Chat 7-26-04
Posted on July 26, 2004
Welcome to the chat, Ralph Roberts!
[Investment Chat]: Ralph Roberts has entered (7:58 pm)
Ralph Roberts: hi guys… let the games begin
Mike Summey: If the sellers have little equity, they probably are not good prospects.
[Investment Chat]: Roger Dawson has entered (7:59 pm)
bobbys: Well, there are a lot of homes for sale here, at all price ranges.
Mike Summey: Hi Roger & Ralph.
Ralph Roberts: welcome, Roger
Mike Summey: I beat you here tonight.
Ralph Roberts: yes
Roger Dawson: I had to come in all the way from the West Coast!
Mike Summey: Bobbys, where there is little equity there is little room to negotiate anything other than price.
justin: I’m not sure. I just bought a foreclosed hud home at a bargain. I’m going live in it as hud requires and then after the first year I’m expected to rent it. I’m near a college town, so hopefully will not have too much trouble getting it rented.
bobbys: Real estate has always been a bit pricier here than in other parts of the state.
Mike Summey: justin, that sounds like a smart move.
Roger Dawson: Had dinner with a builder last night. He’s building 120 homes, in a gated neighborhood, and doing them 10 at a time. When he started, he planned to sell them for $380K, now he’s selling them for $500K
Mike Summey: Bobbys, remember that price is only one part of the equation. Terms is the other. I’ve paid above asking price when I could get the right terms.
bobbys: So, seems as if we might be wasting time on sellers who have little equity and therefore little room to negotiate?
Mike Summey: Bobbys, that’s probably true unless you have a lot of cash or the credit to get a high percentage of financing.
Roger Dawson: HU
bobbys: What cash I do have will be wiped out with only one purchase, so I don’t want to get too tight starting out……I will remember that sellers may have more flexibility with terms.
justin: I got 100% financing from chase for a 30yr loan. What’s the chance that I can get that deal for the next house.
Mike Summey: Everyone is standing for the national anthem at the Democratic convention.
Roger Dawson: HUD has a website where you can access all there listings. It’s hud.org. (Not hud.com which is a forclosure service.
Ralph Roberts: which national anthem do they favor? 
bobbys: I have trouble typing qwhile standing
Mike Summey: me too
Mike Summey: justin, I’ve been correspondint with an investor in NY who has gotten 30 yr financing with the first 10 years interest only.
Roger Dawson: Is it on Fox? I want fair and balanced reporting!
Mike Summey: The nice part about having a chat online is that you can listen to the convention and participate in the chat at the same time.
bobbys: Mike, the reason I asked about the kind of financing we should have before making offers is because a real estate agent saind that he’dd seen many of my kind (novice investors) come and go, so he wanted me to have some finaning all ready so we could act quickly. What do you think?
[Investment Chat]: SFEB has entered (8:07 pm)
Roger Dawson: Hi SFEB
SFEB: Good Afternoon! How are you?
Mike Summey: bobbys, you’re agent is correct that he has seen many novice investors come and go. Having financing in place is not what causes them to go, it’s lack of patience and persistence.
Mike Summey: Hi SFEB
Roger Dawson: Is anybody in a buyer’s market?
bobbys: Should weekend millionaires use a buyer’s agent, or wheel, deal and act alone?
justin: I’ve been strictly looking at hud and have not gone through the neighborhoods. Actually, I’ve browsed some neighborhoods, but have not started calling agents. Should I start doing this?
SFEB: Hi. I am new to the chat room, and wanted to observe and learn for now.
bobbys: Roger, I think you’d call Austin a buyer’s market.
Roger Dawson: Bobby, I think you get the best buys dealing directly with the sellers.
Mike Summey: I was talking with Carleton Sheets on Saturday and we were discussing some research he had that showed several markets where prices have actually declined slightly in the past year.
Mike Summey: SFEB, we’re all friendly and there is no such thing as a dumb question.
[Investment Chat]: Larry W has entered (8:10 pm)
Mike Summey: Hi Larry
SFEB: I am in San Francisco, and it definitely is NOT a buyers market.
[Investment Chat]: Bruce has entered (8:11 pm)
Ralph Roberts: welcome, Bruce
Mike Summey: SFEB, you’re right about that. We’ve had many people complain about prices in the Bay area.
Mike Summey: Hi Bruce
Mike Summey: Larry & Bruce, where are you from?
[Investment Chat]: Eddie has entered (8:12 pm)
Mike Summey: Hi Eddie
Roger Dawson: Welcome Eddie
Larry W: Raleigh, Just talked to you about coming to Raleigh
Mike Summey: I thought that might me you. Glad to have you with us.
Eddie: Hello
SFEB: Yes, the book you gave out at the big Learning Annex seminar was the most valuable resource I came away with. The only thing is that I am beginning to believe I need to look beyond the 10 mile radius you suggest in the book.
[Investment Chat]: wally has entered (8:13 pm)
Mike Summey: This is just a friendly chat where everyone is welcome to exchange ideal and discuss real estate investing.
Mike Summey: Hi Wally
Bruce: Bruce - I’m from Minnesota
wally: Hi Mike
Mike Summey: Well, we have the country well represented already, Texas, California, Minnesota North carolina.
Mike Summey: Has anyone made a purchase this week?
Roger Dawson: Minnesota still has reasonable prices doesn’t it?
Mike Summey: Or made an offer?
Eddie: I did
bobbys: I have followed the weekend millionaires first 3 weekends homework. Now I seem to think I need to make offers. A cold chill comes over me when I think “Of crap, what do I do if the say YES!”
Larry W: Mike ,I read the last chat notes from weeks ago most of your RE is North and South Carolina- Do you mostly buy SFR?
justin: So, if it’s a buyer’s market do you suggest to stay out until a good deal comes along?
Mike Summey: Eddie, tell us about your offer.
Roger Dawson: Justin, did you mean seller’s market?
Mike Summey: bobbys, that cold chill will warm up when you know the offers you make will definately work yfor you if accepted.
SFEB: I have a question. In the book you suggest, that if you have enough equity in your home, you can get a home equity loan for a down payment on an additional house as a method for no money down. Would that potentially eat into the cash flow with the home equity loan plus a mortgage?
Mike Summey: Larry, I started with SFHs, but over the years have expanded into multi-family, commercial, mobile home parks, etc.
Roger Dawson: SFEB, you’d be financing 100% but if the numbers still work, it’s okay. and the leverage is great.
Eddie: I made an offer on a single family home that was foreclosed on. The bank was asking $45,000 for it and we made an offer of 20. They countered with 38 so we went back with 23. They came down to 28 so I told them I would give them 25 and 10,000 earnest up front and they agreed. They also only took 500 earnest.
bobbys: Structuring loans with partbeing financed by a bank and part by a seller-would you say that is the best route to take for a first-time investor?
Roger Dawson: Eddie, that looks good to me.
Mike Summey: SFEB, the way an equity line helps is it allows you to get the money needed for a down payment with convential financing and usually after a year or two you can refinance for enought to repay the equity line allowing you to start the process all over again.
[Investment Chat]: Testut has entered (8:19 pm)
Bruce: the bottom of the market in MN is over 100,000 in the Minneapolis area
Eddie: Yea, my wife and I are very pleased. The house has already been completely remodeled
Mike Summey: Hi Testut
Roger Dawson: Hi Testut!
Testut: Hello Mike/Roger
Mike Summey: Eddie, you need to be teaching Roger negotiating skills.
[Investment Chat]: Penny has entered (8:20 pm)
Mike Summey: Hi Penny
Penny: Hey there.
Eddie: This is our fourth purchase this year
SFEB: Thank you Mike. Do you feel using home equity loans is a good way to accellerate the long process of buying more rental properties as equity builds?
Mike Summey: bobbys, blended financing with conventional lenders and sellers is a great way to start.
Roger Dawson: Mike hates me using rules of thumb, but if you’re paying $100K and renting it for more than $750 a month, you can probably make it work.
bobbys: Mike- Loved your book-it was the book that changed me from a thinker to adoer. As repayment, would you like me to tell you about a typo?
ike Summey: SFEB, when you can get a revolving line of credit to use to purchase income properties it gives you so many more options.
Roger Dawson: I would
justin: Eddie, can you tell us how you went about selecting this house
Testut: Mike/Roger, how do you feel about interest only loans (fixed 7 or 10 years) if this is the only way to make positive cash flow?
bobbys: Mike/Roger p. 200, 2nd paragraph, 3rd line reads “buyers” when I believe you mean “sellers”!
Mike Summey: Once you can get a property paid for, you can use it as colleratal to establish a line of credit. I will be closing a $2,200,000 line of credit on Thursday using a commercial property as security.
Roger Dawson: Testut, I’m okay with interest only loans. The principal doesn’t pay down much in the first seven years anyway.
Eddie: I live in eastern North Carolina and rental property is doing really well. It’s in a nice neighborhood but no one seems to want to buy. I have a close friend that is an agent and she knows what we are looking for.
Larry W: I have a 13 space MHP/100% leased in Mocksville,NC I will owner finance
Roger Dawson: bobbys, you’re right on the typo. We’ll get it fixed in future editions. Thanks.
Eddie: So far I have purchased a 26 unit apartment complex and 7 houses in the past year and half and I currently rented my last unit today. It’s unreal.
Roger Dawson: That’s great Eddie!
bobbys: How do we learn what a seller might owe on the property if we are dealing with the seller’s agent? Do we just ask?
SFEB: So, in summary using a revolving line of credit would allow me to purchase more homes, if not necessarily maximize cash flow in the short run.
SFEB: So, in summary using a revolving line of credit would allow me to purchase more homes, if not necessarily maximize cash flow in the short run.
Ralph Roberts: hi Rich
Roger Dawson: Welcome, Rich
Rich: Thanks
bobbys: So I needn’t
Mike Summey: SFEB, a revolving line of credit give you the option to buy for cas with a quick closing, then gives you time to secure permanent financing at your convenience.
Mike Summey: Eddie, I will be in Raleigh September 21 & 25.
Mike Summey: Hi Rich
Rich: Hi Mike
bobbys: Ooops… so I needn’t use an agent to help me make offers and negotiate. A bit frightening at first….
Eddie: That’s great, I’ll be looking for more info
Testut: Mike/Roger, What business entity do you use for your RE investments? LLC? other?
Mike Summey: Eddie, details will be on the events calendar on the sebsite soon.
Eddie: Thanks
Roger Dawson: Bobby, it’s not as intimidated as you think. The for sale by owners don’t know much about real estate either.
Mike Summey: bobbys, you don’t have to use an agent, but you may want to find a buyers agent who will represent you rather than the seller.
bobbys: Who pays the buyer’s agent?
Roger Dawson: Testut, I’ve always used my own name to take title, but Mike’s big on LLCs.
Mike Summey: bobbys, usually the buyers agent shares in the listing agent’s commission.
Mike Summey: Testut, I took title in my own name until recently when my atorney and accountant advised me to use LLCs.
Rich: Mike/Roger - have you used land trusts?
Roger Dawson: There are some buyer’s agents who work only for the buyer and will not take commission from the seller, but it’s rare.
Mike Summey: Rich, no I’ve never used a land trust.
SFEB: I found out about this chat room through Al Lee’s website, and recently joined the Tortoise Clubs. Anyone use their Turnkey Investment program, and if so how did it go?
Roger Dawson: Rich, neither have I used land trusts. You mean where the seller holds title until the loan is paid?
Rich: Thanks Mike
bobbys: In Austin there are many many “bread and butter” homes for sale. I assume that we’d call this a buyer’s market. Does that bode well for investing?
Mike Summey: Larry, would your club members like to take part in these chats?
Rich: yes, Roger
Eddie: Our agent seems to be very satisfied looking for us. We usually send her a gift certificate at a nice restaurant for her and her husband.
Roger Dawson: Then land trusts are great for the seller, but put the buyer in a vulnerable position.
Mike Summey: bobbys, we have had several people tell us that Texas is one of the best states in the country to invest in SFHs.
Larry W: Yes, I’ll spread the word. This was the fastest 1/2 hr
Rich: Thanks Roger
Mike Summey: Eddie, I’ve used a buyers agent who takes his commission over 60 months. Thsi lets him build an income stream without buying a property.
Mike Summey: Larry, time flys when your having fun…or learning!
bobbys: Mike, you use a buyer’s agent who gets a % commission paid by you, or the seller?
Mike Summey: Larry, at your next meeting, please tell you members about our website and remind them to sign up as a new user. Then they will all get the email notices of the chats.
Mike Summey: bobbys, his commission is actually a split of the l isting commission, but he agrees to take it in payments from me. this means I have to come up with less cash at closing.
bobbys: Brilliant.
Roger Dawson: The trend is toward buyer’s agents, meaning that the seller pays both sides, but the relationship between the parties is more clearly defined. The buyer’s agent is working solely for the benefit of the buyer.
Mike Summey: bobbys, I had one transaction where he took $18,000 over 60 months.
Larry W: I have a builder, building new single family res. for 80%ltv. The bankers love it so they give me all 80%$
Mike Summey: larry, we have a friend in Dallas doing the same thing.
Mike Summey: He keeps some of them and spins off others.
bobbys: Guys, tomorrow I meet with my CPA and I would like to know if I should find another CPA who actually is a realestate investor himself. Any thoughts?
Larry W: Mike, I told him i would buy 100 a year for 5 years
Mike Summey: Larry, I want to look at that when I’m in raleigh.
Mike Summey: bobbys, whether the CPA is an investor or not is immaterial. What’s important is the he/she knows the tax implications of investing in real estate and can advise you appropriately.
Testut: Mike/Larry, how does that work? Is the builder selling the homes for 20% below FMV
Roger Dawson: I don’t think a CPA has to be an investor. CPAs are not very good at risk taking. As long as your CPA is up on the rules and thinks creatively, you’re okay.
Larry W: ok, How do you find a deal on commercial?
justin: Can someone explain a buyer’s market and seller’s market?
Mike Summey: Larry, commercial is much more complicated than SFHs, but there are great deals there as well. You just have to be very careful and make sure you get all the facts before making an offer.
Mike Summey: justin, a buyer’s market is one in which there are more sellers than buyers. A sellers market is just the opposite; more buyers than sellers.
Roger Dawson: When there are more buyers than sellers prices go up. A good indication is the number of days on the market. Any agent can show you the statistic from their local board of realtors. It’s the average number of days that it takes a listing to sell.
Larry W: Testut, yes he knows he has a buyer for all his houses. He makes good $ and I get 20% equity at closing. Everybodies Happy
Testut: Thanks Larry
Mike Summey: Larry, I’d be cautious about owning too many homes in a single neighborhood. Homeowners who live in their home help police tenants who rent in the same neighborhood.
Mike Summey: Personally, I don’t like to own more than 10-15% of the homes in a neighborhood.
Testut: Roger, would you extend that into a “Renters” market? How many days it takes on average to get a tenant?
Roger Dawson: I guess you could, but I’ve never heard of that statistic being kept.
Larry W: I give the neighbors my business card and tell them to call if anythings going on
Mike Summey: Good idea.
Mike Summey: Where’d everyone go?
bobbys: Well, after completing the NOI calculations on different properties, Iguess there’s only one thing left fo me to do- make an offer.
Eddie: Still here just going back and reading some of the other comments
Mike Summey: That’s right.
Roger Dawson: Was talking to a doctor on Thursday from Bakersfield. Said he was making more money by accident owning real estate that he was working 60 hours a week.
SFEB: Earlier in the chat you directed a comment at Larry about club members joining this chat. Is this in reference to the Tortoise Club?
Mike Summey: bobbys, making that first offer is always the hardest. Each one get easier after the first bacause you learn from each one.
Roger Dawson: I think it was in reference to the Raleigh NC investors club.
Mike Summey: SFED, no, I was referring to the Triangle Real Eastate Investors Association members in Raleigh, NC
Testut: Mike/Roger, after you first got started in RE investing, how many homes did you acquire before you started to feel financially secure?
Larry W: SFEB, that’s TREIA as in www.treia.com Our local REIA for Raleigh,NC
Mike Summey: Any of the rest of you who are members of a real estate investors club, you are welcome to invite your members to join us as well.
SFEB: Thank you.
Roger Dawson: Testut, when the cash flow from my properties exceeded my income.
[Investment Chat]: Rich has entered (8:55 pm)
Eddie: I’ve been looking for a club in eastern NC, haven’t found one yet
Mike Summey: Testut, I was secure after the first one, I just got more secure with each additional purchase because I bought them right.
Mike Summey: Eddie, check the clubs on our website. We list all the ones we can find in the country together with the contact information. They can be found by clicking the Investor Clubs button.
Testut: Mike, do you still recommend using a property management company starting from investment #1?
[Investment Chat]: Roger Dawson has entered (8:57 pm)
Eddie: Ok, thanks
[Investment Chat]: Eddie has entered (8:58 pm)
[Investment Chat]: SFEB has entered (8:58 pm)
Mike Summey: What happened? did everyone jump out and then back in?
Roger Dawson: I pressed the wrong button, but I’m back now
bobbys: Don’t know…….I’ve been sitting here trying to get it all to sink in…
Eddie: I didn’t go anywhere, I don’t know what happened
SFEB: yes. when you suggested looking at Investor Clubs, I clicked on that button, and it took me out of the chat.
Mike Summey: bobbys, trust me, it will sink in slowly.
Mike Summey: Sometimes these chats cat get so lively you can hardly read the text before it scrolls off the screen.
Roger Dawson: I want to thank you all for recommending our book. Sales continue to climb and it’s all on word of mouth.
Larry W: Eddie, log onto TREIA.com/ board and email me
justin: when’s the next one coming out?
Eddie: Thanks Larry, I’ll do that
Mike Summey: It has to be word of mouth because we have not been doing too many radio & TV shows lately yet sales have climbed for 8 straight weeks.
bobbys: Mike, I make an offer, suppose, and we go back and forth, but they accept. Perhaps it calls for 70% new $ and 30% seller financing. My credit is ggod-I shouldn’t have any trouble getting those monies, right?
Roger Dawson: In the spring of next year Justin. It’s called the Weekend Millionaire’s Mindset.
Eddie: Larry I live just a few miles from Greenville, NC
Larry W: We have members in Greenville
Eddie: Great
Mike Summey: bobbys, it certainly wouldn’t hurt to visit some of your local lenders and talk with them. They can often times give you a preliminary approval in the beginning.
Mike Summey: bobbys, if you are the least bit concerned, put a line in the contract that reads, “Offer subject to being able to secure financing acceptable to buyer.”
[Investment Chat]: Benny has entered (9:04 pm)
Mike Summey: Hi Benny
Mike Summey: Where have you been.
Roger Dawson: Some of these lenders wouldn’t give the president a loan. Doesn’t live in his own home and has an uncertain employment future.
bobbys: Mike, I started that task today- B of A, who handle my business accounts seems not to be the small real estate investor’s best friend. They work with rather strict 20% down parameters.
Larry W: Mike, do you recommend residencial lenders or commercial bankers for newbies
[Investment Chat]: Bruce has entered (9:05 pm)
Eddie: bobbys, we have a couple of banks that will now actually loan us 100% on a property
Benny: I’m new to this game. Do you all find that most lenders you work with want 20% down?
Mike Summey: bobbys, I know how you feel. At one time B of A was my lead bank. Today I do nothing with them.
Mike Summey: Benny, 10-20% down is pretty standard for commercial lenders, but there are huge opportunities using seller financing.
Larry W: b of a did my first reo 10 yrs ago and haven’t done one since
bobbys: I could threaten to take all my loans, all my accounts away from them if they don’t “dance” with me. I bet that will really scare them……. Ha!
Benny: I am working with Al Lee - tortoise club. has anyone had expereince with this group or with Al?
bobbys: Benny-never heard of them.
Mike Summey: bobbys, making threats rarely, if ever, gets you anywhere with bankers.
Eddie: I have had best results with small local banks to start with because it seems easy to build a relationship with the lender
bobbys: Just kiddin’, Mike
[Investment Chat]: Eddie has entered (9:09 pm)
Roger Dawson: wb Eddie
Benny: Anyone else?
Mike Summey: One of the biggest problems I’ve had with the large multi-state banks is turn over of employees. They can’t seem to keep people in the same job long enough to build trusting relations.
SFEB: I too am looking at Tortoise Club, but have not heard any feedback about other people’s experience.
Eddie: I started with Southern Bank then BB&T and now First South
Mike Summey: Al Lee has participated in several of our chats, but I have never done a deal with him.
bobbys: That’s been my problem too. We’ve had three separate closings with B of A over 2-1/2 years - each time with a different “personal banker”!
Benny: SFEB where do you live? I want someone around there to confirm that the operation is legit and high quality.
Benny: What’s your take on him Mike?
SFEB: I live in San Francisco, and attended his last seminar and was impressed, but have not done any deals yet.
Benny: Me too.
Mike Summey: The best advice I can give about banks is to develop relationships with several. Banks are businesses just like other businesses. They have their ups and downs too. When you’re locked into one bank, you have to ride their wave and it may not be the wave you want to ride.
SFEB: hmmmmm…no response so far, should we worry?
SFEB: hmmmmm…no response so far, should we worry?
Benny: Mike?
Mike Summey: Benny, I had lunch with Al when I was in Dallas and he seems to be a reputable person, but I haven’t done business with him nor do I personally know people who have. Why don’t you just email him and ask him for references?
bobbys: Thanks for the “vine”, Mike and Roger. I really appreciate it. Will report back on how my first offers go.
Benny: I did. I got one person only in the club and they were only willing to talk via email. No past club members.
Roger Dawson: I need to leave you now. Thanks for your participation!
Ralph Roberts: nite Rog
Rich: Thank You
Mike Summey: bobbys, don’t get discouraged if you aren’t successful with the first few offers…it took me nearly a year to buy my first rental house.
Mike Summey: Goodnight Roger
bobbys: Thanks for pumpin’ me up. Continued success to you.
bobbys: Thanks for pumpin’ me up. Continued success to you.
Mike Summey: I’ll be needing to leave soon myself so if anyone has any more questions you are dying to ask, do so now or hold your peace until next Monday night.
SFEB: Thank you for the chat!
Mike Summey: I hope everyone enjoys these chats. Roger & I want to do all we can to encourage you and help you become a successful investor.
SFEB: Thank you for the chat!
Mike Summey: I hope everyone enjoys these chats. Roger & I want to do all we can to encourage you and help you become a successful investor.
Eddie: Thanks for all the information, I look forward to doing this again
Mike Summey: Yes, we will chat again next Monday, same time, same place…without the Democratic Convention for competition.
Ralph Roberts: and the transcript (of this chat, not the Democrats) will be published shortly.
[Investment Chat]: Eddie has entered (9:18 pm)
Ralph Roberts: click on CHAT TRANSCRIPTS
Mike Summey: Let’s all give our great webmaster Ralph a big hand for all he does. He will have this chat transcript posted within minutes.
Larry W: I had some DNC girl knock on my door today. I gave her a BUSH sticker
Mike Summey: See you here next Monday.
Ralph Roberts: nite mike
Mike Summey: Be sure to tell your friends about the chats.
Larry W: Thanks RALPH, goodnight
Penny: nite all
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