Jack Thursday – How to Calculate your Cash Return on a Land Deal (LA 1592‪)‬ Land Academy Show

Jack Thursday - How to Calculate your Cash Return on a Land Deal (LA 1592)

Transcript:



Steven J Butala:

Steve and Jill here.



Jill DeWit:

Hello.



Steven J Butala:

Welcome to the Land Academy Show, entertaining land investment talk. I'm Steven Jack Butala.



Jill DeWit:

And I'm Jill DeWit, broadcasting from the Valley of the Sun.



Steven J Butala:

Today is Jack Thursday and I'm going to talk to you about how to calculate your cash-on-cash return on a given land deal.



Jill DeWit:

Isn't it just like, you buy it for 10, you sell it for 30? Or, is there more to it than that?



Steven J Butala:

There is a little more to it than that, but that's the basic.



Jill DeWit:

Okay, cool.



Steven J Butala:

And so, well, let's use your example. You buy for 10. You sell for 20. What's your cash return?



Jill DeWit:

Hundred percent.



Steven J Butala:

Right. You've been hanging around me too long. Buy for 10. Sell for 30. What's your return?



Jill DeWit:

Even better.



Steven J Butala:

It's 200%.



Jill DeWit:

Jill numbers.



Steven J Butala:

If you buy for 10, and this is a-



Jill DeWit:

Keep going.



Steven J Butala:

This is a giveaway. You buy for 10. You use deal funding. You sell for 20. You get $5,000 back. What's your cash-on-cash return?



Jill DeWit:

50%.



Steven J Butala:

You can't calculate it.



Jill DeWit:

Why?



Steven J Butala:

Because you didn't put any money in.



Jill DeWit:

Oh.



Steven J Butala:

So if you want an infinite cash-on-cash return just use [crosstalk 00:01:14]-



Jill DeWit:

Okay. Well, there's the show, everyone!



Steven J Butala:

That's not all. 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. And don't forget to subscribe on the Land Academy YouTube channel and comment on the shows you like. It's very interesting that whenever these shows are about numbers and technical stuff, Jill jokes around.



Jill DeWit:

Hmm. Victor wrote, "Maybe-"



Steven J Butala:

Just, hmm!



Jill DeWit:

I know, I know. "Good morning, everybody. I have spent many days researching individual counties, days on market and price by zip code. And I've sent two mailers for the first time yesterday. I have three other counties that I want to send to that are going to average $2,500 an acre on the buy side. But I'm worried that if I don't get accepted offers back, I won't have money. Meaning, that since I'm new-"



Steven J Butala:

I'm worried that I do get accepted offers back.



Jill DeWit:

[crosstalk 00:02:11] do. Sorry. I won't have the money.



Steven J Butala:

I won't have the cash.



Jill DeWit:

Yeah. "Meaning that since I'm new, I feel like funding partners would not be interested. Any thoughts?" Well, that's not true. I just had a conversation with somebody about this. We have someone that we have done a handful of deals with. She wrote me a book of questions the other day, which I'm still responding to, but I hope by the time this airs, I've hit the reply button. But anyway, she's like, "Do you have a bottom? Is there a bottom here that you're willing to work with?" And I'm like, "The deal stands for itself. The deal should stand for itself. So I guess the answer is, yes and no. So don't be afraid."



Steven J Butala:

I can answer that. In some capacity, I've been involved in acquisitions since the minute I got out of college. I don't know why, it's just that career chose me.