Chat 1-24-05
Posted on January 24, 2005
Welcome to the chat, Ralph Roberts!
[Seminar Room]: Michele has entered (7:56 pm)
Ralph Roberts: hi Michele
Michele: Hi Ralph
[Seminar Room]: Jeremy has entered (7:58 pm)
Ralph Roberts: hi Jeremy… welcome
Jeremy: hi thank you, first time here
[Seminar Room]: Shane has entered (7:59 pm)
[Seminar Room]: Lina has entered (7:59 pm)
[Seminar Room]: Roger Dawson has entered (8:00 pm)
Ralph Roberts: Great, Jeremy! Mike and Roger should be here in mere moments.
Ralph Roberts: see, there’s Roger!
Shane: Hello Every one
Ralph Roberts: hi Shane… hi Lina
[Seminar Room]: Stephen has entered (8:00 pm)
Roger Dawson: Hi Shane!
Ralph Roberts: Hi Stephen
[Seminar Room]: Coach Karl has entered (8:01 pm)
Ralph Roberts: Roger, this is Jeremy’s first visit, say ‘hello’ to him.
Ralph Roberts: Hi Karl
Coach Karl: Hi every one!
Lina: Hi, thanks for the welcome.
Roger Dawson: Hello, Jeremy. Welcome, we’ll promise not to put you on the spot.
[Seminar Room]: Mike Summey has entered (8:02 pm)
Lina: Hi Jeremy. This is only my second time on.
Roger Dawson: I’m in sunny California but I have to fly to Pittsburgh tomorrow morning. Any know the weather?
Mike Summey: Hi everyone
Jeremy: HI everyone! .. I read the book many months ago and finally able to get on here
Roger Dawson: Hi Mike!
Lina: Hi Mike.
[Seminar Room]: Stephen has entered (8:03 pm)
[Seminar Room]: Bruce has entered (8:03 pm)
Mike Summey: Hi Stephen
Mike Summey: Hi Bruce
Shane: I bet it is not as warm as California
Stephen: Hello
Bruce: Hi Mike
Coach Karl: what are we talking about tonite?
Lina: I was in an area in Raleigh yesterday that had some FSBO signs on two plexes.
Mike Summey: It was 9 degrees this morning in Asheville…brrrr e
[Seminar Room]: Bryant has entered (8:04 pm)
Stephen: First time in the room for me tonight! Just finished Weekend Millionaire this past weekend.
Mike Summey: Hello Bryant
Mike Summey: Great! Glad you could join us.
Roger Dawson: I spoke to National Land Partner in Orlando last week. They buy 100 - 4000 acre parcels, put in roads and utilities and sell five acre lots. I was able to give them two good leads from last weeks chat, so if you know of any big parcels of land for sale, let me know.
Bryant: hello everyone
Lina: What area are they looking for Roger?
Roger Dawson: Lina, they operate from Maine to Florida and out to West Texas.
[Seminar Room]: KTLu has entered (8:06 pm)
Lina: I’ll keep my eyes open. I have not been looking in that direction.
[Seminar Room]: sermiex has entered (8:06 pm)
Roger Dawson: Lina be sure you check out those two plexes (called duplexes) could be a good lead
sermiex: Hi all!!
Roger Dawson: Hi Sermiex!
Bruce: hello sermiex
Coach Karl: Wow! Alot of people tonite.
Mike Summey: One of our readers, Steve Murray, sent me an email this afternoon advising that he couldn’t make the chat, but he wanted to share some good news. He had his 2nd offer accepted.
Mike Summey: Hi KTLu & sermiex
Mike Summey: Hi Karl
Roger Dawson: Mike, can you cut and paste that Email? I thought it was great.
KTLu: hello…!
Mike Summey: Glad you could be with us again.
[Seminar Room]: Al Lee has entered (8:07 pm)
Roger Dawson: Hi Al!
Mike Summey: Hi Al.
Coach Karl: Howdy Mike.
Al Lee: Hi, everyone. I made it.
Mike Summey: Roger, I’ll try.
Lina: One is a quad and one had six units, Roger. I talked with the guy that had the 6-plex and he wanted to know if I was a broker. When I said no… he eased off. I’m thinking he is wanting to put a lot of the money in his pocket.
[Seminar Room]: sermiex has entered (8:08 pm)
Al Lee: Mike, did you ask yet if anyoen’s bought any properties this week?
[Seminar Room]: GrayC has entered (8:09 pm)
Mike Summey: Ralph, How do I cut and past to the chat? Or can it be done?
Mike Summey: Hi Gray
[Seminar Room]: sermiex has entered (8:09 pm)
Shane: Does anyone have any suggestions were to buy refrigerators and stoves at a good price
GrayC: Hi everyone!
Mike Summey: Shane, I get mine at Lowe’s
Stephen: mike summey and roger dawson, when do you use an agent to represent you when buying and when do you do it on your own
Lina: Shane, if you are looking for used… I have found the local rescue mission a grand place.
Roger Dawson: Lina, don’t assume that he wants too much. Check it out. Eyeball using the monthly rents versus sales price. It’s a very crude rule of thumb but if he’s not asking for more than 120 times the total month rates, you’re within deal range.
Mike Summey: Stephen, I use an agent most of the time. I find that it frees me up and I don’t have to worry about all the details.
Al Lee: I have a guy, club member, who has a business installing new appliances for Lowes, Sears, etc. He keeps the good take-outs and I can buy them really cheap. He installs them and repairs them, too
Shane: Mike, I have been buying used, but seems like new is not much more. 185 refr 150 for stoves
Stephen: so do you write the offers and then have a real estate agent present it to the seller
Mike Summey: Shane, we have a used appliance dealer here who repairs and sells used appliances with 90 day warranties. I use him a lot as well.
Shane: Thanks Linda
Lina: Thanks Roger… I’ll run the numbers. The location is SO good.
[Seminar Room]: Jeremmy has entered (8:12 pm)
Mike Summey: Stephen, I have a buyer’s broker that I use on most of my transactions. He represents me, but he gets paid from the listing broker
Mike Summey: Hi Jeremmy
Stephen: thanks
Shane: Mike, Al How about carpet?
Roger Dawson: Coach Karl: are you a speaker type coach or a sports type coach?
Mike Summey: Stephen, what I mean is that he get the sellers split of the commission.
GrayC: Al, I know you are “big” on interest only loans. Are those available for commercial purchases?
[Seminar Room]: Doug in CT has entered (8:13 pm)
Mike Summey: Hi Doug
Stephen: right i understand mike. thanks
Coach Karl: Stephen, I have found that your buyer’s broker can be great, but they need to know what and how you are trying to buy.
Doug in CT: Hi Mike
[Seminar Room]: Jeff-south Fla has entered (8:13 pm)
Roger Dawson: Hi Doug! How’s the weather up there? I’m flying to Pittsburg tomorrow.
Mike Summey: Hi Jeff
Mike Summey: Looks like the cold weather is bringing out a good crowd tonight.
Al Lee: Interest-only may be available for commercial purchases. On those deals it is strictly a maatter of your negotiations with the bank/lender.
Doug in CT: We only got a foot of snow– they were predicting 30 Inches, so we got off easy.
Jeff-south Fla: Hi
Coach Karl: Mike, and there is no football
Mike Summey: Coach Karl, you work with Carleton Sheets organization, right?
Stephen: do you try to work with more than one broker or do you try to work with one broker exclusively? I figure the more brokers the more people helping you find good rental properties..
Al Lee: What you won;t likely get is a fixed rate for mre than a few years. Five or ten at most.
Mike Summey: Roger asked a minute ago.
Coach Karl: Mike, Yes, In Personal Coaching
Doug in CT: Roger the football came looked very Raw in Pittsburg yesterday.
Mike Summey: I was answering that for Roger, Karl
Roger Dawson: Thanks Karl. We’re big fans of Carleton’s program.
[Seminar Room]: Jeremy has entered (8:16 pm)
Mike Summey: Stephen, I use primarily one broker who represents me, but he works with dozens of other brokers to find properties.
Coach Karl: Glad to hear it!
[Seminar Room]: mike has entered (8:16 pm)
Mike Summey: Hi mike
Jeremy: sry for the in and out .. computer keeps freezing
Mike Summey: there’s two of us now.
Lina: I have two offers on the table right now. One I think will go and the other probably not.
Stephen: In creating your team, do you find it’s important to find a maintenance person? Or does that something you can have your property manager do for you?
Mike Summey: Karl, I spoke with Carleton a few minutes ago and invited him to join us tonight, but he has house guest and probably won’t be able to.
[Seminar Room]: Kim-OH has entered (8:17 pm)
Al Lee: I just put contracts on 8 proeprties, two are duplexes, from one investor. All will generate positive cash flow.
Coach Karl: Lina, Tell me about the “probably not”
Mike Summey: Hi Kim
GrayC: Al, any lenders you would recommend? We have single family investments but are wanting to branch out into commercial investing. The interest only loans have worked great for us with the single family properties.
Kim-OH: Hi Mike
Coach Karl: Mike, it is fun when he joins in.
Lina: The one that will probably go is a duplex that I will cosign for my son on. He is 22 yo and want bad to be a re-investor so he can live in one and rent the other.
Mike Summey: Stephen, I let my management companies find the maintenance people. That’s part of the service they provide.
Bruce: Mike, Roger - This Thursday I’m going to an auction. It’s a BK and hostile environment. The current owner won’t give the bank the rent roll or operating expenses. The auctioneer does have ‘unofficial’ rents. I’m using 35% for expenses, 5% as my vacancy factor. I’m backing into the price, what else should I factor into the decision? The property’s were renovated within the last two years, seperate meters, very strong rental area.
Al Lee: I have a line on about $14 Million more worth of occupied rental properties from older investors who want to cash out and retire.
[Seminar Room]: Shane has entered (8:18 pm)
Stephen: ok good. otherwise i don’t know how you can manage a lot of property
Mike Summey: Hi Shane
[Seminar Room]: David V has entered (8:18 pm)
Mike Summey: Hi David
Stephen: thanks for the tip mike summey
David V: wow crowded room
Lina: The one that probably will not is a dump! It needs total redo. It is a forecloser that they were asking $56,000 for and I offered $40,ooo
[Seminar Room]: Penny has entered (8:19 pm)
Shane: Hi Mike, lost my internet connection
Al Lee: Hi, Penny
David V: Hey mike
Penny: Hi Al.
Roger Dawson: Hi Penny!
Coach Karl: Lina, does the bank own it?
Stephen: sorry to keep asking silly questions, but if the broker represents you when buying, when would you use the negotiating skills you teach in the book?
Mike Summey: Bruce, calculate the rents and vacancies based on market conditions for where you are and make your offer based on what the property should be able to do rather than what a seller in distress says it will do.
Mike Summey: Hi Penny
Penny: Hi Mike.
Lina: They said they had several offers, but a friend of mine looked at that same dump property 5 years ago when it was on the market then.
Mike Summey: Stephen, direct that to Roger. He’s the negotiating guru.
Lina: I guest-imate the value of the property fixed up is $125,000.
Coach Karl: Lina, in those cases, there is not much else you can do.
Roger Dawson: Bruce, have you been able to talk to the bank officer handling this bankcruptcy situation. They usually are straight with you because they fear repercussions if they misrepresent.
Penny: Hi Roger!
GrayC: When purchasing mobile home parks, would you all recommend purchasing parks where the mobiles are park owned or where there are only pads to rent out?
Coach Karl: lina, WOW. how dumpy is it?
Penny: Back in warm weather?
Lina: It will probably take me $50,000 to fix it up. It is commercially zoned.
Stephen: Roger, do you handle the negotiations when buying a property or would you have the broker do that?
Penny: Roger, are you back in warm weathernow?
Mike Summey: Gray, I wouldn’t touch a park where I owned the mobile homes. Just buy the land and let the tenants take the depreciation on the homes.
Roger Dawson: Stephen, re negotiating. I challenge the agent to get the offer accepted but reserve the right to meet with the seller if they can’t. It really challenges them to go for it.
[Seminar Room]: JD has entered (8:22 pm)
Mike Summey: Hi JD
Bruce: Roger, they don’t have the rent roll or operating expenses. I have a pretty good idea of the area, the operating expenses should be 25 - 30% max.
Coach Karl: Lina, what do you see as the highest and best use of the property?
GrayC: Thanks, Mike. That’s what we were thinking also.
JD: Hi Mike
[Seminar Room]: Stephen has entered (8:23 pm)
[Seminar Room]: KTLu has entered (8:23 pm)
Mike Summey: Busy night tonight
Mike Summey: I think some people are getting kicked out and then coming back in.
Kim-OH: Roger, do you ever have problems getting the agent to do what you want?
Roger Dawson: Penny, I got back from Orlando late Saturday night but leave for Pittsburg early tomorrow. My body’s in California but it feels like my brain is still in Orlando.
[Seminar Room]: Jeremy has entered (8:24 pm)
Lina: Commercial use. Maybe a landscaper office or such. There is plenty of room to park.
Stephen: thanks for answer my question roger
Mike Summey: Stephen, where are you located.
Stephen: i’m in chicago
Roger Dawson: Kim, you have to find an experienced agent who wants to work with investors. We’re not the easiest people to work with because we make low offers, but some of them like it.
Lina: The area the house is in is on a hwy in a little town that is growing.
Kim-OH: Roger the agent I have now is experienced but he kicks on my desired offers
Penny: geeze Roger. warm to warmer, then back to cold again. You will really be confusing your body’s temperature. Good luck and safe travels.
[Seminar Room]: Jay Gajewski has entered (8:25 pm)
Mike Summey: Kim, find an agent who understands investors.
Coach Karl: Lina, how long has the dump been on the market?
Kim-OH: Roger he seems to want to be in charge and I’m fighting with him on that
Mike Summey: Hi Jay
David V: my realtor quit for that reason
Jay Gajewski: Hi Mike
Al Lee: If the agent balks at presenting the offer you want to make–get another agent. They are obligated to present every offer to the seller, regardless what they think of it.
Roger Dawson: Re Mobile homes. We once had a lucrative business in LA buying trashy mobile homes in order to take over the lease on the space. Shortage of spaces is a big problem. We sold the trash in Arizona and put a new mobile home into the old space.
Stephen: i actually live in downtown chicago. would you guys recommend that i focus my investments in the suburbs where there are actually single family homes?
Lina: I have an agent that does not mind making low offers… but RE is his second job and I don’t feel he gives it his whole heart.
Kim-OH: Al, thanks I know that and I’m going through agents at record speed
Stephen: it seems there are a lot of speculators in the high rise condos downtown chicago
GrayC: Any pros or cons on net lease investing?
Al Lee: Kim, just remind them that they are obliged to present the offer to the seller. It is their job and they can lose their license for not doing so.
Coach Karl: Lina, are you attending the offer presentaions with your agent?
Mike Summey: Stephen, you will probably do better in the suburbs. It’s tougher to get started in the major cities.
Roger Dawson: Stephen, we’re wary of condos because of the problems with home owners associations that don’t work to the investor’s best advantage.
Stephen: yeah that makes sense. thanks
Lina: A friend of mine bought a mobile home park and found that a lot of folks that wanted to live there could not finance the homes themselves so he buys them and finances them. He says it is good money.
Kim-OH: Al thanks I will do that, and I keep telling them I want to be there when they present and they have not gotten on board with that
Mike Summey: Kim, find an agent who will work for you. If you try to present your offers through a listing broker you must understand that the broker works for the seller, not you.
Stephen: i live in a condo right now and they keep jacking up the assessment fees every year
Kim-OH: Mike not using the listing agents for the most part
Jay Gajewski: I’m a beginning investor. Is it advisable to form an LLC to purchase properties through or should I just purchase in my own (and family’s name?)
Roger Dawson: Kim, challenge the agent by reserving the right to speak with the seller only if they can’t get your offer accepted.
Al Lee: Right, both brokers legally work fo rthe seller UNLESS you have signed a buying broker’s agreement with one.
Kim-OH: I have an interesting situation here as I have a list of 25 tenants waiting for me to get properties to modify and rent to them lol
Mike Summey: Stephen, that’s another of the big problems that makes condos a less that desirable long term investment.
Lina: Coach Karl, no… I don’t attend the offers. They are all done by phone.
Al Lee: Jay, if you want to get mortgage loans no lender will make thm into an LLC. If you can use commercial lending, and LLC is fine.
Stephen: i have been actually thinking to move out to the suburbs should i even look to rent this property out or should i just sell since the real estate market has appreciated so much
Kim-OH: Jay you will personally have to sign on the loans, most lenders will not lend to a new LLC
Mike Summey: Jay, I’d wait until I got my first property under contract and then set up an LLC to hold title to it. You’ll still probably have to personally guarantee the loan until you get established.
Al Lee: Most banks will nto make a commercial loan uneder $1M, soem have much higher minimums.
David V: I just had an offer expire this week. couldn’t get them to come down low enough
[Seminar Room]: Michele has entered (8:31 pm)
Mike Summey: Hi Michelle
Jay Gajewski: Thanks everyone. You just saved me $800!
Roger Dawson: Stephen, it depends on: can you cover your expenses with rent? Do you need the money a sale would bring you for investement capital?
Kim-OH: Al, the light just went on will commercial lenders lend for SFH if bought in quantity?
Coach Karl: Lina, A tele-conf might be helpful, so that you can voice your position
Mike Summey: Stephen, if the numbers work, by all means keep the property.
Stephen: well i’m at a 15 year fixed at 4.75%. if i refinance to a 30 year fixed i definitely can get positive cashflow of a few hundred dollars
Stephen: at 15 year though i don’t think i can break even
Al Lee: Kim, if you buy enough to borrow about $1M, you ought to be able to get commercial financing–but, they will loan only 80% max on the purchaase price. You will have to pay 20% down or more
[Seminar Room]: Jeremy has entered (8:33 pm)
Doug in CT: Gotta go do a chore, I will catch the transcript later. See ya.
Lina: Thanks coach… I’ll see what I can do. So much to learn..
Kim-OH: Al, that’s fine, I have my first private lender with funds lol
[Seminar Room]: Michele has entered (8:33 pm)
Jeremy: Hi, I read the book a few months ago and loved it. I just got out of insurance and I’m going back to school full time. I’m a newbie in real estate and as I looked at the different types of investing and I was intrigued by “Subject to” as a way to acquire property. Do you guys have any comments good or bad about sub2?
Mike Summey: Stephen, if you can rent at break even now I’d keep the 15 yr financing. the rents will go up with inflation, but that 4.75% will be hard to find again.
Al Lee: Kim, Great!
Kim-OH: Stephen, I agree totally with Mike on that!!!
Mike Summey: Jeremy, I’d be very cautious about buying “subject tos” What you’re talking about is illegal in most areas.
[Seminar Room]: JJ has entered (8:34 pm)
Stephen: yeah. i agree with you there. the interest is so low. i might be able to break even but with property management fee and assesments i may lose 200-300 bucks a month
Mike Summey: Jeremy, it’s an attempt to circumvent the due on sale clause in mortgage loans.
Mike Summey: Hi JJ
Kim-OH: Stephen can you manage the property yourself?
JJ: hey mike
Jeremy: ok thanks Mike. I didn’t know that
Al Lee: You can easily lose your entire investment if you buy “Subject to”. Loans are not assumable these days.
JJ: everyone
Roger Dawson: What does subject to buying mean? I thought it was just a way of including contingencies in an offer.
Mike Summey: Where you been JJ?
Stephen: yeah i could, but i want to hire a property manager right from the get go
JJ: i know many, many people who buy subjec to, and its fine…as long as you intelligently protect yourself
Stephen: i figure the professionals are going to do a lot better job at it then i can
[Seminar Room]: Neal Rz has entered (8:36 pm)
Jeremy: reading things online I never know what to believe
Kim-OH: Stephen, would it work if you manage it for the first couple of years until it cash flows?
Al Lee: Buying “Subject to” means paying the seller some equity (or not) and assuming the payments on his/her loan. That is not allowed on any modern loan. You used to be able to assume loans in the “old days”
Stephen: yeah probably
JJ: and buying subject to works better in normal markets, not as well in hot, fast aoppreciating markets
Mike Summey: Roger, buying “subjet to” means buying subjet to existing financing and is usually nothing but an attempt to bypass the due on sale clause of a loan.
Mike Summey: Hi Neal
Coach Karl: Jeremy, are you in a mortgage or trust deed state?
Al Lee: When the lender exercises its rights of the “due on sale” clause, you have to come up with the cash to pay off the loan, or lose the property andyoru investment
JJ: Jeff-south Fla, where you from?
Roger Dawson: If you want to assume an unlderlying loan, the best way is to have the seller transfer the property to a trust. Then you take over the trust. The bank is less likely to realize that ownership has changed. But it’s not ethical and I don’t recommend it.
JJ: roger that is exactly how people buy subject to
Jeremy: what I’ve read (again just forums online) said that the banks don’t really care about the due on sale as long as the payments are being made but I figured I would check with some of you that I trust (after reading your book)
Mike Summey: The best way to assume a loan is to go to the bank and ask to assume it. It’s not only the best way, it’s the legal way.
Al Lee: I believe that if you use a trust for purposes of deception it is illegal
Jeff-south Fla: JJ- palm BEach county
David V: The banks don’t care as long as interest rates don’t go up. then they will care
Kim-OH: Roger, there is a guy who buys subject 2 and sends the lender a letter telling the lender what he is doing along with his first payment and is relying on the doctrine of latches
David V: and you will be eaten.
JJ: hey Al, yes thats true Al
Stephen: Roger, when i read about your bio, i saw that when you moved around you rented out each house you bought. did you use property managers for each house to collect the rents? how often did you have to go back to the houses to check up on everything?
Roger Dawson: Jeremy, they care if they can get a better rate from you or charge you points to refinance. If rates are declining they don’t care as much.
JJ: how r u doin jeff?
JJ: im in miami
Jeremy: Karl I really don’t know what type of state I am .. I’m in Indiana/Michigan border
Al Lee: Jeremy, a cold state
Mike Summey: Right Al
David V: I figure if I have to hide it, I would rather not do it.
Lina: Too cold for me.
Roger Dawson: Stephen, that was when FHA would let you have another loan if it was a company transfer. I managed the properties myself. That was when I developed an adversion to owning our of town property.
Stephen: gotcha thanks
Jeff-south Fla: JJ-I live in palm beach gardens
JJ: new or experienced investor?
mike: JJ, in Miami huh? are you Jimmy Johnson?
Lina: So Roger, you only own in town properties? How often do you check on them?
Bruce: Roger, if you have a great property manager, why does it matter if it’s out of town property?
Shane: What kind of rate is everyone getting now? Is anyone able to get fixed for the length of the loan on thier investment proprties?
Coach Karl: Jeremy, those 2 states are mortgage. Subs2 get more dicey w/ mortgage. It is JUST another technique.
JJ: no no, Im Jonathan…just have JJ cuz its faster for ppl to type
Mike Summey: There are a lot of people running around the country telling people about ways to circumvent the system. When it works, it’s good, but when it doesn’t it’s like a house of cards that all comes tumbling down. Doing thing the right way is the slow way, but the sure way.
Al Lee: Shane, I get 30-year fixed rate on every property
Jeff-south Fla: JJ new to the game how about you
Roger Dawson: Bruce, technically that’s right, but it’s sure a lot more comfortable to be able to drive by your properties on a regular basis and see how they are doing.
Jeremy: ok thanks everyone .. yes I bilieve that the trust for deception is illegal too .. thanks
David V: Hey mike, do you have a percentage of market price you won’t go above or do you always base it on making the numbers work for covering your costs and not worry about the price so much?
JJ: relatively new, in the process of buying several now though, im 21, you?
Bruce: Roger, understood
Stephen: so does everyone strongly recommend investing locally
Jeremy: Al can you tell me what you mean by “cold state”? thanks
JJ: who cares where a property is as long as you have a good manager, right Al?
Shane: Al, How do you do that. The last properties(apartment) I bought would only fix for 5 yr.
Mike Summey: David, I calculate the value as we show you in the book and I don’t care about appraisals, listing prices or market prices.
Al Lee: Steven, I do not recommend investing locally. Mike and I differ on that. We agree on using professional management, though. If you have good managers, it doesn;t matter where youlive. Invest where the investing is best and live where the living is best.
Mike Summey: David, if the numbers work the price is irrelavant. If they don’t it doesn’t matter if the price is 1/2 market value.
David V: so you go over market sometimes?
JJ: Jeff, new or experienced?
Stephen: Al that’s probably true
JJ: sorry i already asked that, i had forgotten
Mike Summey: David, I’m willing to pay above market price if I can get below market financing rates. That is usually done by the seller.
Al Lee: Shane, I use standard mortgages (for investor owners, though). My last dozen deals used 30-year fixed rate at 7% or lower with the first 10-year period being interest-only. That gives very low debt service and high cash flow.
Stephen: i think maybe once i have more property i can consider investing further away
Lina: Mike, when you say “if the numbers work” do you mean you can show a positive cash flow?
Al Lee: Another thing we all agree on is POSITIVE CASH FLOW!
Mike Summey: Lina, that’s correct. I won’t buy unless I can at least break even cash flow.
Bruce: Al, when you use I/O, are you paying your mortgage down as well?
[Seminar Room]: sermiex has entered (8:47 pm)
sermiex: I got kicked out - sorry
Al Lee: Bruce, No, you are not paying yoru mortgage down. I don;t care about paying the mortgage down, I want equity from appreciation and I want to use the bank’s money as long as I can
Shane: Thanks Al, Very interesting.
Mike Summey: I didn’t kic you out
JJ: Jeff so you own anything yet or still looking
Lina: Mike, there are many ways to finance and one can pick a way that makes the cash flow positive, but it may not get the property paid off. Is that still a good deal if the cash flow is positive???
David V: It’s very frustrating trying to find properties that you can do creative financing with.
sermiex: I’ll check the transcript to see what I missed
Stephen: as far as speculation goes, can you guys believe that a 1 bdrm in the new Trump tower in Chicago is being listed for almost 1million dollars now
Bruce: Al, I understand I/O, I’m just wondering if your ROI will be greater by paying down the debt on your timing versus the bank.
Mike Summey: Bruce, Al makes a good point on I/O loans. I don’t like them, but for a new investor it can be a way to build equity through appreciation while you are getting started.
Roger Dawson: Here’s a reader comment: In September I read your book. On December 5th I had my 2nd offer accepted. I have re-sold the property and will close in the next couple of weeks for a nice profit. Although this does not fit my long-term goal of buying and holding, it does start my cash reserve to use to make all-cash offers in the future. And along the way I have helped out a desperate couple avoid a foreclosure situation and put an immigrant family in a nice home at a nice price! Thank you for the learnings and take-aways that you have given me from your book. I share the philosophy of building long-term wealth and want you to know that after reading your book I was inspired….borrowing from Nike….to “Just do it.” This experience has given me the confidence and knowledge I need to build upon this first success. I am currently negotiating 3 other properties and have more sellers calling me every week. And true to your book’s title, I am doing this in 5-10 hours per week without the expense of time away from my family. Thank you to you and Roger for a book that not only has touched my life, but also has touched the lives of two VERY grateful families. God bless.
Mike Summey: I like to get properties paid off as quickly as possible. The cash flow is great when you don’t have any debt.
Stephen: is that why most of the financing you did in the book were for 15 years?
Lina: Mike, I understand, but to start an interest only loan that creates a cash flow positive can be a good thing…?
Al Lee: Bruce, if you get higher cash flow because of lower debt service, you will recover your capital faster
Mike Summey: Stephen, that’s correct. I had very little cash flow for years, but I’m doing quite well now. About 70% of what I own is owned free and clear.
JJ: Al, I understand you like 30-year loans for extra cash flow and using the banks money as lon as possible…what about 40 year loans?
Al Lee: If you recover your capital faster, you will buy more properties sooner, giving your more growth through appreciation on more properties.
Stephen: yeah that makes sense. turtle wins the race.
Roger Dawson: A 40 year loan is just about an interest only loan. I would never do it.
Al Lee: I will do a 40-year loan if it is offered, and not too high an interest rate
JJ: i thought youd say that
[Seminar Room]: Michele has entered (8:52 pm)
Mike Summey: That’s what I like about have a lot of experts in the chat. You get different perspectives, which helps build your knowledge.
Roger Dawson: Maybe because Al’s a lot younger than me. 40 years is effectually eternity to me.
Al Lee: I like to get 30-year fixed-rates because I know that a 7% fixed rate will be a joke over most of the next 30 years
Mike Summey: 4 years may be an eternity if you don’t slow down a bit Roger.
JJ: yes but payments would be smaller on a 40 year which would allow more people to buy properties
Al Lee: Roger, I was born in 1945!
Mike Summey: Roger was born in 1912
Mike Summey: Just kidding
Roger Dawson: Mike what’s the difference in payments between a 30 and 40 year loan? I bet it’s not much.
Al Lee: I don’t care how old you are, higher cash flow is better! So what if my loans are not paid off when I die? I have insurance
JJ: Jeff r u having trouble finding good deals?
Bruce: Mike, thanks, my first two prpoerties are I/O. I’m just wondering when to cross over from I/O to 15 year fixed as discussed in your book? At some point in time I want to have investments with no debt.
Al Lee: I have a bunch of houses that the loans are paid off on and I am gradually selling them off to by RE with debt–LEVERAGE
David V: Mike I was going to use home equity to downpayment on a property. Having hard time getting the equity loan. The actual loan for the property is not a problem.
David V: Ideas?
[Seminar Room]: george has entered (8:55 pm)
Stephen: al wouldn’t you want to own the property free and clear. your cashflow would spike through the roof as properties got paid off
JJ: why not just buy a ridiculous number of properties and leave a real estate empire to your children or other heirs
David V: have the owner take a second?
GrayC: Do lenders have a limit on how many I/O loans they will finance with an investor?
Mike Summey: Bruce, that’s a question only you can answer. The I/O loans will give you more cash flow now, but less down the road than you would have if you paid off the loans.
Lina: Got to go. Thanks for the sharing. Maybe by next week I’ll have a couple of deals under my belt.
Penny: Goodnight everyone. Thanks.
Mike Summey: Hi george.
JJ: Al, why not just finance those properties again instead of selling them off?
Mike Summey: Goodnight Penny
george: Hi Y’all
Roger Dawson: JJ, why on earth would you want to leave money to your children? When I die, I want my kids to be devastated!
Mike Summey: Goodnight Lina
Al Lee: Your Return on Equity is low on paid-off properties, you coudl sell one old house and buy four or five new houses using 80% financing and get much more cash flow and MUCH more apprecaition
Lina: Goodnight Mike and stay warm.
george: Hello Al, enjoyed your class in San Francisco you gave a few weeks ago on Income properties
JJ: so its only because the properties are old then? would you still sell of a new property?
Al Lee: Oh, hi George. You must be THAT George, right?
JJ: sell off*
Mike Summey: Al, you are correct, but just as in the boardgame Monoply, there comes a point when your cash flow is great enough to keep buying for cash.
george: hehe
Stephen: so if that’s the case Al, are you always refinancing your properties if you can get better rates
Roger Dawson: That George in San Francisco! What does that mean?
Al Lee: Even Donald Trump uses financing to buy RE, it is good business!
JJ: mike whats the 80/20 rule again?
JJ: i like that rule
Mike Summey: Roger, that’s a personal question.
Stephen: oh wait. once your cashflow is so large, do you just buy property outright for cash mike?
Al Lee: LOL
george: haha
Roger Dawson: The 80/20 rule in negotiating is that 80 percent of the concessions come down in the last 20 percent of the time left to negotiate.
Al Lee: George is a serious investor who attended my seminar in SF a couple of weeks ago
Mike Summey: Stephen, that’s correct. Or you can reach a point where you might buy something like an airplane…for cash.
JJ: mike said the regarding property though roger
Shane: Sounds like one could use Als to get enough cash flow and a safty net and then eventually finance some at lower terms to have a good mix.
Stephen: nice.. congrats on that by the way
JJ: mike said the rule regarding goals roger*
Al Lee: I do agree with buying an airplane or car for cash, just not real estate
JJ: i think its something l ike…80% of a large goal is accomplished in the last 20% of the time
David V: what about buying from heirs. I found a good property that needs fixing up. I offered the heirs 20 grand less than they asked….they met me half way…still not low enough..I’m stumped on how to make the deal work…can’t figure out what they want from it.
Mike Summey: My philosophy on airplanes and other big toys is that if you have to borrow money to buy them, you aren’t ready to onw them.
Roger Dawson: Leverage is a very simple concept. If it’s going to go up in value, use as little cash as you can. If it’s going to go down in value, pay cash.
Al Lee: No, it’s: the first 80% of any project consumes 80% of the time and money, the last 20% consumes the other 80% of the time and money
Mike Summey: David, have you offerred to pay their price if they will finance at a favorable rate.
Al Lee: Roger, you are supporting my philosophy now
Roger Dawson: Al, you knew you had to get to me sooner or later!
JJ: Mike Summey: with big goals, you will find that 80% of the goal is often accomplished in the last 20% of time allowed.
David V: two reators between me and them
JJ: thats what i was talking abouit^
Stephen: well this has been very informative. thansk everyone but i have to call it a night. i’ll be in next week
Mike Summey: Right JJ, I just wanted to see if you remembered.
Roger Dawson: Thanks for your input Stephen
JJ: i did, just didnt know how to word it
Mike Summey: David, that’s okay. Deals like I’m talking about happen every day.
David V: No I hadn’t thought on that….I just figured they wanted their money to walk away….damn
Mike Summey: Goodnight Stephen
Roger Dawson: David, if we could solve this problem of buyers not being able to talk to sellers, both sides would find better win win solutions.
Coach Karl: See you all, next time!
Mike Summey: Goodnight Karl, thanks for joining us.
Mike Summey: See you next week?
David V: well my realtor quit. He sent me an email saying he doesn’t want to work wtih investors anymore.
David V: hmm
Coach Karl: sure! it is in my schedule
Roger Dawson: David V: number one negotiating mistake. You tend to assume that they want what you would want if you were them.
David V: maybe they would be interested in a deal that gave them cash flow for a fixed time.
Bruce: Al, are you refinancing at 80% LTV as your properties continue to increase in value. i.e every 3 - 5 years?
Mike Summey: David, never, never, never assume a seller will not take an offer.
Shane: Good night every one. It has been very informative. Thanks
JJ: mike and roger, when is your software coming out?
Mike Summey: Goodnight Shane
Kim-OH: Mike that’s true
[Seminar Room]: GrayC has entered (9:06 pm)
David V: Damn…now I don’t know where to start. I really think I can turn that house into a jewel.
Roger Dawson: Got to run. Thanks everyone.
Kim-OH: I have someone willing to give me their house if I can solve their problems
Al Lee: Bruce, no I do not usually refi, though I have occasionally. The costs of refinancing can eat up too much of the gains. I do sell using Section 1031, though, and buy better leveraged properties
sermiex: Section 1031?
JJ: mike arent you working on some software program that will crunch numbers and spit out like 3 or 4 offers using the NOI?
Mike Summey: David, calculate what you would pay per month if they took your cash offer, then calculate what interest rate they would have to give you on all or a portion of the financing to stay below that amount if you give them their asking price.
Kim-OH: 1031 exchange
David V: I also don’t knoiw how many heirs there are. I have tried to get that info from my realtor but he just isn’t motivated to find out.
Al Lee: Section 1031 lets you sell a RE property and use the moeny to buy another without paying any tax on the proceeds
GrayC: Mike, Hi… this is Jim in Fletcher…. how are you?
Mike Summey: JJ, yes, but it’s still a ways off.
JJ: ok
Al Lee: IF you go to my website www.myRentProperty.com, you will find information about it
JJ: hard to do?
sermiex: Thanks
GrayC: Just got home and wanted to say hello.
Mike Summey: Hi Jim, why are you in as Gray
GrayC: Gray is my wife’s alter-ego
Mike Summey: Where’d you fly today?
Mike Summey: Oh
JJ: Al, do you have any Multi units?
David V: what about the realtor fees. how do I cover that in my offer?
JJ: i know u like sfh
Mike Summey: We haven’t seen you in the chat in several weeks.
Al Lee: JJ: Yes, a few
GrayC: I Actually think I still have a job… flew to Cancun on Sunday
JJ: Ive noticed that with Multi’s there is better cash flow
Mike Summey: David ask for partial financing from the sellers and get partial from a bank or third party.
Al Lee: I am in the process of negotiating for some large packages of properties that include sfh, 2-plex, 4-plex, apartment buildings, etc.
GrayC: I know…. that’s what a “job” does to Monday nights
Bruce: Al, good strategy, what avg. interest rate are you looking for on your investment?
David V: primary from the bank?
Al Lee: With multi ther is a whole new relam of problems
Al Lee: realm
JJ: yeah
Mike Summey: Gray, by the way, I bought the King Air. Haven’t taken delivery yet, but I close next week on it.
Al Lee: You had better get yoru feet wet wtih sfh and then move to multi
GrayC: Cool… I would love to see it (KingAir) sometime
Mike Summey: David , yes or from an individual that has money in CDs they would like to double their return on and be secured with a mortgage.
GrayC: I wish I could take you along in the AIrbus (put you in the junpseat) It really is quite an airplane
Mike Summey: When do you want to go?
Al Lee: Bruce I have gotten investor loans at 7% and below for 30-yr fixed-rate with 10-yr interest-only
GrayC: 9/11 changed all that…. too bad
Jay Gajewski: Got to go. Thanks for the great advice!
george: David, a friend of mine found an interesting way to deal with heirs. Buy one of heirs’ RIGHTS out for that property. Then you would become one of the “sellers.” Now you are in a position where all other heirs have to deal with you, including creative things.
JJ: yes but Al you have years of experience and oither SSETS, ETC.
Mike Summey: Goodnight Jay, glad you could join us.
JJ: assets, etc*
GrayC: My bride and I are looking at multi-unit properties… MHPs and apt complexes
David V: Mike, how do I find someone who would take a chance on real estate loans instead of cd’s?
Mike Summey: Gray, have you bought anything here yet?
Al Lee: JJ, if your credit is good, I can get you the same deals. Maybe even better thgan mine as I have dozens of loans already. That actually bumps my rate up a little
JJ: my credit is 750, but im young
JJ: its good credit, but new credit
GrayC: Can you explain what a “net lease” investment is?
george: Al, do these lenders fund in Oklahoma?
GrayC: No, we haven’t bought anything yet.
JJ: Al do your lenders lend nationwide?
Al Lee: 720 is the break point, You should qualify
[Seminar Room]: Kim-OH has entered (9:14 pm)
Al Lee: Being young is soemthing you can be forgiven for, except by us old codgers!
JJ: your lenders are listed under the strategic partners on your site right?
Mike Summey: David, do you have friends, relatives or acquaintances that have some money…especially older people who are looking for the income from their investments to live on. They are all good sources. Run an ad in the newspaper offering x% for a mortgage loan, tec.
GrayC: Mike, do you know anybody who has MHP or APTs for sale?
JJ: sometimes i get so upset when someone doesnt take me seriously cuz im so young, and have a baby face
[Seminar Room]: Clair-MO has entered (9:15 pm)
Al Lee: We just have to ask about out-of-Texas lending. Soem certainly do, but I don;t know if the same products are available everywhere.
Mike Summey: Hi Clair, where you been?
Mike Summey: Gray, no, not at the moment.
Clair-MO: Been busy doing some biggies in NC and PA
Al Lee: JJ, that is right. That is on the Tortoise Club website
Bruce: Al, are you a lender?
Al Lee: No, I am not a lender. I am an investor who buys proeprtie sand leases them.
Al Lee: But, I started an investor club for members natinwide to help them buy Texas propertis that cash flow. Go to www.RentHouses.org to see it.
JJ: (damn these chats r great…how many authors of books can ppl really takl to?, not many)
george: Anyone know of lenders that fund double-closings nationwide?
Mike Summey: Thanks, JJ
GrayC: Can anyone explain the pros and cons of a “net lease” investment is?
JJ: goerge go to your local REIA
JJ: ask around
JJ: ask investors
Mike Summey: We try to give our readers all the support we can.
David V: Wife and I have been workin hard to get our dredit straight. It’s been a long road. finally got the numbers right but still hard to over come the past.
Bruce: Al, how is the San Antonio market from your view?
JJ: some title companies wont know what ur tlaking about and will even say its illegal, which it is not
Mike Summey: David, building great credit takes time. There isn’t really any valid shortcuts. The key is to not backslide once you get on the right road.
[Seminar Room]: sermiex has entered (9:19 pm)
Al Lee: Bruce, I don;t own any San Antonio properties, but we do have a property manager for San Antonio and I might soon buy some there. I think there are some areas with great potential. Soem business have moved in (Toyota) and are doing some hiring
David V: It eats me up that we have equity in our house that ew could use to buy a house…but can’t touch it.
Al Lee: David, why can’t you touch it?
David V: I’m gonna roll the numbers around on paper and see if I can offer the sellers their asking price.
David V: I can’t get an equity loan
Bruce: Al, yes, I’ve heard the same.
Mike Summey: Gray, a “net lease” in primarily used with commercial properties and may be a “net lease” “net, net lease” or a “triple net lease” this refers to the tenant paying taxes, insurance and maintenance.
David V: don’t make enough by myself…my numbers are around 700. wifes are around 660 can’t get the loan together.
JJ: jeff hows it going with the deals? or still looking for good ones?
Clair-MO: david, Is it feasible to credit a mortgage note and use it for the purchase?
David V: what do you mean credit a mortgage note?
Al Lee: David, keep fixing your financial problems–pay off credit cards, etc. Then you will be able to get a Home Equity loan. Get yoru scors to 720 or above and you are in like FLynn. (Erroll Flynn wa “in” a lot, I understand)
[Seminar Room]: Michele has entered (9:23 pm)
Mike Summey: David, my advice is to get the credit straightened out first. Buying with marginal credit can often have the same effect as building on a less than solid foundation.
Clair-MO: I meant create a mortgage note.
Jeff-south Fla: JJ-every thing hear is high, willnot cash flow on fix-mort
GrayC: Thank you, Mike. We are looking into these. As we understand it, a “triple net” stays at a fixed amount of income. Is this the case?
Bruce: Mike, I was offered from a builder ‘cost plus 10%’. Any thoughts on why he would offer this?
Mike Summey: Bruce, yes, because he can control the cost.
Al Lee: Bruce, because he can run the costs up to whatever he wants them to be, that’s why
Mike Summey: I bet you to the punch Al
Al Lee: You are too quick fo rme
Al Lee: AND with fewer typos!
Bruce: protection from my side would be a fixed price up front, correct?
GrayC: Mike “Supersonic” Summey
[Seminar Room]: Dr_D has entered (9:25 pm)
Mike Summey: Everyone, I’m going to have to leave the chat at 9:30, but you are welcome to stay and talk among yourselves as long as you want.
Mike Summey: Hi Dr D
Mike Summey: You’re late.
Kim-OH: Thanks Mike, appreciate your help
Bruce: Al, Mike, how do I win in that situation? Walk away?
Mike Summey: Subsonic
Kim-OH: Ralph thanks to you as well
David V: thanks for the suggestion MIke. I’m going to see if I can make those numbers work.
Dr_D: Just got back home from work
GrayC: Sonic
JJ: jeff thats true in almost all areas of where we live, but not all
Al Lee: Offer a flat price–what it is worth
Ralph Roberts: thanks, Kim … for the thanks 
Jeff-south Fla: JJ-true of s-Fla
Kim-OH: Ralph you are very welcome
Mike Summey: Bruce, calculate what the property will generate in NOI and then use that to make an offer to the builder. If he takes it fine…if not you won’t be going in the hole each month.
GrayC: Hello Ralph….Jim from Fletcher here
JJ: but also remember jeff, that if you buy and hold some down here, you get rich much faster cuz of the accelerated appreciation
Bruce: Mike undestood
Mike Summey: Here’s my advice for the night…NO ONE EVER WENT BROKE BECAUSE OF THE PROPERTY THEY DIDN’T BUY.
Al Lee: JJ: Cash Flow is more important than appreciation because appreciationis a MAYBE
Kim-OH: ^5 Mike
JJ: i know i know
Jeff-south Fla: JJ-adjustable intrest only is all that works hear
Al Lee: If you are making money each month and the property appreciates, great. IF it doesn’t appreciate, that’s fine too.
Mike Summey: You can get rich buying the right properties, but you can just as easily go broke buying the wrong ones. Don’t force the issue. Make offer that work and be patient until one is accepted.
Al Lee: Adjustable Rate mortgages will kill you when rates go up–and they will go up
JJ: how old r u jeff
David V: Thanks for that reminder . I am so eager to get my second rental that I can’t stand still.
Kim-OH: Goodnight all, got to run
george: Al, what is the absolute lowest monthly net cashflow (in terms of dollar amount) you will go for on a property? $100/month? $50/month
Jeff-south Fla: JJ-47
Al Lee: When you calculate that “it works” you are only considering the initial interest rate, called the “teaser rate” in the industry
Dr_D: Good night miss Kim
[Seminar Room]: speedy1906 has entered (9:30 pm)
Mike Summey: David, don’t get too eager. Mistake #1 in the last chapter of the book is BEING IMPATIENT!
Mike Summey: Hi speedy, you’re late.
Al Lee: george, 5% net the first year based on cash-on-cash
speedy1906: I know
Al Lee: That means that if I put 20,000 cash into down payment and closing, I want to make at leaset 1,000 the first year aftter all costs. I often do much better, but that is my minimum
george: Al, ok but what is that number is $50/month? IS there a minimum dollar number you have?
Mike Summey: Sorry floks, but I’m going to have to sign off for tonight. See you all next week. Great chat tonight! Thank all of you for participating.
Mike Summey: folks
Mike Summey: Al typed flokes
Al Lee: no minimum dollar amount, just a percentage
Bruce: goodnight Mike
JJ: looking to go elsewhere jeff?
Al Lee: Hem you can;t pin that on me
george: ok - I see
Ralph Roberts: and… as usual… a full transcript of this chat will be posted shortly
speedy1906: In NC are there things to be weary of if a residential home thats zoned commercial?
Mike Summey: Goodnight all!
Dr_D: Just got your email about the chat tonight will be on time next week
george: Goodnight Mike
Al Lee: I need to run now, but it has really been fun. I will try to be in here next week again.
Al Lee: Night, all
Ralph Roberts: good night, Mike
george: ‘Night Al
Ralph Roberts: night, Al
sermiex: Good Night and Thanks Mike
Jeff-south Fla: JJ-posibility
Bruce: Goodnight all
sermiex: Good Night Al and Thanks
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