what else. There’s bunch of stuff we can say about confidence and childhood experiences, I guess. Is this going to go deep into psychology?
Jill DeWit: Oh, no.
Steven Butala: But, it’s just a dataset for me.
Jill DeWit: Let me back up.
Steven Butala: Let’s just make it the show.
Jill DeWit: Okay, well this is different. Okay, go ahead and start the show because then I have some different things. Well, I have different things to say about the pricing. I mean, so you think Mabel’s question is not about is… I think it’s about numbers, right? We’re agreeing with Mabel’s question’s about numbers, not a feeling. It’s really easy to run the numbers and see what things are worth and what they’re selling for. It’s too easy to go, especially with houses, this is what I love about House Academy.
Jill DeWit: Oh, my gosh. I can easily, me not even being the data pro that you are, go into a dark room, in a couple of hours, come out with a really pretty spreadsheet that says, “You know what? In this zip code or these zip codes, I know how many days on market there have been and the square footage and price for per square foot, and what things are selling for, how fast it’s going to go.” So, I know that. I know those numbers so I can accurately know going into this transaction that Mable’s talking about what I should offer, what I should buy it for.
Steven Butala: A lot of people come to us from, obviously, from lots of different places in life and I think what these questions are, this person, the situation I just described, and I think Mabel’s question here is I’m staring at all these properties for sale in the MLS. How do you know that this property that’s priced at this price here, I’m going to make money on it?
Steven Butala: The answer is: you’re not. You will never, ever, ever make money buying a property out of the MLS with very, very few exceptions. I mean, very few. Find a smoking deal like a diamond in the rough that’s listed on the MLS, go through the motions of buying it, and get it all done if not, for any other reason than this, the amount of fees that are associated with a property that is listed in the MLS, that if a property is listed for a hundred grand in the MLS, that’s not what it’s going to say on the HUD-1 closing statement. It’s going to say a lot more.
Steven Butala: When you’re buying it our way and when you’re telling the seller what you’re going to pay versus accepting whatever’s listed in there, you’re just so further ahead right from the very, very beginning. So, I think that’s what this whole notion of, “How do you know?” What Mabel’s question is, “How do I know that this is listed for $180,000?” Then, “I don’t know if that’s a good deal.” We’ll talk about that here in a second. How do you get that confidence? If you start at wholesaling a house for confidence, this is why you’re listening.
Jill DeWit: So I took it like this. I was thinking about just in everything in the whole transaction, “Okay, I’ve got House Academy, I still have the program, I know the data. I’m still not feeling confident. What do I do?” So then, my first thing is you need to know your stuff even more. Let me back up with my example here. Within the last year, I had to get a California driver’s license. I’ve been carrying around my Arizona driver’s license for quite some time.
Jill DeWit: Now, I obviously have been driving for several years. I’m not new to driving, not new to the rules of the road, so I could go in cold, right? And fingers cross, take the stupid driver’s test and I may or may not pass. This is not how I roll, by the way. If I’m going to do it, I’m going to do it right. I don’t want to go back and drive to the DMV three times. I’m doing it, I’m all in. What are you laughing at?
Steven Butala: I’m not.
Jill DeWit: Okay.
Steven Butala: I was there with you and the DMV is cracked up.
Jill DeWit: Oh, it is. That’s a whole separate thing.
Steven Butala: Yeah.
Jill DeWit: But, so here’s the reality. So I went in with confidence. What did I do? Yes, I got the stupid book and I read the stupid book. I even had my kid quiz me on the stupid book. I’ve forgotten most of it now, I’ll just be honest, but when I need to take the test, it was in my head, I could pull it quickly, I could tell you every little school, church, fire department, what are the speed limits? What’s the stopping distance? What’s this? What’s that? I mean, what it at all the different signs?
Jill DeWit: All the little nuances to California, too, that they throw in there, I had them down. You know what? I went in with confidence and what’d I do? I nailed the test because I was prepared. I’ve done this, this has been my whole life.
Steven Butala: Yeah, this is how you are.
Jill DeWit: I am not photo, whatever that’s called. I don’t have a photographic memory. I have to study. Depending on what it is, it might be flashcards. So even now with me, I think part of my memory process, I’m pretty sure it’s why I do this way, now I’m just second nature. I write things down and then I transpose them into an email or something like that because I think it just makes it clear for me, I remember it.
Steven Butala: Well, that’s what works for you, yeah.
Jill DeWit: Exactly.
Steven Butala: That’s all that matters, if it works for you.
Jill DeWit: Thank you. So man, if you’re doing a house deal, whether you’re buying it or selling it, know your stuff. On the buy side, that means knowing the area, feel good about your price. You pull the comps. You know three houses in the neighborhood just sold, so you know you have a good price. You’re going to come at this with confidence and everything, and it just makes everything easier.
Jill DeWit: The second thing is if you don’t know something, or then let me go back to the sell side. On the sell side, know your property, know everything about it that you possibly can, and I don’t need you to be a general contractor, but I want you to have a general contractor that you can call and ask questions. So if you don’t know it, you can get back to people on it and go, You know what? That’s a really good question. I know my guy that did the inspection has that. Here’s the inspection,” share that too.
Jill DeWit: So if you don’t know it, don’t shoot from the hip. Say you’ll get back to them and find out. All of this makes you look good too, by the way, and that builds confidence. The third thing is you’re still struggling. Do a deal with someone else who is a little bit ahead of you, or a lot ahead of you, I kind of like someone’s who’s a little bit ahead of you, and you’ll learn from them and that will give you even more confidence.
Jill DeWit: I know that there’s times, I’m trying to think of a good example, but we’ve all been there. Maybe you started a new job and you’re watching someone run, I don’t know, making pizzas, let’s just give an example. I don’t know, because one of my first jobs was Straw Hat Pizza, and I’m sure going into it I’m like, “This might be tricky. I don’t know what to do,” and you get into it and you’re like, “That’s all there is? A scoop of that, two cups of that, and that’s whatever. I know how to make a pizza, duh.”
Jill DeWit: When someone shows you, it’s not that complicated sometimes. So really working with somebody, it’ll take some of the questions and concerns and what you think is a big deal and make it go away.
Steven Butala: Let me describe a scenario to you, and you’re going to be the buyer, okay?
Jill DeWit: Okay.
Steven Butala: We send a bunch of mail out and all the houses in the environment are $150,000 both from comparison value of sales. They’re all listed for like 150,000, 160,000 bucks. I go and send out, or Jill does, an offer campaign for $89,000 across the board, all these houses. Then a person calls back and says, “You know what? I need to move to Boston anyway. My house is a mess. Call it $90,000, you got a deal.” What’s the next step? What did you say?
Jill DeWit: I need to send someone out. We’re going to take some pictures on it.
Steven Butala: Okay. So all these questions that Jill’s about to do, all of these answers that she’s about to tell us hopefully, and not a tremendous amount of detail because this is a radio show, are how she gains confidence that this deal is okay. Because as it stands, it passed my tests. I’m the person who does all the data. I pulled in a property that I’m pretty confident. I’ve got my confidence. I’m confident this property’s worth 150 grand, and I’m confident the offer that I made it for $90,000 that just got signed, I kind of did my job. Now, Jill, how do you get your confidence? You pull in what?
Jill DeWit: I want to get eyes on the property and I want an inspection, and I want to know where we stand on the taxes and I want to double check that there are no outstanding liens that anybody is trying brush under the rug, or they don’t know about it.
Steven Butala: So financial confidence, she wants to make sure there’s no liens, which is what the show was about yesterday. Doing her own little preliminary title report to see if there’s a mortgage or something like that, it’s free if you’re with their group. There’s resources that we have. That’s financial confidence. Economic confidence, I already accomplished.
Steven Butala: The third one is physical plan confidence. Are there cracks in the foundation? She’s going to send a guy in there because neither one of us are qualified to see if this physical plan itself is okay. If it’s fallen down, are there holes in the roof? It looks good. The pictures are great on Google Earth. I don’t know, but I don’t have any confidence about the physical plan. So, we find out there’s no liens, and the inspection comes back great with a few little issues as there are always. What else do you need to have some confidence?
Jill DeWit: Nothing. I’ve already had a signed purchase agreement with this guy. I’m opening escrow.
Steven Butala: Okay. So, that’s my whole point. That was perfect, by the way. We’ve done 16,000 deals. Our confidence level, at that point is, “Okay, we’re going to do this deal because we’ve checked it off our list.” There’s probably, for me, there’s a couple more little things that I need to know. I would go back and check census tract information and I would check to see if I actually missed something-
Jill DeWit: That’s your financial piece, so that’s on your side of the sheet.
Steven Butala: Yes. Okay, okay. So, the regular person, maybe this nurse that I mentioned earlier, it’s not going to be enough. She doesn’t have the confidence. It’s not a real estate thing, it’s everything. It’s the DMV thing. She’s just not a confident person. So when people say, “I don’t have a confidence to do a real estate deal,” what they’re really saying is, “When something goes sideways,” because it always does in a real estate deal, “I don’t have the self-confidence to call in some people that know more about it than I do.”
Steven Butala: Maybe I have some extra dough set aside because sometimes this $90,000 deal that I’m going to think is worth $150,000, man, it turns out everybody missed a bunch of stuff, I missed some stuff, and it’s going to cost me probably 130,000 bucks to get the thing just where I can sell it in an as-is condition because I made a mistake.
Jill DeWit: You mean up to $130,000 to try to sell the $150,000?
Steven Butala: Yes.
Jill DeWit: Okay.
Steven Butala: So, I made a bunch of mistakes. I missed a bunch of stuff. I don’t know what to do. Do you cower? Do you cower and say, “Oh, well I suck. I can’t do real estate. I can’t do anything. My mom was right. This is a mess. Screw it.” That’s the person
Jill DeWit: No, reason. I’m alone, no one will have me, my dog hates me.
Steven Butala: No, what you do is you stand up straight, you say, “Damn it, I miss some on this stuff.”
Jill DeWit: So what?
Steven Butala: I call in a guy, I’m going to get on the phone, it’s probably going to take all day. I’m going to find a foundation guy. I’m going to do what I need to do to get the roof fixed, the leak thing, own it.
Jill DeWit: Yeah.
Steven Butala: I might have to eat it, I might lose money on this deal. I don’t look in the mirror and say, “Boy, I suck at real estate.” No, you just missed a few things and that’s it. So, that’s what this show to me is really about. Everybody in our advanced group has, they’re so overconfident, it’s silly. They’re not afraid of anything-
Jill DeWit: No. They’re with scissors. They’re running with scissors in both hands and their teeth-
Steven Butala: Yep, with a stick of dynamite-
Jill DeWit: In their back pocket lit.
Steven Butala: … in whatever happens in any real estate deal and in their career. How they’re doing any of this stuff, they’ll deal with it.
Jill DeWit: Yeah.
Steven Butala: They may have the contingency plan for it, they may not, but they have a lot of experience in dealing with a lot of stuff, before they got to us and before they got to their real estate career, solving problems. Thank you.
Jill DeWit: Well, this is part of your financial thing. You build in these cushions. You build on cushions, and that helps with confidence. For example, we just sold a property for the title company who’s on the buy side, not the sell side, missed $3,000. Like, doggone it, good thing we had that built in.
Steven Butala: Yeah.
Jill DeWit: So, it’s not like I’m hurting. I just made $3,000 less because I missed it. But, there you go.
Steven Butala: This is not for a lot of people. There are people that maybe they should go into healthcare or whatever, and maybe they need to just have a job, which is fine. There’s nothing wrong with any of this stuff.
Jill DeWit: Yeah.
Steven Butala: There’s just not their risk threshold. If they have to make any decisions or rely on themselves or solve a problem that’s so far beyond their risk threshold and their confidence level that they would just rather be a nurse, and I think that’s fine. That’s totally fine. There are no nurses in our group. There are a bajillion salespeople, there are aerospace engineers. They’re retired accountants, they’re all financial risk-takers.
Jill DeWit: We have some medical, but they’re way up there.
Steven Butala: Yeah, but I don’t know of a single RN. Yes.
Jill DeWit: Yeah. Good point. But wait, let’s not pick on RNs.
Steven Butala: Okay, sorry.
Jill DeWit: We can’t make a generalization, I know.
Steven Butala: By the way, I can’t think of a more rewarding profession.
Jill DeWit: I know.
Steven Butala: It’s like teachers. I can’t think of a more noble profession
Jill DeWit: Because, anybody can do this. I guess the point of this is-
Steven Butala: I disagree.
Jill DeWit: Well, hold please. You can overcome a lot of things like that, but if you can’t overcome confidence, you can’t solve problems. I mean, that’s a whole separate thing.
Steven Butala: That’s my point.
Jill DeWit: Okay, good.
Steven Butala: We can’t change confidence. Confidence is something that that goes on outside of this.
Jill DeWit: But you can do things to build your confidence, like I suggested. Does that make sense? Come on, I know we’re disagreeing. I’m sorry. I’m going to disagree with you.
Steven Butala: I think you should.
Jill DeWit: I flat out disagree. I bet, Steven, if you had to take a test tomorrow and it was something you never worked, you didn’t study for the test, you’re not going to be confident. You studied for the test, you know all the answers. You’re confident. I think that makes sense.
Steven Butala: All right. I’m sorry, we’re going over on time, but I think this is important because I do want to talk about this.
Jill DeWit: I don’t. Yes, it works.
Steven Butala: If I wanted, for whatever reason, to learn about welding, I’m just pulling a thing, pulling a concept out, it’s just DMV story. I’m going to go about it like this. I’m going to take a couple of classes, probably talk to a guy who has been a welder his whole life, gather all the information, and then I’m going to go into trying to weld progressively to see how it’s going to work, and and stuff’s going to go sideways. It always does.
Steven Butala: My first welding project’s probably going to be a disaster. But if I’ve taken the correct education in the beginning, surrounded myself with some people who actually know how to do it, they may or may not able to save me my first two months in welding or whatever it is, but at some point, and I’ll know what to do if I screw it all up. We’ll go trash it, I lost a bunch of money. That’s not going to affect my confidence at all. If it’s important to me, I will become a great welder, and that’s just how it is. So, that’s not real estate specific or any of it, that’s just how we approach stuff in life.
Jill DeWit: Exactly. You might decide too 90 days in that you hate it.
Steven Butala: Yeah.
Jill DeWit: Hate it. “Oh my, it’s too hot. I don’t look good in this. I don’t look good with a thing on,” or whatever it is. “It pulls my hair.”
Steven Butala: Nope. Actually, I’m confident that’s not going to be one of the things that I say, “I don’t look good in this outfit.”
Jill DeWit: Whatever it is, these people are weird, something like that, “This is not my community. I don’t want to be like these guys.” Something like that. You’re going to get in and figure it out, and then that’s not confidence though. Then hopefully, you have the confidence to leave, that’s confidence. Know what’s right for you. Can we end it on that?
Steven Butala: Yep.
Jill DeWit: Okay, good. Happy you could join us today. Every Tuesday and Thursday, you can find us right here on the House Academy Show. Monday, Wednesdays, and Fridays, we are on the Land Academy Show.
Steven Butala: Tomorrow, the episode on the Landing Academy Show is called The State of Land Academy After Five Years. Like, where are we after five years? Who really is part of the group after five years? How many mistakes did you make, or what’s great on the other end? What’s the result of all this?
Jill DeWit: You are not alone in your real estate ambition.
Steven Butala: Oh, my gosh.
Jill DeWit: Now, go. So, where are we now?
Steven Butala: Oh yeah, I forgot. Oh, thanks.
Jill DeWit: Yeah, that’s okay. I am here to help you. No worries.
Steven Butala: It remains commercial-free.
Jill DeWit: I will do that right now. The House Academy Show remains commercial-free for you, our loyal listener. So wherever you’re watching, wherever you’re listening, please subscribe and rate us there. We are Steven and Jill.
Steven Butala: We are Steven and Jill. Information…
Jill DeWit: And inspiration…
Steven Butala: … to buy undervalued property. I have to say, I think it’s fun for me when we disagree a little bit.
Jill DeWit: Oh, okay. That’s good.

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