Chat 2-21-05
Posted on February 22, 2005
19:57:28 Ralph_Roberts: hi guys
19:57:37 TT: hi
19:58:28 Ralph_Roberts: hi Michele
19:58:36 Michele: hello everyone
19:59:13 TT: where are you from michelle?
19:59:32 Jeff:FestusMO: Hello
20:01:09 Ralph_Roberts: Hi Mike!
20:01:14 Mike_Summey: Hi everyone.
20:01:38 Ralph_Roberts: Hi roger!
20:02:04 Mike_Summey: Hi is everyone tonight?
20:02:15 Roger_Dawson: Hi Ralph, Mike, everybody from soggy Southern California.
20:02:27 Ralph_Roberts: we soggy heah, too
20:02:37 Mike_Summey: Roger is getting washed away in the place where it never rains.
20:02:52 Roger_Dawson: Ralph, I don’t speak Southern, would you translate?\
20:03:03 Mike_Summey: Hi Steve
20:03:25 Steve: Hey everybody!
20:03:30 Ralph_Roberts: Roger, it’s rained so much here I just saw Mike’s hill with his house on it float by.
20:04:00 Mike_Summey: We had a major thunderstorm about noon today.
20:04:27 Steve: It has rained here in SC non-stop since yesterday
20:04:28 Mike_Summey: Anyone done any deals this past week?
20:04:29 Roger_Dawson: Had lunch with an old friend on Friday. We talked about 43 homes that we owned together and sold for 40,000 each. Now they’re worth $400,000 each. Ruined my whole bloody day!
20:04:31 Ralph_Roberts: I had one name server go down but this site stayed up through the storm
20:04:53 Mike_Summey: I told him not to sell!
20:05:16 Roger_Dawson: That was before Mike taught me how to buy and hold.
20:05:20 Steve: Mike - is the word “sell” even in your vocabulary??
20:05:26 Mike_Summey: No
20:05:41 Mike_Summey: Been at it 32 years…never sold one.
20:05:42 Jeff:FestusMO: I’m just getting started. I listened to your audio program and am about halfway through your book.
20:05:59 Mike_Summey: Jeff, are you learning anything?
20:06:02 Mike_Summey: Hi Penny
20:06:08 Penny: Hi MIke!
20:06:09 Mike_Summey: Hi bsalus
20:06:12 Ralph_Roberts: hi Penny!
20:06:18 bsalus: hello all
20:06:19 Steve: Jeff, you’d better keep reading that book because the next one will be out soon
20:06:21 Penny: and Ralph!
20:06:23 Jeff:FestusMO: I’m learning lots. They’re very interesting and easy to follow.
20:06:28 TT: I have a question about llcs
20:06:38 Jeff:FestusMO: I saw that and will buy it also when it comes out.
20:06:48 Mike_Summey: Jeff, we’ve tried to make our materials easy to understand and to do.
20:06:52 Steve: Me too, can’t wait
20:06:54 Mike_Summey: Go TT
20:06:56 Roger_Dawson: Mike wont’t sell when there’s a Democratic administration because he refuses to pay them capital gains. He won’t sell when Republicans are in because he thinks they’re going to eliminate capital gains.
20:07:28 TT: My atty has been trying to get me to form one but I see it as an un needed expense that a big liability policy suffice.
20:07:31 Steve: Roger, tell Mike to stop hoping for Ross Perot!
20:07:33 Mike_Summey: We received a great endorsement from Al Lowry on the new book today.
20:07:36 Jeff:FestusMO: Do most investors get their real estate license or do they simply work with one or more agents?
20:08:18 Mike_Summey: TT, llcs have some liability protection aspects, but I find them to be more helpful as estate planning tools.
20:08:40 Penny: glad you changed your default color Mike
20:08:52 Steve: I have a question…
20:09:00 Mike_Summey: Jeff, I feel a license is a detriment. It subjects you to a much higher scrutiny than you will face as an individual investor.
20:09:05 Roger_Dawson: Jeff, be aware there are some negatives to having a license. You have to declare that to the seller and put it in your offers: “Buyer is a licensed real estate agent buying at below market price for resale at a profit.”
20:09:06 Penny: *beep*
20:09:22 Steve: Do most people buy one insurance policy for each property or a blanket liability policy?
20:09:33 Steve: excuse you, Penny
20:09:43 Jeff:FestusMO: OK, thanks. How do you find out enough information about the seller when you are working through an agent?
20:09:47 Penny: yep, sorry, I’m not sure about what I did
20:09:50 Roger_Dawson: The plus to having a license is that you are on the inside of the market and can find better deals.
20:09:51 Mike_Summey: Steve, I cover all of my investments with one large blanket policy.
20:09:51 TT: Mike how do llcs serve as estate planning tools?
20:09:57 Penny: it will not happen again.
20:10:27 Steve: Mike, how do you gauge how much liability you need?
20:10:31 Al_Lee: Hey, Mike. I made it. Howdy everyone
20:10:40 Bruce: Hi Al
20:10:47 Al_Lee: Hi.
20:10:52 Mike_Summey: TT, for one thing, it allows the properties to bypass probate, but it also allows you to give shares in the llcs rather than partial ownership in a property.
20:10:56 Mike_Summey: Hi Al
20:11:29 Al_Lee: Hi, Mike. I just got in from taking the kids to see “Winn-Dixie”
20:11:32 Mike_Summey: Hi Eric
20:11:36 Al_Lee: What a terrific movie!
20:11:37 Eric: Hi Everyone!
20:11:48 Mike_Summey: Movie?
20:11:55 Mike_Summey: it is a grocery store.
20:12:07 Al_Lee: The new movie “Because of Winn-Dixie”
20:12:09 Penny: *bird* I heard that was a cute movie. You must have little ones AL
20:12:28 Al_Lee: first grader and third grader
20:12:38 Penny: its about a dog Mike
20:12:43 Penny: I think
20:12:43 Mike_Summey: *welcome*
20:13:09 Steve: Jeff, have you been riding around looking at properties yet?
20:13:15 Mike_Summey: I have a little daushund running around my feet right now. It’s Jason’s dog.
20:13:25 Eric: This is my first visit here. Great book guys!
20:13:31 Mike_Summey: Thanks Eric
20:13:40 Bruce: Al, the last time you were on, you discussed 10 yr. I/O for your purchases. Do you ever sell, if yes, what parameters do you use?
20:14:03 Jeff:FestusMO: So far, I have only been looking through the papers to get an idea of what homes are available. I have one rental, but not purchased as Mike and Roger advise.
20:14:17 Eric: Does anyone know anything about the Phoenix AZ market? (That’s where I am obviously)
20:14:39 Mike_Summey: Jeff, you need to get out and ride your markets.
20:14:45 Jeff:FestusMO: My wife Robin and I have decided to do this together. She will join the chat shortly.
20:14:59 Al_Lee: Bruce, I differ from Mike in my strategy in that I like to be well-leveraged. I like to use other people’s money to make me money. Therefore, I don;t liek to have paid-off proeprties (though I do still have some), or properties that are almost paid-off.
20:14:59 Steve: Is my computer locked up or is everyone just being quiet?
20:15:02 Mike_Summey: Eric, sorry, but I don’t know anything about Phoenix real estate.
20:15:28 Mike_Summey: Must be your computer Steve.
20:15:31 Roger_Dawson: Here’s the endorsement that Al Lowry gave us for our new book The Weekend Millionaire Mindset: “For more than 30 years I’ve taught people how to build wealth. This book is not only a great read, but it defines the characteristics ordinary people must develop if they expect to achieve financial independence better than anything I’ve read in my lifetime.” “For more than 30 years I’ve taught people how to build wealth. This book is not only a great read, but it defines the characteristics ordinary people must develop if they expect to achieve financial independence better than anything I’ve read in my lifetime.” Phoenix has had enormous growth because of immigration from Mexico and from US retirees. The negative is that their is endless land to build on. Scarcity never pushes prices up.
20:15:44 Al_Lee: I refi occasionally, or I sell the ones that have a lot of equity and use the cash to buy several proeprties–or somethign larger.
20:15:54 Jeff:FestusMO: I’ve also been watching the papers to see the rental section to see the average rent price.
20:15:54 Roger_Dawson: That was supposed to be two posts. Sorry.
20:16:15 Mike_Summey: Hi Robin
20:16:33 Jeff:FestusMO: Hi Robin (that’s my beautiful wife)
20:16:54 robin:festus:mo: Hi
20:16:59 Bruce: Roger, Mike, nice write up on your new book
20:17:08 Eric: ok… a quick background. It seem my personal home has appreciated 50% per year the last two years. Prices are about $140-$160 per sq-ft. right now. I finally decided to take the plunge and add some real estate to my investment portfolio and now doing the research described in your book I am nervous. Prices are SO high here right now
20:17:09 Mike_Summey: Roger Dawson
20:17:13 Penny: thats okay Roger. If we all read the entire thing we fot your answere to Erics question at the end
20:17:14 Mike_Summey: Mike Summey
20:17:19 Al_Lee: Bruce, [more] I recently have sold several old houses using a Section 1031 exchange to avoid capital gains tax and put the cash into better-leveraged, newer properties
20:17:22 bsalus: Al - Is that why you recommend 30yr financing over 15? Fewer refis…
20:17:44 Penny: *bird* You guys are so full of yourselves.
20:17:49 Eric: hehe
20:17:57 Bruce: Mike,
20:18:29 Al_Lee: I like 30-year because if gives lower payments and more cash flow. I like using the bank’s money to make me money. The better my cash flow, the sooner I will have my invested dollars back in my pocket so I can buy another property with the same dollars!
20:18:36 Mike_Summey: Al & I differ on the financing, but that doesn’t make one right and the other wrong. We are both successful at what we do.
20:18:44 Roger_Dawson: Al, to be clear to anyone not familiar with 1031 exchanges, you didn’t avoid (or evade) the tax, you carried it forward to when you sell the next property in the chain.
20:19:14 Bruce: Mike, wouldn’t be appropriate to use both strategies? Depending on the deal?
20:19:23 Mike_Summey: I like shorter financing, because when the properties are paid for the cash flow is really good.
20:19:27 Eric: My questions (if it’s ok to jump right in, first time and all), is: Is this kind of growth healthy? I didn’t find in your books NOI analysis how to account for a declining house price market.
20:19:45 Penny: Roger, is their a time limit on the carry forward of the tax?
20:19:56 Penny: 3 years like all other filing?
20:19:58 Steve: (you gotta love Road Runner)
20:20:10 Al_Lee: Roger, if you do a 1031 on the nest one you will defer it again–and again and again. Whenb you die, you can leave the properties to your heirs having them revalued a their fair market value as ther new “cost basis”, so they will never pay that capital gains tax either
20:20:28 Roger_Dawson: Penny, no. I reduces the cost basis of the property you’re buying, so it only becomes an issue when you sell that property.
20:20:28 Mike_Summey: Eric, that’s because we don’t worry much about what selling prices do. Rental prices tend to be stable even when selling prices flucuate.
20:20:39 Al_Lee: In effect–you can avoid the tax forever!
20:21:16 Jeff:FestusMO: How do you find out about a seller when you’re working through an agent? Do you ask the agent to find out the particulars such as how much equity they have?
20:21:21 Penny: gottcha, thanks Roger. and the point is never to sell, right?
20:21:26 Mike_Summey: Hi Jim
20:21:37 Jim_(La.): Hey Mike- Loved the Book!
20:21:40 Roger_Dawson: Well, the assumption is that someday you’ll be in a lower tax bracket. I don’t buy that. I never intend to be in a lower tax bracket than I am now. So I think there’s something to be said for paying the taxes.
20:21:47 Al_Lee: Roger, that is right. It reduces your cost basis, but if you buy more, or more valuable properties, they will still throw off depreciation allowance.
20:21:57 Mike_Summey: Jeff, I ask the agent to set up a meeting with the sellers so I can speak with them directly.
20:22:14 Eric: Mike: Another piece of info I have heard on the news lately here is that 25% of all homes sold are sold to investors right now in Phoenix. Didn’t know if this is out of line or what
20:22:16 Jeff:FestusMO: Do you do this before the first offer?
20:22:20 Steve: Jeff, you can check with the county the property is in. They will tell you when the owners bought the property and what they paid.
20:22:35 Penny: Hi Ryan!
20:22:43 Jeff:FestusMO: Thanks, Steve.
20:22:57 Brian: Hi Mike, I read your book and applied what you and Roger taught and just closed on a 4 plex with $170 positive cash flow up here in Toronto! I’m delighted to have happened upon your website and book!
20:23:16 Steve: Cool Brian!
20:23:22 Mike_Summey: Eric, that’s possible. If so, I’d probably approach deals with a bit more caution. Too many investor owned properties in an area can cause big flucuations in prices.
20:23:44 Roger_Dawson: Be aware that what the sellers paid has no bearing on the value. A property is worth what a willing buyer will pay a willing seller when both are informed and neither is under pressure to buy or sell.
20:23:47 Mike_Summey: Great Brian. Tell us more about your success.
20:24:11 Mike_Summey: Hi Rich
20:24:25 Rich: Hi Mike
20:24:28 Al_Lee: Mike likes the idea of having a lot of paid-off properties bringing in cash flow. That is not a bad situation,either. Mike is certainly right about too many investor-owned properties. We have some neighborhoods where I won;t buy because some foolish investor group bought up entire blocks of houses. A street with a “For Lease” sign on every house is not a good place to be.
20:24:35 Eric: Mike: Agreed. So in reference to your earlier comment, rent prices are stable and not totally tied to sales prices, does this hold true in a market where home prices drop dramatically?
20:25:12 Brian: Found it on the internet and went over the #’s and amazingly everything worked just like you said in the book..in fact the rents a kind of low for that area..it’s in the country about 1 hr from Toronto.
20:25:23 Mike_Summey: Eric, I’ve seen sales prices rise and fall dramatically with very little effect on rents.
20:25:41 Steve: Roger, I just like to know what the owner(s) paid and when so I will know if they have room to carry any mortgage
20:25:49 Roger_Dawson: Eric, I think it holds true. In the early 90s in Calif we saw selling prices drop by 25%. It didn’t create bargains for renters.
20:26:07 Roger_Dawson: Steve, that’s a valid point.
20:26:10 bsalus: Wouldn’t rents go up if prices started to drop… increase in foreclosures, trepid market, etc
20:26:20 Mike_Summey: Steve, they may have paid cash and have plenty of equity. Over half of all the property in the country is owned free and clear.
20:26:27 Eric: ok I feel a little better. But it is making it nearly impossible to buy a house for the right price to rent…
20:26:47 Steve: That’s true
20:26:54 Al_Lee: Mike, I agree. There is a market for rents and a market for sales and they have little to do with one another. Proof is that a 1600 square foot house will lease for about the same in almost any major metro area, but they cost much more to buy in San Francisco than in Fort Worth
20:27:18 Bruce: Mike, where do you find stat’s like the one you just shared about half the country owning their home free and clear?
20:27:22 Mike_Summey: Eric, the stable rent and flucuating price situation is what makes it easy to find deals sometimes and harder others.
20:28:12 Roger_Dawson: The aarp magazine had an artcle last month on retirees. Half of them have paid off their home mortgages.
20:28:22 Mike_Summey: Bruce, I can’t remember the website, but I recently fount that fact while searching several government sites when I was doing some research on the new book.
20:28:26 Steve: Are you sure about that, Al? A 1600 sq ft house in a decent area of my city rents for about $700 - $800 a month. I would think it’s higher in larger, metro areas
20:28:58 Al_Lee: Steve, what is your area? I am compareing major metropolitan areas
20:29:05 Steve: I am in SC
20:29:16 Eric: 1600 sqft in Phoenix (NW area, a little above avg) is renting for about $1100 right now
20:29:23 Penny: Bruce, Mike and Roger both read a lot. And they somehow, retain everything they read. Its quiet amazing!
20:29:30 Roger_Dawson: Steve, whats the rent multiplyer in your market. How many months rent would it take to buy the property?
20:29:40 Al_Lee: There is some difference in rents form one area to major city to another, but not nearly as much as there is in prices.
20:30:07 Mike_Summey: Eric, here in Asheville a 1600 ft house rents for $1100 - $1400.
20:30:13 Roger_Dawson: Thank you Penny, and I can clog too!
20:30:38 Mike_Summey: Roger, is that clog or clod?
20:30:41 Bruce: Penny, yeah, not sure how they retain all the information, I most certainly cannot.
20:30:49 Steve: Roger, it would take 100 - 110 months of rent to equal the sale price
20:30:54 Penny: thats what I’m told. And I’m still waiting to see you clog!
20:30:55 Eric: 1600 sqft ASP here is about $240k for the last 6mos or so
20:31:02 Al_Lee: In Fort Worth a 1600 sq ft house will rent about the same as what you are quoting, now, what will it cost to buy in each city?
20:31:16 Roger_Dawson: Clogging a a southern dance, for you notherners. It has nothing to do with toilets.
20:31:17 Penny: Me neither Bruce!
20:31:22 Mike_Summey: Hi Sermiex
20:31:28 Eric: And they are selling in less than 5 days
20:31:34 Al_Lee: In San Francisco it might cost $800k, In Fort Worth it might be $100k
20:31:55 Sermiex: Hi All - sorry to be late
20:32:04 Roger_Dawson: Hi Sermiex!
20:32:12 Steve: I think square footage is relative. There are so many other factors. I have seen one house that size sell for $140K and another the same size sell for $60K
20:32:49 bsalus: 1600sf here is $600k and rents for about $2300
20:33:01 Bruce: Al, Are you buying anything in San Antonio?
20:33:02 Roger_Dawson: Of course the neighborhood makes a big difference. Prices jump ten times from South Central to Beverly Hills and it’s only five miles.
20:33:18 Al_Lee: Steve, that is right. What I am talking about is the type of house that a typical middle-class renter might live in.
20:33:18 Steve: bsalus, where do you live?
20:33:27 bsalus: Burbank,CA
20:33:37 Penny: Roger, what do you mean by the rent multiplier. The rent x the number of months to equel the price?
20:33:38 Mike_Summey: I think construction quality has more to do with price that area. I have a friend in Naples, Fl who built what he calls a two bedroom cottage. It cost him $7,400,000.
20:33:50 Penny: Forgive me for not knowing?
20:33:57 Mike_Summey: Penny, price divided by monthly rent.
20:34:08 Eric: Al_Lee: Same here… Im looking only at properties I think would rent well
20:34:13 Al_Lee: Maybe a better way to say it is: a house that rents for $1200/month might cost you $800k in one city and $100k in another. I buy where the ratio is best. My rule is never pay more than 100 months rent.
20:34:39 Mike_Summey: Or less Al. I agree.
20:35:04 Al_Lee: Or less, of course. That is max
20:35:20 Steve: Al, I haven’t ventured out of my area yet. I am just buying properties within a 60 mile radius that I think will rent well and appreciate well over time
20:35:43 Mike_Summey: I’ve been exploring a large project this week. I’m looking at the possiblilty of building a 6-8 story office tower across the street from our airport.
20:35:49 Roger_Dawson: Penny we used to say that a 100 times muliplyer was a great buy. If it rents for $2000 it’s a great buy at $200K. With low financing that we have today, you can pay maybe 130 times and still make it work.”
20:36:11 Penny: Okay, thanks Roger and Al
20:36:20 Penny: I think I understnad now.
20:36:29 Roger_Dawson: Penny, Mike hates it when I use crude rules of thumb like that. There’s a lot more to analysing the value.
20:36:34 Al_Lee: Roger, I agree. But, if you can get properties for 100 months rent, why pay more?
20:36:37 bsalus: Al, I know you invest in TX, but are there other areas that you find still match your 100mon rent rule? FL? NV?
20:36:45 Jeff:FestusMO: Rent in my area for a typical home is anywhere from $600 - $900 with the vast majority fall around $600-$700. Houses that could rent for this are listed at $100 - $110. If I’m not to pay more than 100 months rent, I should pay no more than $70,000 for a home?
20:37:21 Mike_Summey: Everyone, keep in mind that any deal you can structure that will let you buy with the NOI is a good deal.
20:37:22 Roger_Dawson: Jeff, see my comment above. with today
20:37:44 Roger_Dawson: ’slow financing you can afford to pay more than that, if you have to.
20:37:59 Al_Lee: bsalus, I haven’t found any and I have looked. There are more reasons why I am partial to Texas for residential (not necessarily for commercial) properties. the laws are favorable, the land cost is low (giving higher depreciation allowance), etc. etc.
20:38:16 Bruce: Mike, Al, Roger, isn’t it about cash flow with minimal money into the deal?
20:38:18 Penny: I know, like doing a marketing analysis of the area, rentals in the area etc. but using the mutliplier is a good quick place to start, to see if you want to investigate further on the property.
20:38:36 Penny: thanks
20:38:42 Mike_Summey: Jeff, if you’re paying more that $70,000 - $80,000 for a house that has a market value of $100,000 - $120,000 you’re paying too much.
20:39:32 Al_Lee: Bruce, that is sorta right. I don’t try to do the “no money down” deals because I focus on higher-quality houses most of the time. I don;t mind paying a down payment to get the best financing terms and rates
20:39:34 Jeff:FestusMO: OK, thank you. So, to follow Roger’s advice in negotiation, how low might an initial offer be? $60,000?
20:39:38 Roger_Dawson: Bruce, that’s right. Structure a break even, figuring the NOI like we teach you in the book and get the shortest loan you can. That’s a good balance of leverage and one day owning the property free and clear.
20:39:45 Eric: Mike: The only concern I have with the any deal under NOI is that if I made a mistake or the NOI drops or can’t rent it, I might have a loan or combo of loans with balance greater than I can sell it for to get out of the deal…
20:39:47 Mike_Summey: The key to success is to make offers that work for you and keep making them until one is accepted.
20:40:02 Eric: or does that just not happen?
20:40:18 Al_Lee: I believe that we all agree to never buy negative cash flowing properties (on purpose).
20:40:53 Roger_Dawson: Eric, it’s not risk free, but it’s ten times safer than the stock market and three times safer than putting your money under the mattres, where it could get stolen!
20:40:57 Mike_Summey: Eric, if you buy using the NOI as a guide you won’t have that problem. You will be buying at 60-80% of appraised value.
20:41:01 Penny: no matter how much you love the property, right Al?
20:41:52 Eric: Ok thanks. I guess I just need to structure some deals and make some offers now to convince myself of that
20:41:53 Al_Lee: btw, referring to an earlier discussion I just picked up the tail end of. I have never had a RE licnense and never want to for exactly the reason Mike stated. You will be held to a higher standard and scrutiny in every transaction and you must disclose that you are a professional
20:42:18 Steve: Last week, somebody brought up the topic of Quit-Claim Deed. I spoke to my attorney this week and he strongly advised against it.
20:42:29 Penny: Mike when you use the appraised value, do you use the market appraisal or the tax apprasail. I’ve noticed around here they are usually different.
20:42:58 Al_Lee: Steve: you have one of the few good attorneys in the world. Most of them will think it is just peachy for you to put yoruself at risk for a trivial benefit.
20:43:16 Roger_Dawson: Steve, a quit claim deed just releases any interest you have in the property to a named person. What do you mean by avoiding it?
20:43:18 Mike_Summey: Steve, a Quit Claim deed is nothing more than a deed for your interest in a property. I could give you a Quit Claim deed to the White House, but I doubt if you could get on the grounds with it.
20:43:56 Steve: Al, he agreed with you, saying the lender could call in “Due on Sale” clause
20:44:30 Steve: Roger, meaining re-deed a property to the LLC name even if the loan is in your personal name
20:44:37 Eric: Another question: Is there cap that you all use for how expensive a house you buy (assuming single fam)? i.e. Is a $400k house that rents for +$200/mo still a good buy?
20:44:39 Mike_Summey: The only time you would want to use a Quit Claim deed is if you think a person may have some interest in a property, such as a distant heir. A quit claim deed would remove them from challenging your ownership at a later date.
20:44:57 Al_Lee: Roger, I beleive he is referring to buying a property in his personal name to get good financing, then using a quit-claim to transfer it to an llc, or other entity. it violates the “due-on-sale” clause of every mortgage I have seen.
20:45:34 Mike_Summey: Eric, we cover this in the book in Chapter 40 ” The 14 Biggest Mistakes New Investors Make”
20:45:55 Roger_Dawson: A quit claim just takes you off ownership of the property. In no way does it release your liability for the loan. That’s a different matter.
20:46:20 Jeff:FestusMO: Someone mentioned going to the courthouse to find out when and how much an owner paid. Which county office would have this information? Recorder of Deeds? Assessor?
20:46:27 Al_Lee: Roger, yes- but taking yourself off the ownership of the property that is promised as surety for a loan is not legal
20:46:50 Mike_Summey: Jeff, this information is located in the Register of Deeds office.
20:47:13 Eric: MIke: Ok I guess I just need to figure out what is upscale and what is slum. I know I dont want either…
20:47:17 Steve: Roger, I had considered doing a quit-claim to switch a couple of properties to my LLC name but still continue to pay the mortgage as I am now. I am just concerned the lender will want payment in full if they find the property in the LLC name instead of mine.
20:47:18 Roger_Dawson: Al, I don’t think you’d get arrested for it. But you’d still have to pay off the loan, as agreed to in the note.
20:47:28 Jeff:FestusMO: I have a small company which contributes to my SEP monthly. I have read that I can set up a sep-ira that invests in real estate. Is this something anyone would recommend?
20:47:55 bsalus: Somewhere I read that you need to finance in the name of the LLC because if you quick claim the property the lender could call the loan when rates are higher
20:47:56 Mike_Summey: Eric, conversations with good property managers in the area will help a great deal in making that determination.
20:48:04 Eric: Jeff: It is the assessor that has that info in my area
20:48:37 Mike_Summey: Eric, usually the assessor is the one who assesses the propety for taxes.
20:48:37 bsalus: Mike how do you find/qualify propert mgrs
20:48:48 Al_Lee: Roger, if you routinely deceived banks, which are federally insured, by transferring the collateral for loans without their permission, you could go to federal prison for defrauding a federally insured institution.
20:48:55 Eric: Mike: Yeah… Havent found and “good” one yet. There are about 5000 listings in the phone book.
20:48:59 Roger_Dawson: If you make friends with a title company representative, they will get a you a complimentary preliminary title report. It tells you about all the encumbrances on the property.
20:49:17 Al_Lee: If you do it once and get caught and claim ignorance, they will jsut call the loan, I am sure.
20:49:18 Mike_Summey: bsalus, by interviewing them just as you would if you were interviewing applicants for a job in your business.
20:49:53 Eric: Mike: Yah but the assessor here seems to have this info online. I suppose I should check if the recorder does also but since the assessors website was so great I didn’t check anywhere else…
20:50:23 Steve: Al, I personally don’t see why they would care, but I guess that is why we pay attorneys
20:50:25 Mike_Summey: Eric, I believe you will find much more information in the Register of Deeds office.
20:50:39 Eric: ok I’ll check…
20:50:49 Jeff:FestusMO: I have done a yellow pages search and Yahoo search and a couple of others. There are no property managers in my general area. I live about 40 miles outside of St. Louis. Is it out of the question to use someone from St. Louis?
20:51:22 Roger_Dawson: Al, I didn’t mean to encourage tranferring title, I just wanted to make the point that it wouldn’t do any good. You’d still be liable for the loan.
20:51:28 Al_Lee: Steve, because the house is the collateral for a loan. Also, because they have didfferent rates and terms for loans to an individual or to an entity (commercial loans) and you committed fraud when you intentionally deceived them in order to bet a better rate.
20:51:33 Mike_Summey: Jeff, you will probably find that there are real estate firms that both sell and manage. That’s not the best situation, but it’s better than none.
20:52:01 Mike_Summey: Hi Cathy
20:52:12 Bruce: Al, It’s interesting that the numerous mortgage lenders I’ve dealt with have the quick claim deed in their loan package. From individual to LLC
20:52:45 Eric: Mike: You are right. The assessor has an interactive map of the entire area down to the plot level that you can drill down to. Once there I can use the plot number to get even more info on the recorder’s site… thanks!
20:53:25 Al_Lee: Bruce, that is certain ly interesting. I also know of loan officers who went to jail because they encouraged borrowers to state that the property they were financing was a second home, not a rent house, in order to get a getter rate. that is also fraud and it happens all the time.
20:53:28 Jeff:FestusMO: If we are just starting, should we form an LLC to do business under?
20:53:30 Mike_Summey: Everyone, I’m going to give you some advice you all need to consider. In spite of what a lot of the real estate gurus may say, there is no need to do anything shady or under the table to be successful in real estate. Straightforward honesty will carry you much farther in the long run.
20:53:52 Roger_Dawson: I hope this doesn’t sound self serving, but everything is negotiatiable. Go to the lender and negotiate with them rather than do something behind their back that could get you into trouble.
20:54:06 Steve: Eric, I put the burden back on the agent. When I get a call about a property, I tell the agent to research what they can get from the courthouse and have it for me when we meet.
20:54:11 Al_Lee: I heartily second what Mike just said!
20:54:37 Eric: Steve: good idea 
20:54:58 Bruce: Mike, I agree, no need to pay 30.00 less a month and go to jail for fraud.
20:55:25 Penny: didn’t sound self serving at all Roger. Its just the truth. Everything is negotiatiable.
20:56:01 Roger_Dawson: I can do it but I can’t spell it. It’s negotiable.
20:56:01 Mike_Summey: I’ve lost some deals because I wouldn’t compromise my principles, but I sleep well at night and I’ve never lost money on a deal I didn’t make.
20:56:06 Penny: even if the negotiating item stays the same at the end, it was still up for negotiation!
20:57:05 Mike_Summey: Build a reputation for honesty and in the long run you will be way ahead of those who do shady deals.
20:57:16 Penny: my wine fingers spelled negotiable the same way yours did Roger!
20:57:32 Mike_Summey: They may get ahead for a little while, but it all catches up with you eventually.
20:58:32 Roger_Dawson: I had Lasik surgery on my eyes Saturday. The first surgeon wanted $5600. The second one wanted $2700. I talked him down to $2300 and we were both happy.
20:58:51 Penny: whow Mike, the last our last few entries looked like Christmas time!
20:58:57 Al_Lee: Of course, Roger can’t see now, but his is happy!
20:59:14 Bruce: Roger, but can you see better now?
20:59:16 bsalus: Roger, I just had mine done early Jan and it is great!!
20:59:19 Mike_Summey: Changing the subject a bit. I just got word last week that the bound book date for our new book has been moved up to April 3rd. It will still be several days after that before it hits the book stores, but McGraw-Hill has it on a fast track for release.
20:59:20 Roger_Dawson: Just ring a bell Al, and I’ll find you!
20:59:21 Jeff:FestusMO: I just checked the assessors site and found the listing of my personal home. It shows a 2004 assessed value of $127,400. I bought it a year ago for $204,000. What gives?
21:00:00 Penny: still using your cane with the red tip Roger?
21:00:01 Steve: Jeff, that is good! Don’t complain - you pay less taxes than you should!
21:00:08 Penny: just kidding.
21:00:22 Roger_Dawson: Jeff, don’t tell anyone about this! Your assessed value is below the price you paid. That’s great!
21:00:27 Penny: ope you are seeing much better now Roger. And you saved a lote of money!
21:00:29 Al_Lee: Roger, I agree with ou on everything being negotiable, but the lowest bidder is not always the best bargain *slap*
21:00:51 Sermiex: Mike, Roger - how do we get autographed copies?
21:01:01 Al_Lee: I just wanted to try out these sondi emoticaons–kewl *choochoo*
21:01:07 Steve: Good question Sermiex
21:01:24 Mike_Summey: Jeff, new assessments are usually made every 4-8 years. You may be in for a surprise shortly.
21:01:29 Steve: As loyal Monday night chatters, I think we are all entitled to signed copies!
21:01:46 Bruce: yeah, what Steve said.
21:01:59 Roger_Dawson: Sermiex, we’ll have authographed copies available on our website. We still have a few autographed copies of our first book available too.
21:02:04 Mike_Summey: Sermiex, we will make autographed copies available on this website jsut as we do with the real estate book.
21:02:33 Al_Lee: Mike wouel be cheating you if he gave you a free book. I gave soem books free when I released mine and those people never read them. They valued it at what they had paid.
21:02:35 Mike_Summey: Anyone who orders books from our site get autographed copies.
21:02:40 Steve: Bruce and Sermiex, I don’t think they understand where we are going with this….
21:02:48 Penny: by the way Roger, I have a autographed copy from Mike, but you need to autograph it the next time you are in these mountains.
21:03:02 Roger_Dawson: Jeff, don’t tell anyone about this! Your assessed value is below the price you paid. That’s great!
21:03:34 Mike_Summey: Jeff, the other possiblility is not good…you may have paid too much!
21:03:43 Roger_Dawson: Penny, I’d love to. You’ll find me on my usual barstool at Magnolias.
21:03:46 Penny: better come tax time, right Roger! and you made a funny too!
21:04:21 Sermiex: Roger - is there any way I can get your tapes autographed? They are truly the best ever!!
21:04:32 Bruce: Roger, is that Magnolias in Fullerton, CA?
21:04:36 Jeff:FestusMO: I agree. I think the price I paid was roughly market. Other homes in my area are have sold for roughly what I’ve paid. I’m really not concerned about that part in terms of this discussion. I’m trying to find out how to find what an owner paid for their home.
21:04:47 Al_Lee: Mike, Roger, everyone–I have to go put some kids to bed and read to them. It has been fun as usual.
21:04:48 Penny: Just let me know when you head over there, and I’ll be there waiting on a seat at the bar, holding another bar stool for you!
21:04:54 Steve: Mike, can I get an autographed check from you and Roger too?!
21:05:02 Mike_Summey: Goodnight Al.
21:05:09 Al_Lee: Night all
21:05:12 Eric: nite Al.. Thanks for the info!
21:05:13 Bruce: Thanks AL
21:05:28 Roger_Dawson: Bruce, no that’s Magnolia’s Peach in Asheville, NC. Not that I don’t have a stool at the one in Fullerton too!
21:05:55 Mike_Summey: Steve, sure! Just write it for a significant amount and I’ll be =happy to autograph it on the reverse.
21:06:45 Steve: Okay, we’ll call it a wash
21:06:53 Mike_Summey: Touche
21:07:11 Penny: Bruce, Roger probably has a private glass locked in the vip case at that Magnolia’s too!
21:07:26 Roger_Dawson: Sermiex, Bless you. You made my day. Just call my office 800-032-9766 and tell them what you want. We have them in CDs too now.
21:07:31 Mike_Summey: Steve, here in the mountains, we talk real slow, but we think real fast.
21:07:47 Sermiex: Thanks Roger
21:07:48 Bruce: Penny, I’m sure he negiotated a good deal for himself.
21:08:01 Steve: Mike, I see that. I am only a few hours from you so I know how to handle you mountain people.
21:08:24 Mike_Summey: Where are you in SC Steve?
21:08:26 Roger_Dawson: That office number is ydawson, which is 800-932-9766
21:09:02 Steve: I live in Florence, about an hour from Myrtle Beach
21:09:27 Mike_Summey: Anyone who doesn’t won Roger’s Power Negotiating tapes is losing a ton of money every day. I’ve probably made $5,000,000 with them over the past 15 years.
21:09:37 Roger_Dawson: Steve, I’m speaking to a bank in Florence next month. I had no idea where it was, so thank you.
21:09:47 Eric: General question: How much conventional financing are you all using in general. Just starting out I dont have the 20% per property for retail loans. I read your book about seller financing and such but I wonder if this is kinda like forclosures: few and far between…
21:09:53 Steve: Roger, let me guess… First Reliance Bank?
21:10:08 Mike_Summey: Steve, I may fly down to Florence and pick Roger up after his speech.
21:10:43 Steve: I’ll buy both of you lunch or dinner if I can pick your brains for an hour!
21:11:05 Roger_Dawson: Steve, yes, that’s right. On Saturday April 30th
21:11:20 Mike_Summey: Eric, I use a lot of seller financing and I get much of it at 0% interest. The key to getting it is to ask. I’ve never had a seller come to me and offer financing.
21:11:33 Penny: That would be a great bargain Steve. Hope that works out!
21:11:45 Steve: Roger, First Reliance is a mover and shaker around here. I have known the President for years. I might see if I can get him to sneak me in!
21:11:52 Roger_Dawson: When you say pick our brains, is that like the poor monkey in the middle of the table who gets his head bashed in?
21:12:25 Mike_Summey: That’s Roger for you! So skeptical he would demand a bacteria count on the milk of human kindness.
21:12:25 Eric: Mike: agreed. I havent tried yet but I suspect that with an average of 8 days on the market Im not going to get many bites. Only one way to find out I suppose…
21:13:02 Steve: I just thought it would be an attractive offer for Mike because I know he doesn’t like to go into his wallet very often!
21:13:04 Mike_Summey: Eric, there are many sellers who don’t need or want all cash. The only way to find them is to make an offer.
21:13:12 Eric: ok
21:13:31 Roger_Dawson: Steve, the person who booked me was Jeff Paolucci, he’s the senior VP.
21:13:53 Penny: Ralph, just fyi, you are really doing a great job with the chat and the entire web site!
21:13:56 Steve: Roger, Rick Saunders is the President (and founder). He is a sharp guy.
21:13:59 Eric: Paradigm shift I suppose. I still cant figure out why anyone is renting.
21:14:22 Mike_Summey: Eric, it a little thing called fear.
21:14:38 Ralph_Roberts: Penny, thank you
21:14:39 Eric: ah
21:14:41 Penny: gotta run, I’ll leave you guys to talk seriously.
21:14:51 Mike_Summey: Goodnight Penny
21:15:01 Eric: never thought of it that way but it’s really why I don’t have an empire of rental homes too haha
21:15:13 Sermiex: Ralph - I was looking for a transcript of last week’s chat - how can I get it?
21:15:27 Steve: Was that a “no” for lunch or dinner? Okay Okay - Mike you can buy mine.
21:15:29 Penny: you are welcome Ralph. just think praise should be given its due!
21:15:36 Mike_Summey: Eric, the more offers you make…even if they are turned down…the more confidence you will gain.
21:15:47 Penny: night Mike and all.
21:15:48 Jeff:FestusMO: I’m going to run also. This was my first chat and appreciate everyone’s help. Thank you Mike and Roger for a wonderful book. I’ll be back to update you on my progress.
21:15:48 Ralph_Roberts: Sermiex, go the chat transcript area of the website
21:15:50 Eric: got it
21:15:57 Penny: have to watch the Bachelorett!
21:15:58 Sermiex: Good Night Penny
21:16:10 Penny: nite Serminex
21:16:18 Eric: so alot of deals have some conventional financing.
21:16:18 Mike_Summey: Thanks Jeff. Be sure to join us again next Monday
21:16:21 Steve: By Penny
21:16:26 Steve: Bye
21:16:30 Eric: Bye penny
21:16:31 Jeff:FestusMO: I certainly will.
21:16:38 Jeff:FestusMO: See you next week.
21:16:39 Bruce: Bye Penny
21:16:52 Penny: tata for now
21:17:44 Mike_Summey: Eric, I do many deal with a small conventional loan and a larger seller loan. That get’s the seller some cash or pays off a small mortgage and still gives me the flexibility to work with seller financing.
21:18:25 Steve: Roger, how long do you normally speak at those things?
21:18:35 Mike_Summey: It does require the seller to be in a second position, but since the seller gets the money from the first mortgage, he is secure also.
21:19:08 Mike_Summey: Steve, Roger is like the energizer bunny…he just keep going and going an going.
21:19:36 Bruce: Mike, I can qualify for rental homes in my own name, however, I want to acquire in my llc. Any advice on how to make the transition from personal qualifying to llc?
21:19:38 Roger_Dawson: Steve, I usually do all day for banks, but they have booked me for 5 hours. Email me tomorrow please (rogdawson@aol.com) and we’ll discuss it some more.
21:19:57 Mike_Summey: Ralph, I like the new chat program.
21:20:03 Steve: Will do, Roger
21:20:17 Roger_Dawson: Yes, Ralph it’s working well. Thanks.
21:20:21 MarkNC: I have a question. I have a couple of sfh’s already but have been looking at a duplex today. I know Mike you suggest sticking with sfh’s early on. Why and what are the main differences I should be looking at?
21:20:27 Sermiex: Ralph - you have my congratulations too
21:20:32 Mike_Summey: Bruce, I hold all of my properties in llcs, but I still have to sign for the loans.
21:20:35 Eric: I just thought of a good side effect of this nutty growth in price we have had here: Sellers ALL have tons of equity!
21:20:54 Ralph_Roberts: Glad y’all like it
21:21:23 Roger_Dawson: Mark, I don’t see much difference in strategy between a duplex and a single family home.
21:21:31 Sermiex: Mike - How do you make the transition from your personal name to llc?
21:21:40 Mike_Summey: mark, there are expenses associated with multi-family properties that aren’t there with sfh. Common area maintenance, utilities, grounds maint., etc.
21:21:53 Roger_Dawson: Got to leave you now. Thanks, folks.
21:22:06 Bruce: Good night Roger
21:22:13 MarkNC: OK thanks Mike, Roger. Good night Roger
21:22:16 Sermiex: Good night Roger
21:22:25 Steve: Thanks Roger
21:22:26 Eric: OK on to property managers… Is there a base set of qualities I should be looking for?
21:22:39 Mike_Summey: Sermiex, I title the properties in the llcs when I purchase them, the loans are in the llcs name, but I still have to sign for them.
21:22:50 Eric: Mark, what part of NC are you in?
21:22:57 Sermiex: Thanks Mike
21:23:01 Mike_Summey: Eric, tow: honesty & reputation.
21:23:10 MarkNC: Boone, in the western part of the state.
21:23:22 MarkNC: Where are you Eric?
21:23:28 Eric: Phoenix AZ
21:23:29 Mike_Summey: Sermiex, the only one who knows I’m personally involved is the bank.
21:23:36 Eric: Parents are in Charlotte
21:23:51 Mike_Summey: Hi zert, where have you been?
21:23:54 Sermiex: Mike Great strategy - I plan to use it
21:23:58 Eric: Was thinking of buying rentals in the charlotte area too
21:24:01 Steve: I have to say good night too. See you all next week hopefully.
21:24:14 Mike_Summey: Goodnight Steve. See you next week.
21:24:15 Eric: Bye Steve
21:24:15 bsalus: night Steve
21:24:17 Sermiex: Good night Steve
21:24:23 Mike_Summey: Next week we have aguest.
21:24:32 Steve: Bye everyone…
21:24:34 zert: haven’t been able to make it on time, read the transcripts though how have you been?
21:24:44 Mike_Summey: ie Brooks will be with us and he is an expert in making money with abandoned properties.
21:24:59 Mike_Summey: Reggie Brooks
21:25:26 Bruce: Mike, can I use my personal income in the LLC to qualify for a loan? Or does the LLC need to qualify on it’s own?
21:25:31 MarkNC: I don’t know much about the Charlotte area, other than around Lake Norman where appreciation seems to be crazy like in many markets.
21:25:38 Mike_Summey: Reggie is from Los Angeles and he speakes all across the country on making money with abandoned properties.
21:25:53 Eric: marknc, sounds like a common theme
21:26:33 Mike_Summey: Bruce, the LLC is usually just a holding entity. Your income and credit is what the banks will loan against.
21:26:35 bsalus: hmm… he is probably the one taking all the vacant properties around here
21:27:00 Eric: Mike, any suggestions on finding a prop mangager? There are literaly thousands of them listed. I have began making a list of ones I see on for rent signs…
21:27:04 Sermiex: Mike -it’s going to be interesting to hear from Mr. Brooks
21:27:21 Mike_Summey: Prices have been very hig for the last 2-3 years. Watch what happens as interest rates continue to rise.
21:27:43 Mike_Summey: Sermiex, I’m interested to hear what he has to say also.
21:28:32 Mike_Summey: If anyone has any more questions for me, let me have them as I have to go at 9:30.
21:28:51 Eric: Mike, any suggestions on finding a prop mangager? There are literaly thousands of them listed. I have began making a list of ones I see on for rent signs…
21:28:59 zert: I would be afraid to go in to some of the abandon properties that we have around!!!
21:29:04 Sermiex: Me too Mike - Good night everyone
21:29:13 Eric: Nite Sermiex
21:29:26 MarkNC: Good Night Sermiex
21:29:26 bsalus: From what I hear, last time prices were high and rates were increased to bring it under control they went up to 12% before prices leveled off… true?
21:29:35 Mike_Summey: Eric, there is a chapter in the book on finding a propety manager. If you will follow what it says you should be fine.
21:30:22 Mike_Summey: bsalus, that’s true. Let’s hope that doesn’t happen now, but if it does there will be a ton of deals floating around.
21:30:25 Eric: ok I will review….
21:31:02 Mike_Summey: Rich & Cathy, you guys have been awfully quite. Just watching?
21:32:04 Eric: OK! Thanks a lot Mike. I feel a little more confident now. Gotta put the kids in the sack now. Hope to get on again next week!
21:32:11 Bruce: Mike, thanks for the lively chat tonight. Time to go. Good night all
21:32:27 Mike_Summey: Well, I guess everyone has run out of steam for the night, so I’ll say goodnight until next week.
21:32:31 Eric: Nite to all as well!
21:32:38 bsalus: Thanks Mike… good night all
21:33:17 zert: thanks Mike, will try to make it on time!
21:33:28 Jim_(La.): Thanks Mike- Chat with ya’ll next week!
21:35:36 zert: ralph - I like the new chat program
21:36:14 Ralph_Roberts: Thanks, glad you enjoy it
21:37:39 zert: from reading the posts, it seems to be working well
21:38:17 Ralph_Roberts: Goodnight all
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