Chat 5-24-04
Posted on May 24, 2004
Welcome to the chat, Ralph Roberts!
[Investment Chat]: Ralph Roberts has entered (7:56 pm)
Ralph Roberts: hi there
[Investment Chat]: Mike Summey has entered (7:56 pm)
Ralph Roberts: hi Mike!
[Investment Chat]: Peter has entered (7:56 pm)
Mike Summey: Hi everyone.
Ralph Roberts: welcome, Peter
Welcome to the chat, Ralph Roberts!
[Investment Chat]: Ralph Roberts has entered (7:56 pm)
Ralph Roberts: hi there
Peter: Hi Mike..thanks
Mike Summey: You’re welcome.
Mike Summey: Glad you could join us.
Peter: You are competing with President Bush tonight lol
Ralph Roberts: how many houses does he own?
Mike Summey: We’re a bit early.
Peter: LOL
Ralph Roberts: besides the big white one, of course
Mike Summey: I’m going to turn him on and listen during the hat.
[Investment Chat]: Al Lee has entered (7:58 pm)
Mike Summey: Hey Al,
Ralph Roberts: hi Big Al!
Mike Summey: I beat you here tonight.
[Investment Chat]: Quinn: Fort Worth has entered (7:58 pm)
Al Lee: Hey guys, we’re baaaaack!
Mike Summey: Hi Quinn
Quinn: Fort Worth: Hello!
Al Lee: Hi Mike, Ralph, everyone
Mike Summey: I just got back from the airport.
Quinn: Fort Worth: Hi, Al
Mike Summey: Been looking at a new airplane.
Quinn: Fort Worth: A jet? 
Al Lee: Mike, how much fun is that!
Mike Summey: No.
Mike Summey: Not a full jet, a propjet. Beechcraft King Air
Mike Summey: Runs on jet fuel.
Al Lee: Better than a jet in many ways
Quinn: Fort Worth: Is that a twin?
[Investment Chat]: Roger Dawson has entered (8:00 pm)
Mike Summey: Bigger cabin
Mike Summey: Hi Roger
Al Lee: Hi roger
Mike Summey: We’re just shoot the bull until everyone gets signed in.
Roger Dawson: Hi Mike and Al!
Quinn: Fort Worth: Mike, how long have you been flying?
Ralph Roberts: Hi Roger!
Mike Summey: Roger, I was just telling everyone I just got back from the airport looking at a new plane.
Mike Summey: Roger loves to fly with me…ha!
Roger Dawson: You need a bigger plane Mike!
Mike Summey: Quinn, about 30 years.
Al Lee: Mike, I suppose you’re starting to get the hang of it by now, right?
Roger Dawson: I’ve been doing book signings at
Roger Dawson: Barnes and Nobles in S. Calif. The book is selling very well out here inspite of the high prices.
Mike Summey: Roger is developing quite a following in the California area.
Mike Summey: Al, I liked you email about the houses you have under contract. Has anyone else made any offers since our last chat.
Quinn: Fort Worth: I want to learn how to fly. Maybe once I get some cash flow coming in…
[Investment Chat]: aer has entered (8:04 pm)
Mike Summey: Hi aer
Mike Summey: Welcome to the chat.
aer: hello
[Investment Chat]: Penny has entered (8:05 pm)
Al Lee: Mike, I haven’t been able to put the listings on the website yet, but I have about 20 people who have said they want at least one of those deals. I ned to keep a few for myself since I did a 1031 sale and need to place the cash so I don;t have to pay the taxes.
Mike Summey: Quinn, that’s what I had to do. I waited until I had a decent cash flow before even taking lessons.
Ralph Roberts: Hi Penny!
Mike Summey: Hi Penny
Penny: Hello everyone.
Quinn: Fort Worth: In my area, property taxes are very high (about 3% pf the home’s value). Does anyone have problems with the increased taxes overcoming rent increases, turning the cash flow negative?
Roger Dawson: We had some readers from New Zealand buy a new house in Jacksonville Florida for a rental. Talk about your absentee owners.
Mike Summey: Roger & I have been traveling quite a bit during the past couple of weeks, which is why we haven’t had a chat.
Al Lee: Quinn: I get my soem of my best returns in Fort Worth.
Roger Dawson: Quinn: We solved the property tax problem with a initiative on the ballot, limiting taxes to one percent of the purchase price.
Mike Summey: Quinn, if you just follow our guidance when determining NOI and then use that to calculate the value you put in your offers, our methods will work anywhere.
Al Lee: Roger, yes–but you have 9.3% income tax and Texas has ZERO
Quinn: Fort Worth: Al: Do you only look in certain areas, or all over FW?
Roger Dawson: True. I’ve reluctantly come to believe that the only way to stop politicians spending our money is not to give it to them in the first place.
Mike Summey: Property taxes…ugh! We all cuss them because they are one tax I haven’t found a way to avoid or defer.
Al Lee: Quinn, only in certain areas, of course. Every metro area has its good and bad areas. I buy mostly in Dallas and Fort Worth and NEVER, repeat NEVER accept negative cash flow.
Quinn: Fort Worth: Mike: I did! I used the NOI calculations and a rent quote from a property management firm, and I would have had to offer less than half the asking price…
Mike Summey: Roger, you’re starting to sound like a Republican.
Al Lee: I thought I liked ROger for soem reason!
[Investment Chat]: aer has entered (8:10 pm)
Mike Summey: Quinn, that may be true for many deals, but what you are looking for is the properties you can purchase at wholesale.
Mike Summey: Welcome back are
Roger Dawson: One thing I’ve found that really resonates with property owners is don’t try to manage the property yourself.
Quinn: Fort Worth: Al: I’ve been looking around the White Settlement area, but I get the impression that it’s too much on the low side…
Al Lee: Quinn, last year our average rent was 1.11% of purchase price which means positive cash flow regardless of tax rate. I pay 3% on mos of my houses,
Al Lee: most
Mike Summey: Quinn, in NC I experience the same problems you are talking about. Wholesale offers are often 1/2 to 3/4 of the asking price, but Roger can tell you, I buy them at wholesale in spite of this.
Roger Dawson: Mike and I were in Chicago recently and were surprised to find that it’s now a buyer’s market there.
Al Lee: We had a few houses get about 1.25% of price for rent. They were home runs for sure, but I don;t coount on that happening. Just 1% is all I need to make money.
Quinn: Fort Worth: My wife is really afraid of losing money, and I’m afraid of losing money because she’ll say “See, it doesn’t work!” I just want the first one to be a clear winner…
[Investment Chat]: aer has entered (8:14 pm)
Mike Summey: aer, are you having a problem getting kicked out of the chat?
aer: Im new to investing & lookiing at a fixer upper in a great area. the owner indicated he a ballpark price after he completed some work. My original thought was to submit an offer of about 10% less. Since then I have learned that half a dozen other people are interested as well. Would you still submit a wholesale offer? Any thoughts? Thanks
Roger Dawson: We used to say that you could buy for 100 times the monthly rent and make money. With today’s low interest rates I think you can pay 125 times the monthly rent and still be positive.
Mike Summey: aer, don’t get married to one property. Make offers that work for you and be patient until you find sellers who will sell the way you want to buy. I’ve had years I bought very little and other where I bought as many as 65.
Quinn: Fort Worth: I’ve been extremely conservative in my estimates of repairs, vacancy, etc.
Al Lee: Quinn, is yourcredit good? do you have soem cash to invest? If so, I recommend that you buy with 20% down, a 30-year fixed-rate note and maybe interest-only payments for the first 10 years. If you buy a good house you nearly can not fail doing that.
[Investment Chat]: aer has entered (8:17 pm)
Al Lee: Roger, you are right, especially with the I-O note on 30-year amortization.
Quinn: Fort Worth: Al, yes my credit is good, and we do have some for a down payment. It’s just that we couldn’t afford another house payment if we can’t get it leased for a while.
Mike Summey: Al, you and I differ, but that’s not to say that one of us is right and one wrong. I won’t buy unless I can make the numbers work with 15 year financing.
Mike Summey: That’s just my criteria.
Quinn: Fort Worth: It seems like if it were vacant for a month or two that it would erode a year’s worth of cashflow or more…
Roger Dawson: An interest only note nevers pays off so presumably you’d plan to refi somewhere down the line.
Al Lee: Quinn, I have a program that solves that problem. Go to www.TurnkeyInvestments.net later on and read the description. It is almost a guaranteed return–as close sa you can get.
Mike Summey: Quinn, when you’re getting started, you should set aside money in reserve to cover periods of vacancy. The reaso for this is because when you only own one property and it goes vacant you are 100% vacant. When you get the second one and one goes vacant, you are only 50% vacant. It gets better the more you own.
Al Lee: Roger, yes, I would probably refi before the amortization starts, but even if I don;t the payments are not so high that I won;t get a positive return with rents appreciated after ten years, etc.
Quinn: Fort Worth: Thanks, Al, I will.
[Investment Chat]: Ken has entered (8:21 pm)
Mike Summey: Hi Ken
Mike Summey: Welcome to the chat.
Roger Dawson: Hi Ken
Mike Summey: aer, did you get your answer?
Ken: Hey Guys!
aer: Yes, that makes the most sense
Mike Summey: We’re competing with Bush right now.
Roger Dawson: Is anybody seeing a rise in foreclosures in your area?
Mike Summey: We didn’t know that when we scheduled this time…sorry!
Quinn: Fort Worth: I’m seeing a bunch of HUD foreclosures in my area…
Roger Dawson: Prices rose 25% in Los Angeles this last year. That can’t go on for ever.
aer: some in missouri
Al Lee: Roger, foreclosures are rising in Texas–espacially where all those people who marginally qualifid bought houses last year at the fantastically low rates
Peter: Mike…I turned this house I owned and live in in NC into a rental. I recently moved to the Cincinnati area. But I feel that I should continue to look for additional rental investment properties in NC as well as where I live now. The reason is because I have a great Property Manager, and I know a realitor, and have other contacts down there. What do you think?
Al Lee: Peter, those are good reasons.
Peter: Plus the property taxes are very low
Roger Dawson: HUD has a website now that lists all its foreclosures. It’s HUD.org. Don’t be lured onto HUD.com which is someone selling foreclosure lists.
Mike Summey: Peter, if you have a property manager you are comfortable with and can trust, by all means try to give them more to manage.
Mike Summey: I have the same situation with properties in South Carolina.
Quinn: Fort Worth: I have some HUD questions: How low can you bid for it to be accepted, and can you look at the inside of a house before you place an offer to purchase with an agent?
Peter: That what I was hoping to hear…thank you.
Mike Summey: Quinn, that’s a loaded question. If you bid their asking price you can probably get your offer accepted, but I wouldn’t do that. Bid what works for you and if it’s not accepted, don’t worry about it. Go on to the next one and bid on it.
Roger Dawson: I used to be up on HUD buying when I was a broker, but I’ve forgotten. It’s all explained on their website.
Mike Summey: Quinn, often there is an agent who will let you see the problem.
Mike Summey: property.
ike Summey: Ken & Peter, where are you grom?
Mike Summey: from.
Mike Summey: Can’t type tonight.
Quinn: Fort Worth: I’ve looked at the outside of a few HUD’s, but I thought you had to make an offer to see the inside…
Roger Dawson: You need a ghost writer Mike.
Peter: I used to live in Boone, NC. Now I live in Northern Kentucky
[Investment Chat]: aer has entered (8:30 pm)
Quinn: Fort Worth: Al, does Turnkey set up financing for you along with the lease contract?
Mike Summey: Quinn, I’ve lookes at several HUD properties with real estate agents in my area. Usually there is someone who can show the property.
Al Lee: Quinn, yes! We have a super lending source that deals with investors almost exclusively and knows how to make a deal work.
Ken: Mike, I’m down in the very Northeast corner of Florida near Jacksonville on a small barrier island called Amelia Island. This area has seen some great appreciation over the past few years. The big challenge is that the rental rates have not kept up with the housing values in most areas here.
Roger Dawson: I’ve done seminars on Amelia Island. It’s a great venue
Mike Summey: Ken, you’re in a great place. I guess you know that to find the deals you’re going to have to leave you’re island and move inland a bit.
Quinn: Fort Worth: In the book, you use 5% vacancy, and 10% maintenance and reserve. Are these very conservative numbers? Also, do you call up an insurance company on every property to get a quote, or are there general guidelines for determining that? The same with property tax estimates?
Roger Dawson: There’s a lot of talk these days about Jacksonville being a great place to invest. I guess it’s going through a rennaissance.
Ken: Yes, the best place to look for rentals right now is inland. There are plenty of good opportunities there.
Mike Summey: Quinn, we used 5% and 10% as averages. These figures, especially the vacancy factor, will vary from amrket to market. We also advise you to get with a professional property manager in your area to find out what the actual numbers are for your area.
Mike Summey: Ken, then look inland!!!
Al Lee: Quinn, you can get the tax rates and numbers from the internet in just about every county in Texas. I use 6% of gross rent as a mainteannce allowance for older houses and 3% for new construction, which I am mainly focusing on lately.
Ken: The population of the Jacksonville area has been growing very rapidly. With the superbowl here this year it can’t hurt either. Yes, we will look inland Mike.
Quinn: Fort Worth: I’ve just got to get started! All the analysis is killing me *head explodes*
Mike Summey: I made an offer today for a house in a neighborhood near me.
Al Lee: Without Action Your Dreams Are Worth Nothing!
Roger Dawson: Analysis can lead to paralysis!
Mike Summey: I may get a counter and I may not.
Roger Dawson: How did you hear about the house, Mike?
Quinn: Fort Worth: Al: I heard you say that on the radio on Sunday and I’ve been thinking about that ever since.
Mike Summey: If I don’t, I won’t worry about it, I’ll just make an offer on another one tomorrow or the next day.
Al Lee: Mike, am selling two houses (closing both in the next couple of days) and buying a dozen brand new houses with the money (signed contracts yesterday).
aer: Thanks for all the advice , have to go Tornado warnings in KC
Mike Summey: Roger, I found out about this particular house when the owner called me. An attorney he was working with on a divorce situation suggested that he call me.
Quinn: Fort Worth: Be safe!
Al Lee: Qhinn, you never said you listened to my radio program. Did you hear when I interviewed Mike a few weeks ago?
Mike Summey: aer…The big blow is coming!!
Quinn: Fort Worth: No, but I was your caller on Sunday
Ken: Mike, good marketing pays off, again!
Roger Dawson: That’s the great thing about living in California. We don’t have to listen to earthquake warnings!
Mike Summey: I’m going to be on the Dollars & Sense radio program from Boston Friday afternoon at 2:30 PM Eastern. YOu can listen to it over the Internet at www.wbix1060.com
Al Lee: Aha! I was straining to recall where the name Quinn had come up recently. I searched my email files and didn;t find you, so I just wrote it off as a mistake on my part. Now I recall. Mywife told me I shoudl have let you talk more. I hope I didn’t cut your short.
Roger Dawson: You cut my shorts and I’ll sue you.
Quinn: Fort Worth: No, you were fine ( and so are my shorts)
Al Lee: Don;t call me sue!
Roger Dawson: Shirley you’re not offended?
Quinn: Fort Worth: LOL
Mike Summey: After you get some experience, you can move into commercial and multi-family properties. I just signed a commercial lease last week with a major public company, that will pay me over $750,000 over the next 10 years.
Al Lee: Makes me remember the move Airplane
Quinn: Fort Worth: So how do you phrase it when you offer someone something that is really low and will probably offend them?
Quinn: Fort Worth: “I’m an investor and this is all I can afford to pay”?
Roger Dawson: Tell them that you’re an investor and this is what will work for you.
Al Lee: Quinn, I woueldn;t worry much about sellers becomeing offended. You can always make a higher offer later, if you want to.
Al Lee: I have had Realtors tell me they would be embarrassed to turn in my offer. I told them it was their legal duty to do so regardless–it is.
Roger Dawson: If you give people a reason why you’re doing something, it make it palatable and you have a much greater chance of success. Even if the reason is a stupid one.
Mike Summey: Quinn, I tell people right up front that I’m an investor and if they can find someone who wants to live in the house, that person may be willing to pay more. If they really need to sell the property, I can close in days.
Al Lee: Since I have a spreadsheet (a formula) that I use to compute what I will pay (max) for a property, I say I am “formula buyer: and this number is the price my formula says I can pay in order to make the deal work.
Mike Summey: Sometimes, I will tell a seller that when they don’t accept my offer, they are in effect buying back their property for the price of my offer and hoping to sell it later for a profit.
Quinn: Fort Worth: I guess that you need to get things set up with insurance, title companies, lenders, etc. so that you’re ready to go as soon as you find a good deal…
Roger Dawson: I love that close, Mike. It really makes people think twice.
Mike Summey: Quinn, I already have those things in place.
Al Lee: Mike, that is a brilliant analogy. I, being a public speaker, will now steal it and make it my own.
Quinn: Fort Worth: That’s a great way to look at it!
Quinn: Fort Worth: *Yoink*
Roger Dawson: Al, professional courtesy says that the first two times you use it, you should give Mike credit.
Mike Summey: Al, you and Roger can both steal it. I make my money buying properties, not selling semminars.
Roger Dawson: You can’t even spell seminar, Mike!
Al Lee: Roger, right! I will first say that you may have heard Mike say…; then I will say you may have heard me say…; then I will say I have often said,,,; and thereafter it will be a quote of me.
Quinn: Fort Worth: That’s the thing that impressed me so much about your book and website, Mike!
Mike Summey: I’m having a senior moment with my typing.
Quinn: Fort Worth: And Roger!
Roger Dawson: Thanks Quinn, sometimes Mike forgets too!
Roger Dawson: Penny, you still there?
Quinn: Fort Worth: I thought that your negotiating tips were very powerful and insightful.
Roger Dawson: God bless you Sir!
Penny: Hello Roger. Yes, I’m still observing.
Mike Summey: Roger made me what I am today. I’ve learned so much from him and made a fortune with his negotiating ideas. Thanks Roger!
Penny: Roger, you’ve had quite a humorous night. I’ve enjoyed it.
Quinn: Fort Worth: I find it hard to see exactly how the one house turns into $100k passive income/month, but I have faith…
Roger Dawson: Mike, thank you! I’m positively swooning!
Quinn: Fort Worth: *Group Hugs Everybody*
Roger Dawson: Quinn, the high faluting name for that is sociocentrist. We all tend to see the world from our own viewpoint. Get over it.
Mike Summey: Quinn, my first house only rented for $250/mo. Today it rents for $950/mo. By adding more each year for over 25 years is how you get to 100K/mo.
Al Lee: Quinn, it really does! You make money three ways with rental houses and you never pay any taxes on it if yoru do it right (and legally, too). That accumulates fast and if you reinvest it for a few years you could be buying a truboprop twin some day.
Al Lee: Roger, in Califonia youlast remark might be heresy.
Mike Summey: Guys, I’m sorry we didn’t have more participation tonight. I guess our prior Sunday night chats are more convenient to people, so we will try to get back to them.
Roger Dawson: It was quality Mike, That’s what counts.
Ralph Roberts: easier on me… less words in the transcript
Mike Summey: Al, do’t worry about Roger. He’s an Englishman…and Englishmen think differently. He’ll get over it eventually.
Ken: I second Quinn’s thought on Rogers negotiating expertise. I noticed Roger’s name on the book and knew from reading his “power negotiating for salespeople” it would be a good one. What I was suprised at was how simple and easy Mike laid everything out fo you. I will put it to the test and use what I can. Thanks for the help guys, and we should chat again. Mike - work on the spelling in the meantime - just kidding.
Mike Summey: Ralph is the greatest webmaster anyone could have. Doens’t he do a great job?
Al Lee: I am not sure you can ever get over being English, can you?
Roger Dawson: If King Georg hadn’t lost his head, this would still be a British colony!
Mike Summey: But he did!!!!!!!!!!!!!!!
Quinn: Fort Worth: The site is really good. The media stuff works well. The discussion board seems a little lonely, though
Roger Dawson: Al, I’m confused. Why would one want to get over being English?
Al Lee: Actually, you wouldn’t.
Ralph Roberts: yes, we need more posters to make the Forum take off
Roger Dawson: You could stick England in one little corner of Texas, and improve the place considerably.
Mike Summey: Quinn, we’ve intentionally stayed away from the forums for the past several weeks to try to get others people to respond to questions.
Quinn: Fort Worth: Roger, do you or Mike ever post or read in there?
Al Lee: I wouel have sent out a notice to my subscriber list about the chat but I did not have enough advance notice to do so. Next time I’ll try to get it out.
Ralph Roberts: Why not, London Bridge helped Arizona.
Quinn: Fort Worth: I see
Mike Summey: Quinn, I treie dto respond to all the postings, but that seemed to discourage others from responding.
Quinn: Fort Worth: Roger: Improve which? England or Texas?
Roger Dawson: Quinn: Oh, clever! And I thought it was obvious!
Roger Dawson: Okay, folks, got things to do. See you next time.
Mike Summey: Same here.
Quinn: Fort Worth: Thanks, Roger!
Al Lee: So long, Roger. Stiff upper lip and all that.
Ralph Roberts: see ya, Roger … and visit Roger’s website at http://rdawson.com
Quinn: Fort Worth: Thanks for answering all my questions!
Ralph Roberts: same great webmaster
Peter: Ok…thank you for the chat session…I look forward to the next one.
Mike Summey: We’ll try to get back to the Sunday night schedule to have more participation.
Al Lee: I like SUnday night, too.
Ralph Roberts: me, too
Quinn: Fort Worth: Monday is better for me, but I guess I got my own personal session tonight.
Mike Summey: That seems to work better for everyone, but it was either tonight or wait until next Sunday. Roger has been very busy.
Al Lee: Mike, whdon;t you fly that Duke, or King Air, to Addison Airport and I’ll come meet you and show you around DFW.
Al Lee: why don’t
Mike Summey: Quinn, we hope you can make Sunday because it seems to work better for more people. We’ve had dozens more in the chat on Sundays.
Ralph Roberts: I will have the transcript posted momentarily
Ralph Roberts: good night, all
Al Lee: G’Night Ralph
Quinn: Fort Worth: Good Night
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