Finance Friday with Steven, Jill & Justin (LA 943)

Finance Friday with Steven, Jill & Justin (LA 943)

Transcript:

Steven Butala:                   Steve and Jill here.

Jill DeWit:                            Hello.

Steven Butala:                   With guest, Justin Sliva. Welcome to The Land Academy Show, entertaining land 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 with guest, Justin Sliva, about the transactions that we’re funding and completing this week.

Jill DeWit:                            Exactly.

Steven Butala:                   Welcome, Justin.

Justin Sliva:                         Hey, how’s it going?

Steven Butala:                   This is like show 13 or 12, or 13 so, so we’ve got to [crosstalk 00:00:24]-

Justin Sliva:                         Yeah.

Steven Butala:                   Guests. It’s a little bit more permanent than that.

Justin Sliva:                         You did talk to your script writer.

Jill DeWit:                            Exactly.

Steven Butala:                   Yep, that’s … yeah, sure. Before we get into it, let’s take a question posted by one of our members on the LandInvestors.com online community. It’s free. Jermaine … oh, sorry Jill. Go ahead. I’m slowly taking over.

Jill DeWit:                            Are you okay?

Steven Butala:                   Yeah.

Jill DeWit:                            How much coffee did you have today?

Steven Butala:                   I only had like two cups. Maybe that’s the problem.

Jill DeWit:                            Oh, there we go. Okay, I’ve got three things: white [inaudible 00:00:55] … wait, MTV, coffee, we’ll get into all that.

Steven Butala:                   Yeah.

Justin Sliva:                         This is going to be therapy session today.

Jill DeWit:                            It is. Oh, [inaudible 00:01:03].

Steven Butala:                   Let’s talk about the 80s and 90s, I can tell.

Jill DeWit:                            Okay. Jermaine asks, “Has anyone sold their land business? If so, please describe the experience.” I am curious.

Steven Butala:                   We alluded to this … we danced around this yesterday, but I put this in here intentionally because I’d like to hear what Justin has to say about that. Because I know you’re all exit strategy driven like we are.

Justin Sliva:                         Yeah, I mean you put together the business and the LLC and you could sell the LLC as an entity, and everything that’s attached to it, all the assets, with it. So it’s pretty straightforward, if everything’s all together which one of the problems is if you have stuff in your personal name, stuff in your not LLC name, or other LLCs and you don’t have it tied together in one family. I mean, I have never done it, so I just assumed that’s how it would be done though.

Steven Butala:                   I mean, I’ve bought and sold a lot of companies-

Justin Sliva:                         Okay.

Steven Butala:                   And I really think what he’s asking here, and what I’m interesting in getting to the bottom of, is is this attractive to a potential buyer where you’ve got a bunch of 40 acre properties somewhere, you’ve got a website up, you’ve got inbound traffic, you sold some property, you’re buying some property, you’re all in the process. You obviously figured out whatever CRM you’re using, or whatever version of all that is all put together. Is it sellable or marketable? And is it too tied to our faces?

Jill DeWit:                            That’s what … I don’t think it’s-

Steven Butala:                   Is it too much tied to, “Oh yeah, only dealing with people who can run their businesses are Steve and Jill.”

Jill DeWit:                            Well that would be my fear. I would think that it would be a problem.

Justin Sliva:                         Yeah.

Jill DeWit:                            How can you say … because there’s parts of this business that’s not a normal franchise kind of set up, that you can’t just throw them the keys and say, “You got this,” you know, kind of thing. It’s the whole picking a county, and pricing the mailers, and that the talent behind that takes a long time to develop. So I would say the only way it could work is somebody has to A, stay on for a while and run that part of the business and I guess until they’re comfortable and they can train somebody else to do it as well.

Steven Butala:                   I don’t know, what do you think Justin?

Justin Sliva:                         I think the only way that you’d be able to sell it is … what you’re saying is exactly right, the knowledge base which we’re taught, but if you created a business ahead. Say I had a client this week that had $80,000.00 a month, or $90,000.00 a month in cash flow properties coming in, so and he says he has a million dollars in receivables. If somebody made an offer on that, they may say, “Hey, I’ll give you half a million dollars for your million dollars in receivables,” so you’re buying that part of the business, but it’s by the knowledge that somebody’s generated with our business as land investors, we can’t necessarily do that. So I think it’s kind of splitting hairs there, but yeah that’s kind of my thoughts on it.

Steven Butala:                   Jill and I talked about this a little bit yesterday, but in every business there’s a cash flow component like you just mentioned. Let’s call it “The income statement”, and then there’s the balance sheet part where you’re just building this entity and eventually can sell it. Think of a manufacturing facility where there’s nobody, except for the CEO who’s kind of just sitting in the back watching everybody do stuff and solving problems, nobody’s face is attached to it.

Jill DeWit:                            Right.

Steven Butala:                   So that’s what this business is missing, I think. Hopefully, the fact that it’s so profitable, like we’re not operating on 20% margins here. We’re operating on 198% margins. That’ll make up for the fact that that balance sheet component is slightly non-present potentially.

Justin Sliva:                         Yeah, no you’re exactly right. You’re exactly right.

Jill DeWit:                            I’m sorry, what? Just kidding.

Steven Butala:                   She doesn’t feel it. You know what?

Jill DeWit:                            And you lost me.

Steven Butala:                   You know what else we’re talking about? We’re getting all these comments. For some reason, recently in the last couple of weeks we have gotten comments all over the Internet about how Jill and I are just screwing off too much. [crosstalk 00:04:40] you guys, [crosstalk 00:04:43] yourself.

Jill DeWit:                            You should show those to me. I never [crosstalk 00:04:44]-

Steven Butala:                   “Why do you think you could sit there and have fun and laugh? You’re the only two people who really understand the jokes.” They’re all inside jokes.

Justin Sliva:                         Yeah.

Steven Butala:                   “Will you just teach us how to buy and sell land, please?”

Justin Sliva:                         Wow.

Steven Butala:                   Yeah.

Justin Sliva:                         Wow, I was thinking about that last night. A buddy of mine’s took a vacation during spring break, and he’s like, “Oh, I’m just living that Land Investor lifestyle, you know?” And I’m like … It was 9:30 last night, and I was going through deals. I’m thinking, “Land Investor lifestyle?” You know, a random time I’m doing it, but we’re still going through deals. You have to generate deals to be able to enjoy those quiet times.

Jill DeWit:                            Exactly.

Justin Sliva:                         Yeah.

Steven Butala:                   Today’s topic, Finance Friday, with me, Steven, Jill and Justin Sliva. This is the meat of the show. So both of you, and not necessarily in any order, [crosstalk 00:05:26]-

Jill DeWit:                            Well I would like to know, Justin, because since the beginning of the year and fast forward to now, so we’re two and a half almost three months in here, both of us doing deal funding in some way or another, I’ve sensed, and I felt it too, the workload grow and I’m really curious how you’re doing. Are you getting any sleep? Have you got a good system going now? How’s it working out for you?

Justin Sliva:                         Yeah, my second employee just came on.

Steven Butala:                   Wow.

Jill DeWit:                            Wow.

Justin Sliva:                         Yeah, and he’s actually based in LA so I’ll probably come out and see y’all here in the next month or two, come for a couple of days, so I’ll swing by and see y’all. But he’s actually based out there. He’s an intern with the Air Force, and so we brought him on full-time as he transitioned back into civilian life.

Jill DeWit:                            Do we know him?

Justin Sliva:                         Yeah, he is a Land Academy member.

Jill DeWit:                            I’m saying-

Justin Sliva:                         Yeah.

Jill DeWit:                            Was he at one of the events, and I think I know who he is?

Justin Sliva:                         He was at our event. I don’t know … I know you’re thinking of his partner.

Jill DeWit:                            Okay, got it.

Justin Sliva:                         You’re thinking of his partner. Yep, you’re thinking of his partner.

Jill DeWit:                            Oh, okay. Well I know the group you’re talking about.

Justin Sliva:                         Yeah, so-

Jill DeWit:                            Oh, good.

Justin Sliva:                         For me, I sit here and I’m in kind of awe because I have Beth who’s been with us since December, and she’s been knocking it out of the park. She’s MBA. He’s got a masters from MIT, and I’m sitting here like, “I’m just a land guy just trying to figure this out,” so it’s great to see the talent pool that’s coming in. The load is starting to go to them on some of the sexes of the business, so it’s nice seeing them take ownership and do some of that, and give them a couple of tasks and they’re handling it. It’s automated, and it just comes back on your desk and it’s done. You’re like, “Wow, that was nice.”

Justin Sliva:                         So yeah, the deal flow had kind of slowed down this week, but we had some really profitable properties that we put contracts on. Nice deals. We had six that we okayed this week, five of them east of the Mississippi, one west of the Mississippi. The biggest margin was a $13,000.00 contract on a $90,000.00 property. Then a second was a $50,000.00 contract on a $180,000.00 property.

Steven Butala:                   Great.

Jill DeWit:                            Nice.

Justin Sliva:                         Yeah, good numbers. Then your regular small ones, the 12 for 35, your 17 for 50, five for 16, so some smaller ones. Then an 11 for 30. So just our normal small gamut ones, but it’s been crazy. I’ve just been busy.

Jill DeWit:                            Right.

Steven Butala:                   How much equity do you think you and your managers combined will generate this year? A ballpark.

Justin Sliva:                         If we can keep the money turning, we’ve seen some slow down on sales just because of just escrow, and just not getting the money back out. Man, I think that we’ll probably see somewhere in the six to eight million dollars in equity we’ll generate in off-market deals and what we paid for it, for what it’s worth, pretty easily. I say that conservatively. Right now, we’re sitting on about three million dollars in value with a couple hundred thousand out there, $500,000.00 working right now.

Steven Butala:                   We crossed over the million dollar mark this week.

Justin Sliva:                         Wow.

Steven Butala:                   That’s kind of what my goal has been without a tremendous amount of effort, and always helping our members, trying to generate I don’t know $1.2 million for ourselves in equity manually.

Jill DeWit:                            Right.

Justin Sliva:                         Yep, and I tell people it’s pretty simple for us. I wanted to do a $10,000.00 a deal profit, and then two a week. That was what our goal was when we started [Plum 00:08:46], and we’re just smoking that.

Jill DeWit:                            Yeah, no funny, I know.

Justin Sliva:                         Yeah, I’m like, “Oh man, we need to slow down a little bit.”

Jill DeWit:                            Exactly.

Justin Sliva:                         Take a break. It’s not all sunshine though. One of the house deals we got … We get hail in Texas, right? So we had a hailstorm come through Texas, and I have a house that’s closing within a week. A hailstorm comes through. They send a roofer to check it out. It needs a new roof now.

Steven Butala:                   Oh wow.

Jill DeWit:                            Oh.

Justin Sliva:                         You go, normally not a big deal right? You go get insurance, call your insurance agent and they tell you that they can’t find the policy number because their agent that they let go didn’t hit submit on your binder when you okayed everything. So, for those listeners who think it’s all sunshine and rainbows in the investment world, no we have issues. We smile about it. We laugh about it, because we know we’re just going to get blasted anyways. We’re going to take care of it and keep moving.

Steven Butala:                   You know, the hailstorm hit on the land you guys own too, and it didn’t matter.

Justin Sliva:                         Yeah, that’s what Adam told me on our podcast this week.

Jill DeWit:                            Exactly.

Justin Sliva:                         Yeah, because you know what doesn’t get a roofer up? Land.

Jill DeWit:                            Exactly. Yeah.

Justin Sliva:                         Yeah, the land side of our business, we nailed seven counties this week so a lot of fun there. So we’ll see that just start booming in a couple of weeks.

Jill DeWit:                            That’s good.

Steven Butala:                   Did you have any fantastic deals come in this week?

Jill DeWit:                            I had a bunch of small ones, and I’m happy with those. You know, I have a lot of those. I’m with you, it’s buy for 15 sell for 50, in other words 70/80. I like those. Those are easy and those are fine. I had one come in that I just redlined because a guy was a little too eager. First of all, it was one of those, “We have to hurry,” deals because there’s a tax situation going on. Well, that already bothers me. The hurry price is $650,000.00. It’s a whole section. I’m like, “All right,” and he think it’s worth $1.2. Well, I went looking for the comps, and I found double that. I found a comp for 1280 acres at one point, like four or $1.6. And I’m like, “Your numbers don’t support what you think we could do.”

Jill DeWit:                            It does two things. When you tell me to hurry, I’m not interested. And then I can find comps in my two minute quick little review, so now I went back and said, “Unless you can come up with some magic, we’re probably not going to do this.”

Steven Butala:                   Yeah.

Justin Sliva:                         Yeah. We had a deal like that come up, and it was a, “Hurry up. We have some health issues we need to cash,” and the deal was bought to me to fund. It’s in an area that I like to buy, and I’m pretty familiar with the market. The price just looked high. It looked out of the box. Then when I looked at it, people bought it for $8,000.00 in 2010. They’re wanting $32,000.00,” which the manager offered. I was like, “No,” so this is a $10,000.00 property. It’s going to sell for $32,000.00, and you feel bad for the health issues, but this is the best I could do in this situation.

Jill DeWit:                            Exactly. Exactly right.

Steven Butala:                   You know, our whole motto was based on … We self-funded a certain amount of money, and literally put it into a new LLC in a bank account, and we’re trying to-

Jill DeWit:                            We’re keeping it separate. It’s cool.

Steven Butala:                   Generate more than a million dollars a year. [crosstalk 00:12:00]

Justin Sliva:                         That’s what we’re doing. I mean, it’s the exact same thing we do.

Steven Butala:                   [crosstalk 00:12:02] on it. We’re not going nuts about it, you know?

Jill DeWit:                            Exactly.

Justin Sliva:                         Yep.

Jill DeWit:                            I really am, that’s true. My time is valuable. I want to pick the solid deals, and the nice thing is … well here’s a beautiful thing, is if it doesn’t work for me, somebody will fund it, like you Justin-

Justin Sliva:                         Yeah.

Jill DeWit:                            Or Land Tank. I’m telling everybody, “Hey-” I’m helping them out right away telling them good or bad, and if it’s a good one and I don’t want it, get it on Land Tank, and heck I’ll put it there for you. Like, [crosstalk 00:12:32] do that. Because it will get funded, and that’s totally cool. I’ve got something else even more exciting. Should I tell Justin? Do you want to tell here what we’re doing with the house thing?

Steven Butala:                   Sure. Sure.

Jill DeWit:                            Talk about cool. So I am flying with a cameraman-

Justin Sliva:                         Uh-oh.

Jill DeWit:                            Right? On Tuesday, to Scottsdale for the day.

Justin Sliva:                         Nice.

Jill DeWit:                            Yep, so when this airs, it will have been last Tuesday right? Anyway, but-

Steven Butala:                   Yes, you already were there.

Jill DeWit:                            I was already there. I’m already back.

Justin Sliva:                         I’m already back. So let me tell you about my trip.

Jill DeWit:                            Yes, it was great. The weather was gorgeous. So we’re doing House Academy, right? It just ties into what you’re talking about with deals, and how great land is, and the thing about house deals. So I’m going there because a thing that we did, one of our many mailers that we bought and sold a property, we bought it in March 2018 for I think it was 302-

Steven Butala:                   Yeah.

Jill DeWit:                            We sold it … Actually, it was March 9th because April 9th escrow opened, the escrow closed. 30 days in there. So we sold it in like-

Steven Butala:                   Cash in, cash out.

Jill DeWit:                            Five days, but two and a half weeks to get escrow closed. Anyway, for 330. So, it was $28,000.00. We did nothing. Didn’t even sweep the floor. I have all the photos. I still have the posting showing what we did. Well, on March 6th this year, it just got done. The renovation just got done.

Steven Butala:                   Sold [crosstalk 00:13:58]-

Jill DeWit:                            Because I sold it to a flipper.

Steven Butala:                   A renovator.

Justin Sliva:                         Okay.

Jill DeWit:                            Yeah, and I’m going there to interview her, and stand there and walk through it. I want to show the before and the after and everything, and hear her story about what she went through to get to this point. We sold it to her for 330, she’s got it on there for like 535, something like that-

Steven Butala:                   She’ll have [crosstalk 00:14:20]

Jill DeWit:                            Just to make fortune.

Steven Butala:                   And make $100,000.00.

Jill DeWit:                            So yeah. But what’s-

Justin Sliva:                         But it’s taken a year.

Jill DeWit:                            That’s the funny part. I talked to her and I said, “Hey, Maggie I want to interview you,” and she goes, “You don’t really want me to talk about all the problems I had, do you?” And I’m like, “No, that’s not really what it’s about. It’s okay. But I want to really just talk about how we found this deal for you.” You know, I did nothing. “I made this much money. You’re going to make this much money,” and what a great relationship we have now, and we can keep doing this again, and again, and again.

Steven Butala:                   We’re wholesale people, so that was my first response too. You know, “Yikes,” but she’s got 10 of them going a time. She’s making a million bucks a year.

Justin Sliva:                         Oh, exactly. I know exactly what.

Steven Butala:                   And she’s using somebody’s else’s money-

Jill DeWit:                            She’s happy.

Steven Butala:                   And the whole thing … right. Right, so that just would make sense to them.

Jill DeWit:                            It does.

Steven Butala:                   That’s just not what I want to do.

Jill DeWit:                            Exactly.

Justin Sliva:                         Not what I want to do. I’m taking a break from that. [crosstalk 00:15:09].

Jill DeWit:                            Right?

Justin Sliva:                         I’m getting away from that as well.

Jill DeWit:                            Well like you said, it’s taken her a year so I will get … I’m going to find out when I’m there and I interview her, like what really went down. Because I do know that there was like a contractor issue, and people going dark, and it just further why-

Steven Butala:                   The house looks great though.

Jill DeWit:                            Oh, it looks gorgeous.

Steven Butala:                   It’s all staged.

Jill DeWit:                            Yeah. There’s one down the street for 595 with a pool that’s under contract right now.

Justin Sliva:                         Wow.

Steven Butala:                   These are houses that when I moved there in the early 90s we were buying for $85,000.00 and selling them for $110,000.00.

Jill DeWit:                            Right.

Justin Sliva:                         Wow. Wow.

Jill DeWit:                            It’s just crazy.

Justin Sliva:                         The market-

Jill DeWit:                            Yeah, you’re right. I think that’s right. I think that one, I looked it up today, that 595 one, I have it on my computer right now. I think it sold for like 105 or 108 or something back in ’99.

Steven Butala:                   Right.

Justin Sliva:                         [crosstalk 00:15:52]-

Steven Butala:                   Back then without any data, any real-

Justin Sliva:                         [crosstalk 00:15:56] tools.

Jill DeWit:                            Exactly. This is a natural progression. It’s great.

Steven Butala:                   And I had a real job and everything. It was pretty funny.

Jill DeWit:                            You know, land flipping, as you know Justin, turns to house flipping. Now, imagine what you’re doing right now you just marked it up $30,000.00, Justin, and somebody else is dealing with the roof.

Justin Sliva:                         Mm-hmm (affirmative).

Jill DeWit:                            Wouldn’t that be better?

Justin Sliva:                         Yep, that’s why we did 21 of those year.

Jill DeWit:                            There you go.

Justin Sliva: