Chat Transcript … 2/1/04

Posted on February 1, 2004

Welcome to the chat, Ralph Roberts!

[Investment Chat]: Ralph Roberts has entered (4:27 pm)

Mike Summey: Hi Ralph

bigj: Kansas

Ralph Roberts: Hi guys

Mike Summey: finally got it fixed I see.

Ralph Roberts: yeah… offsite name server is down… hadda program around it … quickly


Mike Summey: bigi & TT are either of you from Dallas?

bigj: No, a little north of there.

TT: Mike I am from Asheville

Mike Summey: Any idea what happened to the server?

Ralph Roberts: nothing happened to the server… one of the offsite name servers is down… I programmed it out of the lookup.

bigj: Got to love DNS!

Mike Summey: I just spoke with Carleton & Roger. they should be on shortly.

Ralph Roberts: otherwise lookups just hang

Ralph Roberts: yeah! DARN NUSIANCE STUFF

Mike Summey: that’s way over my head.

[Investment Chat]: Carleton has entered (4:30 pm)

Mike Summey: Hi Carleton

Ralph Roberts: Welcome, Carleton

Mike Summey: There’s no telling how many people we lost at the beginning.

Carleton: Hello

Mike Summey: Any questions guys?

TT: Hi Carleton, I am overwhelmed, in the midst of the greats!!

Ralph Roberts: this is a bad weekend on the internet with MyDoom, etc. 😉

[Investment Chat]: youngvet has entered (4:31 pm)

[Investment Chat]: Roger Dawson has entered (4:32 pm)

Mike Summey: Hi youngvet

bigj: Yea, how easy is it to deal with HUD repo’s

Mike Summey: Hi Roger

Carleton: Hello TT.

Ralph Roberts: Hi Roger, youngvet!

Carleton: Hello Roger

Mike Summey: Who’s going to win the game?

Carleton: The game of life? …..real estate!

youngvet: I am new and hop to invest soon does anyone have familiarity with the miami market

TT: I just got an reo offer accepted, but I think I could have done better on price. It is a rough mobile home on 1 acre, and should rent for 500/mo. I got the packager for $14,000. How’s that for cash flow!!

Ralph Roberts: Charlotte already winning the game of real estate… if you’ve been there recently

Mike Summey: I just did an hour with Al Lee on the Real Estate & Wealth show from Dallas. It was a great show.

Carleton: RE: the other one, I hope Carolina

Mike Summey: That’s terriffic TT.

Carleton: I own a property in Charlotte. Feel the markets getting soft there

Mike Summey: It should pay itself out in 3-4 years with interest.

Roger Dawson: From the Los Angeles Times this morning – an interesting sign of the times: Actress Elisabeth Shur sold her home on the Sunset Strip for about $1.3 million. The asking price was $1.2 million. That’s not a misprint – house do sell for $100,000 over listing price in a market like this.

youngvet: Ive been met with alot of pessimism in terms of rent covering mortgage because of the weak rental market

youngvet: how do you guys feal about it

Carleton: I heard the same thing today about south Florida

TT: exactly, thats why I like these mobiles, though my father thinks I am a fool for buying them.

youngvet: or i shoud say NOI covering mortgage

bigj: seems to be the same here. With rates so low, why rent

youngvet: do you think then that this is a fliperrs market

Mike Summey: The market ebbs and flows. that’s why we list Being Impatient as the #1 mistake new investors make.

Carleton: the market is still strong here in South Florida but just talked this morning with an Illinois investor who said she is running 20% vacancy as opposed to 5% a year ago.

[Investment Chat]: hunter has entered (4:37 pm)

Mike Summey: I’ve had some years when I only bought 1-2 properties and others when I bought as many as 65 and could have bought more if I wanted to.

Mike Summey: Hi hunter

Roger Dawson: I can think of two friends that rent their homes. They have never owned real estate. They’re good people with good incomes. They just don’t want to own.

TT: Mike, how do you characterize our local(Asheville) rental market?

[Investment Chat]: youngvet has entered (4:38 pm)

youngvet: I was looking to invest in south florida miami in particular but how do you feel about it carltom

Mike Summey: There’s no question that the low rates have made homebuyers of many people who have been habitual renters.

bigj: This is where your property manager can make a difference?

Mike Summey: right

Carleton: I don’t know the Miami market well but have to think, because of the tremendous number of people migrating to Florida, that we will not have the same problems as other parts of the country.

youngvet: there is an up and coming area that the state has particularly made an initiative to build up and while I believe prices are low and has tremendous potential set aside money to build uop but there is still no wasy to get NOI to fully cover mortgage

bigj: I am not sure where all the money is coming from, but new homes are being built at a high rate

Roger Dawson: The message of the Weekend Millionaire is to let your property manager worry about tenants. The hgihest and best use of your time is making offers to buy.

youngvet: Before you could get roughlyu 1% amonth of purchase price you just cant

[Investment Chat]: kawika_CA has entered (4:41 pm)

Carleton: TT, how many mobiles do you have in Asheville?

Mike Summey: I was visiting with Carleton when we had our last chat and he was calling sellers and looking for properties while I was there. He’s still an active investor.

Mike Summey: Hi kawika.

kawika_CA: Hi.

hunter: Hello, I just wanted to let you know that I am a rookie at this and look forward to learning quite a bit from you before I get going. I work in private client service for a bank and see quite a few people who have built up equity in real estate over time. I have started a franchise before and now I will only do real estate, stocks, and home based business to build weatlh.

[Investment Chat]: n mclane has entered (4:41 pm)

Mike Summey: Hi n mclane

TT: Roger, when offering on an reo, directly with the bank, not through a realtor, do you always want to let them name the price first?

Roger Dawson: Welcome McClane

TT: Carleton, I just started buying them last year and have 3 , with the fourth under contract

Mike Summey: TT how is your cashflow working out?

youngvet: do you feel it a risky investment if there is an area that has great potential and numereous high rises are going up and the city is really building up but you can only get NOI to cover 75% of purchase price

youngvet: of mortgage that is

Carleton: Good for you! Did you use any ideas for mobile homes that I have in my home study program?

TT: very well, 495,450,595. very little trouble or demands from tenants.

Mike Summey: If you can’t buy for 60-80% of market value, you need to keep looking.

bigj: TT do you have a hight turn over in your mobiles?

Mike Summey: That’s great TT.

youngvet: very easily could cover hole thing if intrest rates rose alittle and rents went up

Roger Dawson: Let them name the porice first, but of course you position them to give you their best offer by explaining that you’re not interest in buying at retail, etc.

youngvet: and if not i see the property going up

youngvet: and if not i see the property going up

Mike Summey: TT Dou you keep your rents in a separate account and let the cash build up to buy more with?

TT: no turn over yet because I “rent to own” the package and let the occupants do minor repairs and think of themselves as owners, married to the deal

youngvet: how do you guys feel about preconstruction

TT: though I doubt that any of them will ever make the step to cash me out, and I hope they dontLOL!!

Roger Dawson: Tell us about the offers you’ve made this week.

Carleton: Preconstruction of what?

TT: Mike that is exactly what I am doing, hope to have enough in 3-5 years to quit my job

youngvet: condo preconstruction set to open in 2yr the one they just opend similar units

youngvet: 1 bedroom are going for 195k

youngvet: a slighytly nicer unit is going for 170

youngvet: not much room for negotiation though

youngvet: it is sligghly better area also

youngvet: still up and coming

Mike Summey: Youngvet, I’d be very leery of buying in a condo development at any time, but especially during pre construction.

Roger Dawson: I made a bunch of money once buying a new home from a builder. Put a$1000 down and it took them 18 months to finish the home. It’s ultimate leverage.

Carleton: I just bought a condo preconstruction in a high demand area. Paid $330,000, 20% down using a line of credit. It’ll be fininshed in mid 2005 and I should make 100K on it.

[Investment Chat]: Roger Dawson has entered (4:48 pm)

Mike Summey: The developer usually keeps the monthly regime fees very low during the build out stage and then as soon as the developer gets out the monthly fees start to go up rapidly.

Carleton: Amen

youngvet: so you dont neccessarily diagre with condo pre construction Carleton

oungvet: so you dont neccessarily diagre with condo pre construction Carleton

Carleton: This is on the water. Otherwise I’d be cautious.

youngvet: this will be a very high demand area especially when done

youngvet: there are multiple high rises going up and stores scheduled to open

Carleton: If it’s phase 2 of a succesful devel. I’d feel better

youngvet: balcony overlooking miami river

Carleton: There’s risk in everything. We must just keep those risks to a minimum through research

Mike Summey: Buying pre construction Condos is fine if you plan to turn them for a profit and feel comfortable that prices will go up. I’m talking about buying them to hold long term for the income stream.

youngvet: what do you mean carleton

[Investment Chat]: youngvet has entered (4:52 pm)

youngvet: that s the problem with the soft rental market theres juist no way the NOI will fully cover mortgage

Carleton: Mike and I met someone the other day, who claims the over 55 condo rental market is a good bet.

youngvet: but I do see being able to flip it for a nice gain based on the area and similar things

Mike Summey: What scares me about condos for long term income is the uncertainties that the condo associations can throw at you. Higher fees! Limits or prohibitions on renting! etc.

Roger Dawson: In the book I tell a horror story of buying a condo in Palm Springs. The homeowners association bought the 27 hole golf course. The monthly dues doubled and it destroyed the value of the property.

Mike Summey: My views may differ from Carleton & roger on some things, because I don’t sell anything. I still own all the investment properties I’ve acquires over more than 25 years.

Carleton: I agree with you Mike, but if you’ve bought for 80-90% of market value, it should be easy to sell for a profit. Owner occupants love those rules.

Ralph Roberts: are duplexes and other multiple unit dwellings better than single family homes?… investment wise?

youngvet: Is there any way to get afeel what there intentions will be in the future or will they surely decieve to get you to buy

bigj: Mike, there is a HUD repo home I am looking at. It is listed for 96k. The house has been on the markedt for over a year. The NOI would be covered with thier asking price, but I think they will go lowere. How do you determin how low they might go?

[Investment Chat]: Pete-CANADA has entered (4:55 pm)

Carleton: I think you get less turn-over with SF homes and a better class of tenant.

Mike Summey: Anyone on from Dallas wh listened to the Real Estate & Wealth program last hour?

Mike Summey: Hi Pete

Pete-CANADA: Hello

Mike Summey: Pete – Where in Canada?

Pete-CANADA: Toronto

Roger Dawson: Ralph, I believe in a mix. Multi family for cash flow. Single family for liquidity.

Mike Summey: Nice place. Too cold for me though.

Ralph Roberts: thanks, guys

youngvet: So carleton do you think if similar units are currently getting 10 – 20% of what they are asking preconstruction it would be worth investigating further

Mike Summey: Ralph – Start with the single family until you get some experience.

youngvet: im talking about the preconstruction thsat is

Carleton: 10-20% down, youngvet?

youngvet: 15%

Carleton: Down?

youngvet: loft style apartment

youngvet: down

Mike Summey: youngvet – can you buy at 80% of asking price on a pre construction contract?

Carleton: Yes, I think it could provide a excellent return on your down payment – but on a case by case basis.

Carleton: I generally don’t buy to flip. I keep most of the properties I purchase.

youngvet: There asking price is approximatly 15% lower then similar building that are already in the area and built

hunter: Mike, did you see Bigj’s question above? Maybe I missed your answer

youngvet: but this unit requires 25% and will not be ready for 2years

Mike Summey: I missed it, I’ll go back & look.

Carleton: What is the price range YOungvet?

youngvet: the area is up and coming and really getting built up

youngvet: with many new projects scheduled to come

Carleton: Does the builder have a good track record?

youngvet: yes they just opened a building very close by

youngvet: just within the last month

youngvet: since that one was well recieved they are opening another

Mike Summey: bigi – make an offer slightly lower than what you would like to pay and let them negotiate you up while you negotiate them down.

TT: Where do you guys think the 30 year mortgage rates are going? Up alot soon or flat for a while? I think they will stay flat for awhile, I see TOO MANY PEOPLE predicting an imminent jump!!

Mike Summey: Roger can address this as well. It’s called setting the stage to arrive at a win/win soulution.

arleton: I agree TT. Probably start heading north in the late spring but not by much.

Mike Summey: I agree with Carleton. I don’t see them jumpin much for several years.

youngvet: However I dont know if maybee you guys know : if you get a unit preconstruction and put the 15% down is there any way to lock in the currnt intrest rate

youngvet: I just dont want to get the unit and when it comes time to pay intrest just several point

Mike Summey: Not that I know of.

Carleton: Not that I know of…at leat not for months

Mike Summey: Unless it’s only for a short time 60-90 days and then that’s stretching it.

hunter: This has been a great conversation about the new lofts/condos. In Portland, OR there is a lot of this now and it seems pretty hot!

youngvet: however if intrest goes up do you see the rental market proprtionately going up

Roger Dawson: When you’re negotiating, always assume that you’ll end up in the middle of the negotiating range. So bracket the asking price the way that I teeach in the book.

hunter: Youngvet some banks, etc, have programs that lock in for 6 months. But, you pay a fee for the lock.

youngvet: well that wouldnt really help because the time frame would be like 24 months from when the unit is ready

Mike Summey: hunter – I’ll be on the Portland Morning News on KXL-AM 750 during the drive time news on Wednesday.

hunter: I’ll be listening. I will try and find out what time.

youngvet: any other hot areas in south florida you can tell me about carleton

Roger Dawson: If interest rates go up, it precludes many first buyers from qualifying for a loan. That’s good for landlords.

Mike Summey: For Everyone – be sure to check the events calendar on the left side of the website. We’ll be on radio or television or speaking live in several markets in the coming months.

bigj: Will you be in the Kansas City area anytime soon?

Mike Summey: biji – is Columbia & Jefferson City close to you?

youngvet: I wqs asking because if I pay my money down pre construction and when it comes time to pay I would be woried that if intrest rates rose I would not be able to sell for such a great profit in which case I would have to pay the higher rate and would hope I could at least get my rent to cover the extra intrest Im paying

youngvet: and i wouldny be in a bind

Carleton: I’m going to have to sign off. Thanks to all.

bigj: about 5 hrs. Close enough to drive. When are you there?

hunter: I have to ask the same. Any trips to Portland, OR?

TT: I really like these chats!! Thanks to everyone!!

Mike Summey: Thanks Carleton

youngvet: thanks

Ralph Roberts: thanks Carleton… nice seeing you again

Roger Dawson: Bigj: there’s a large real estate investment clucb in Kansas City. Are you a member?

[Investment Chat]: Roger Dawson has entered (5:11 pm)

Roger Dawson: Thanks Carleton, glad you could join us.

Mike Summey: We were supposed to stop at 5:00 Eastern, but have stayed a little longer due to the problems everyone had getting on at the beginning.

youngvet: what peoles thoughts on town houses

bigj: No, I would like info on it thought!!!

Mike Summey: I can stay for another few minutes, but everyone is welcome to stay and talk with each other as long as you like.

Ralph Roberts: I’ll be posting a transcript shortly for those that missed any of the chat

hunter: Thanks for the chat, it is appreciated.

Mike Summey: Again, I appologize for the sign on problems early on. I guess that’s one of the down sides of the Internet.

Mike Summey: Thanks Ralph.

TT: No problem.

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