Chat 3-7-05
Posted on March 7, 2005
19:59:57 Ralph_Roberts: hi Michele!
20:00:07 Michele: hi ralph
20:00:34 Ralph_Roberts: raining here again…. maybe will snow tonight *)
20:00:44 Ralph_Roberts: so much for Spring
20:01:06 Michele: our rain in CA finally stopped, we are so happy!
20:01:53 Ralph_Roberts: hi zert!
20:02:08 Ralph_Roberts: that’s good, Michele; I know you guys have had a bunch of rain
20:02:10 zert: hi ralph
20:02:14 Ralph_Roberts: hi Steve
20:02:29 Steve: Hi everybody
20:03:22 Ralph_Roberts: hi WDufault
20:03:25 zert: it is supposed to snow here the rest of the week!!
20:03:28 WDufault: hi
20:03:45 Ralph_Roberts: I’m dreaming of a White Spring 
20:04:04 Ralph_Roberts: hi Roger!
20:04:16 Steve: Hi Roger
20:04:21 Roger_Dawson: Hi Ralph and everybody!
20:05:03 Steve: I hope I can stay online tonight. My computer kept re-booting for no reason last week, so I finally gave up and missed most of the chat.
20:05:25 Ralph_Roberts: hope so, Steve… but there’s always the transcripts
20:05:29 Ralph_Roberts: hi Dean
20:05:36 Ralph_Roberts: Big Al!
20:05:38 Roger_Dawson: Ralph, you’ve added some near sound effects, I hear.
20:05:38 Dean: hi all
20:05:41 Ralph_Roberts: hi Rob
20:05:44 Ralph_Roberts: yep
20:05:48 Steve: I read them, Ralph
20:05:51 Ralph_Roberts: you do hear them
20:05:51 Rob: Hi!
20:05:57 Al_Lee: Hey, Guys. I made it again. This must be some kind of a record for me.
20:06:07 Ralph_Roberts: *bird*
20:06:12 Steve: *evil* like this
20:06:13 Roger_Dawson: Good to have you Al, how are things in Dallas?
20:06:30 Al_Lee: Things are hopping, as usual
20:06:46 Ralph_Roberts: “Not a flock of wild geese cackles over our town, but it to some extent unsettles the value of real estate here, and, if I were a broker, I should probably take that disturbance into account.” — Henry David Thoreau
20:07:19 Al_Lee: Ralph is a man of letters!
20:07:21 Ralph_Roberts: “When I build something for somebody, I always add $50 million or $60 million onto the price. My guys come in, they say it’s going to cost $75 million. I say it’s going to cost $125 million, and I build it for $100 million. Basically, I did a lousy job. But they think I did a great job.” –Donald J. Trump
20:07:25 Ralph_Roberts: yep
20:07:56 Roger_Dawson: Thoreau loved to give the impression that he lived as a hermit, but he used to walk down to Ralph Waldo Emerson’s home for Sunday dinner.
20:08:25 Ralph_Roberts: there he is!
20:08:27 Steve: Quite the contrary of Trump, huh Roger?
20:08:35 Al_Lee: Now we have the big guy!
20:08:51 WDufault: I’m from Boston, where condos start at $60 Million 
20:08:51 Ralph_Roberts: now present Mike Summey and Roger Dawson!
20:08:55 Mike_Summey: Hello everyone
20:08:57 Ralph_Roberts: Dawson
20:09:09 Ralph_Roberts: presenting, even
20:09:23 Ralph_Roberts: hi Bruce, Eddie… hi PENNY!
20:09:49 Bruce: Hi Ralph
20:09:51 Mike_Summey: How Roger’s picture get next to your name Ralph?
20:10:12 Ralph_Roberts: he’s cozying up?
20:10:57 Steve: What’s new and exciting this week?
20:10:59 Mike_Summey: Everyone, I appologize for not getting out the email today. I was running everywhere. I’ve been to SC & back since 1:00 PM.
20:11:06 Bruce: Hi Mike, If I’m having a problem getting a renter, is the number one issue price? What are some other issues I could address? Marketing,etc.
20:11:24 Mike_Summey: Bruce, where are you?
20:11:44 Bruce: Nashville, TN
20:12:01 Roger_Dawson: Mike and I reached agreement with our publisher today on our third Weekend Millionaire book. The Weekend Millionaire’s Frequently Asked Questions. We’re going to take all the questions we’ve been asked at seminars, in the chat rooms and through Email and publish them in book form.
20:12:02 Mike_Summey: Bruce,Are you getting calls on your ads?
20:12:15 Bruce: very few
20:12:34 Roger_Dawson: Your webmaster Ralph Roberts will be a coauthor with us.
20:12:42 Mike_Summey: Ralph is going to coauthor the book with us as he is the best at compiling the questions, etc.
20:12:50 Al_Lee: Bruce, is your house listed in mls?
20:13:02 Bruce: no
20:13:08 Mike_Summey: Roger, I’m glad you fixed your text color.
20:13:10 Steve: Roger, when are you guys going to do an infommercial?
20:13:22 Al_Lee: Most of our tenants come from the MLS listing
20:13:49 Mike_Summey: Bruce, I’d look carefully at the ad. If it’s not bringing calls, it’s probably not a good ad.
20:13:51 Al_Lee: Brokers all over the city will be able to earn a commission by getting you a renter
20:13:55 Roger_Dawson: Steve, we’re talking to Guthy Renker about that. They are the king of infocoms.
20:14:34 Mike_Summey: Steve, I’m the problem. I’m hard to get along with.
20:14:45 Steve: Let me know when you do it. (I’ll set my VCR since I can’t keep my eyes open past 10pm!
20:14:49 Dean: Al, how would a renter get to the mls? Would they use a realtor?
20:14:57 Penny: Hi Ralph!
20:14:58 Roger_Dawson: As a real estate broker I learned that ads should be written to make them pick up the phone and call you, not to make the sale.
20:15:09 Ralph_Roberts: hi Penny
20:15:18 Al_Lee: Use a property manager who is a licensed broker and they will list it in MLS
20:15:23 Bruce: I’ll change the ad and get it put into the mls. Thanks for the help
20:15:25 Penny: Mike, Roger, and everyone!
20:15:35 Mike_Summey: Hi Penny
20:15:56 Roger_Dawson: Hi Penny! Been clogging this weekend?
20:16:27 Steve: Bruce, I have a marketing background so I do a lot myself. i.e. making flyers with color pictures and putting them up in the breakrooms of local businesses.
20:16:31 Mike_Summey: Bruce, design an ad that offers people a reason to call you. A free microwave for a 12 month lease, etc.
20:17:00 Dean: Al, would the renter then call a property manager first before looking for a house themselves?
20:17:23 Mike_Summey: Al, will you be in the chat on the 21st?
20:17:31 Bruce: Steve,
20:17:40 Al_Lee: Yes, lots of people looking for a house to rent go to property managers who run large ads in the paper, have a website, etc.
20:17:51 Bruce: Do you do that even if you have a property manager? Or have them do it?
20:17:57 Mike_Summey: Hi moralesric
20:18:01 Mike_Summey: Hi TT
20:18:09 moralesric: hello Mike
20:18:11 zert: Mike - a relative of mine owns a property and it is a classic case as to why you should use a property manager. They are having a ton of problems with the tenant
20:18:16 Rob: The house that I bought and am rehabbing has an old washer and dryer. Should I keep those appliances or sell them? I don’t want to have to maintain them in case of anything going wrong.
20:18:16 Penny: Hi Roger, done a lot of things this week, but no clogging!
20:18:17 Al_Lee: Mike, I intend to be. I will be in San Francisco before then, but will be back then. Why, do you hae a plan?
20:18:19 TT: hi mike
20:18:58 Mike_Summey: Zert, I have a friend in the same boat. I finally convinced him to get a property manager and it has made a worl of difference.
20:19:36 Mike_Summey: , get rid of the washer & dryer. Provide the connections, but not the appliances. They are more headache than they are worth.
20:19:45 Mike_Summey: Hi Rick
20:19:47 zert: I may take ownership and have someone manage it. Rent and taxes have been late almost every month - and they are letting the guy slide
20:19:48 Mike_Summey: Joe
20:20:04 RickCanuck: Greetings
20:20:06 TT: Mike who do you recommend as a residential property manager in the Asheville area?
20:20:34 Rob: Mike, that is what I have heard, but I thought it could be a “selling point”, but you are right. I also got the fridge and stove from the previous owner. They look ok, so I do plan to keep those until they break down…
20:20:43 Mike_Summey: TT, there are several good ones. Two that I use are Bayshore Company and Alpha Real Estate.
20:20:51 Dean: Mike, what about refrigerators? do you supply them?
20:21:43 Mike_Summey: Rob & Dean, it’s fine to provide stoves & refrigerators, but beyond that let the tenants provide their own appliances.
20:21:54 Steve: Mike/Al, do you use one person or company to give you an estimate on repairs needed on a property before making an offer? If so, do you pay them a set fee for this “appraisal”?
20:22:39 Al_Lee: My property managers will do all that. I get an estimate, or better: quote, for the repairs before buying
20:22:44 Mike_Summey: Steve, I get one or two estimates and I don’t pay for them. the companies providing the estimates do so in hopes of getting the jobs.
20:23:05 Mike_Summey: Hi Gary
20:23:14 Mike_Summey: Gary, where are you from?
20:23:36 Gary: Hi Mike - I’m from Olive Branch, MS (Memphis area).
20:23:47 Steve: Thanks
20:24:01 Mike_Summey: Gary, thanks. I thought you might be a Gary from here in Asheville.
20:24:14 Gary: 
20:24:14 Mike_Summey: Olive Branch?
20:24:25 Gary: Yes, just south of Memphis.
20:24:26 Roger_Dawson: There’s a Gary, Indiana
20:24:42 Al_Lee: I once knew a guy named Gary
20:25:00 Gary: What’s the primary topic of discussion tonight?
20:25:12 Mike_Summey: Roger is a geographer, All is a smart %$$&^
20:25:16 Roger_Dawson: Al, I thought you were bursting into Limerick there.
20:25:22 Gary: haha.
20:25:38 Mike_Summey: Gary, open discussion. Anything you want to talk about.
20:26:05 Steve: Gary, are you familiar with Mid-South Sales there?
20:26:10 Gary: Have you talked to anyone who is using a self-directed IRA account with which to manage real estate investments?
20:26:24 Gary: Steve, no I’m not familiar with that company.
20:26:30 Al_Lee: Gary, I know someone who is doing that
20:26:43 Bruce: Mike, in your 0% interest seller carry (or principle note only), do you ever have an annual payment plan versus monthly? Such as, 10K in year 1, 10K in year 3, 10K in year 5.
20:26:50 Gary: Al, is it very complicated to set it up?
20:26:55 Roger_Dawson: I spoke to a convention of mortgage brokers in Santa Monica on Saturday. I made me realize how the way you finance a property is more important than the price you pay. Which is what Mike preaches.
20:27:17 Mike_Summey: Gary, I discussed this with several people, but I’m not a good one to answer your question. Self directed iras can invest in real estate, but I don’t know the particulars. Check with your cpa.
20:27:21 Al_Lee: Gary, the difficult part is financing. You may only use non-recourse financing in an ira.
20:27:40 Gary: Is non-recourse financing hard to obtain?
20:28:08 Al_Lee: Yes, it is very hard unless you are at the level where you can use commercial financing.
20:28:20 Mike_Summey: Bruce, I usually have regular monthly payments for cash flow purposes, but quarterly or annual payments work just as well.
20:28:24 Gary: Thanks for the info.
20:28:24 Al_Lee: Do you have some money in an IRA that you want to put into real estate?
20:28:53 Gary: Yes, I have some money in a traditional ira, and I’m just looking at different things to do with it.
20:29:16 Mike_Summey: Hi bsalus
20:29:41 bsalus: Hi Mike and gang
20:29:50 Al_Lee: I might be able to help you with either residentail or commercial property. It depends on how much $$$. If it’s over about $150k, I recommend commercial.
20:30:12 Gary: It’s not that much - considerably less.
20:30:24 Bruce: Mike, additionally, don’t you put a clause in the note to allow you to transfer the 2nd to another property? If yes, how do you write the language?
20:30:28 Roger_Dawson: Hi Kim!
20:30:44 Kim-OH: Hi Roger
20:31:03 Dean: There is a local experienced investor who joined a company called “Entrust Carolinas” I don,t have his contact info with me though. He spoke at our creia meeting about it. It didn,t seem too complicated.
20:31:09 Mike_Summey: For those of you who are interested, our new book Weekend Millionaire Mindset will be released in early April instead of May. I plan to send you all a date that we would like you to order it from Amazon if you so choose. We want all the orders to come in on the same day to push it to the top of the slaes rank.
20:31:15 Mike_Summey: Hi Kim
20:31:29 Bruce: Al why 150K and commercial? What if the amount was 50 K or 100K. What would you do then?
20:31:30 Kim-OH: Hi Mike
20:31:50 Gary: If you can locate his contact info, please send to ges1957@excite.com.
20:32:03 Mike_Summey: Hi sermiex
20:32:06 Ralph_Roberts: welcome Serimiex
20:32:20 Dean: Wiil do Gary
20:32:31 Gary: Thanks much.
20:32:38 Steve: Has anyone ventured into building a multifamily property versus buying an existing one?
20:33:07 Mike_Summey: I spent all weekend proofing the final pages of the Mindset book. It is scheduled for an April 1st bound book date.
20:33:23 Al_Lee: With less than $150k, you aren’t likely to be able to buy into the commercial projects I receommend, so you need to go to smaller residential properties. The difficulty is the financing, though. In the commercial deals all the lending in non-recourse, so it is easier and the properties are much larger, so it is very stable
20:33:28 Mike_Summey: Steve, I’ve build many multifamily properties over the years.
20:33:32 Gary: Not me, but I see a lot of advertisements for condominium pre-sales in Florida.
20:33:42 Roger_Dawson: Steve, the problem with building is that you have all that construction time where you’re paying for construction financing but getting no rent.
20:33:43 sermiex: Hi All…
20:33:53 Mike_Summey: Gary, I’d stay away from the condo presales.
20:34:04 Gary: Mike, why is that?
20:34:06 Steve: Mike, any problems with zoning?
20:34:35 Steve: Roger, I’ve thought about that too.
20:34:56 Mike_Summey: Gary, condos tend not to be good investments for long term rentals. Too many uncertainities.
20:34:59 Al_Lee: Condos have strong hoa’s and that is dangerous to iinvestors. They can be very profitable because you can buy them cheaper, but there is that added risk of the HOA
20:35:14 Bruce: Al, If I went that route, would I be able to exchange that commercial property equity into something else downstream? Or am I locked in until 59,5 years old
20:35:33 Gary: What is hoa? I’m kind of newbie to this.
20:35:33 Roger_Dawson: I lot of people in California are making big bucks buying pre-construction real estate. If it’s reasoably priced there’s a good chance that it will go up in value before you have to put any serious money into it.
20:35:35 sermiex: Mike: Please send broadcast messages to all of us (like the chat reminders) to let us know the order date
20:35:58 Al_Lee: I don’t think there are any restrictions on when you can sell the property in you ira, but all the proceeds must remain in the IRA
20:36:02 Mike_Summey: Steve, I’m not a fan of zoning. I think it is legalized stealing. I prefer restrictive covenants. Big difference.
20:36:14 Bruce: Roger, what areas? What about Desert Hot Springs?
20:36:23 Mike_Summey: Sermiex, I’ll send out an email about the date as soon as I know it.
20:36:36 Mike_Summey: What’s happening Steve?
20:36:37 Steve: I keep getting kicked out!
20:36:56 Steve: It takes me back to the sign in screen
20:37:03 Roger_Dawson: A lot of people think that if you put up a $2000 deposit and sign a contract, you’re obligated to buy. Not so, you can always choose to walk away from your deposit. It’s like buying a $2000 option to buy.
20:37:11 Mike_Summey: Help Steve Ralph
20:37:21 sermiex: hoa?
20:37:36 Steve: Ralph, are you messing with me? 
20:37:38 Bruce: home owners association
20:37:50 Al_Lee: hoa: Home Owner’s Association
20:37:53 Steve: (it seems better now)
20:37:57 Ralph_Roberts: heh, heh…. not… you just must have a noisy connection tonight, alas.
20:37:57 Mike_Summey: Sermiex & Bruce … right!
20:38:03 Mike_Summey: Hi Jeff
20:38:10 Gary: Thanks for the info.
20:38:33 Jeff:FestusMO: Hello, Mike. It looked like there wasn’t a chat scheduled tonight.
20:38:42 Mike_Summey: We’re getting a pretty good crowd considering that I forgot to get out the reminder until about a hour before th chat.
20:39:22 Roger_Dawson: We’re scheduled for every Monday night now, aren’t we Mike?
20:39:41 Jeff:FestusMO: I thought so, but the calendar didn’t say so.
20:39:46 Mike_Summey: My appology everyone. I usually post the events calendar and get out the chat reminders, but I’ve been remiss in getting it done for March. It will be handled tomorrow.
20:39:57 Steve: Mike, with regards to zoning: I meant did you have problems getting permission to build a multifamily property in an area that might be mostly sfr?
20:40:48 Bruce: Roger, in So. Calif, is a lot of the 250K - 300K buyers being pushed into the desert because everything else is so expensive?
20:41:29 Mike_Summey: Steve, in Asheville, zoning is ridiculous. We have something called the Unified Development Ordinance (udo). Compliance with it adds 20-30% to the cost of construction without adding a single square foot of livable floor space. Terrible!
20:41:41 Mike_Summey: Hi n2lights
20:41:43 Roger_Dawson: Steve, zoning is very much a local affair. In my city you can’t build multi family or commercial, period. In Asheville you can anything you want because they don’t believe in government there.
20:42:23 Al_Lee: Dallas has zoning, Houseton does not
20:42:28 Al_Lee: Houston
20:42:30 Mike_Summey: Roger doesn’t know what he’s talking about. Asheville is probably more restrictive that where he lives. Not so in the county outside the city.
20:42:34 Steve: Yikes. In my area, you can build it but the city makes you jump through many hoops. Moving into the county is easy though.
20:43:20 Mike_Summey: Roger went with me to an anti-zoning meeting for our county. It was an experience for him.
20:43:25 Roger_Dawson: Bruce, that’s right. Commutes here are absurd. The average commute is 1.5 hours each way.
20:43:46 Bruce: Al, when you use Interest Only, do you every pay down the note? Or hold for 10 years?
20:44:06 Roger_Dawson: There were all weared tshirts that said “Taking this country back one county at a time!”
20:44:27 Al_Lee: I do not believe you should ever pay principal that you do not have to. Use the cash to buy more houses,
20:44:37 sermiex: Hooray for them!
20:44:43 Bruce: Roger, thanks, I’m curious about DHS because a lot of homes are in the process of being built at about 150K - 200K less than Palm Springs, Palm Desert etc.
20:44:56 Mike_Summey: Roger loved it when I was quoted in the newspaper as saying, “You can stick it where the sun don’t shine.”
20:45:46 Al_Lee: Mike, that is: if where the sun don;t shie is zoned for “it”
20:45:59 Mike_Summey: Al and I differ on the principal payment issue. I like to pay things off as soon as possible. That’s why over 75% of my properties are paid for.
20:45:59 Roger_Dawson: Bruce, Palm Springs is a very volatile market. There’s endless land to build on. A high percentage of second homes, and a lot of Canadians that are affected by the exchange rate.
20:46:20 Bruce: Al, what about your own home? Same thought process?
20:46:47 Steve: Mike, were you doing a little PR work for the new book with that quote??
20:47:39 Mike_Summey: Steve, I was talking to the locals and referring to the document the county was proposing to adopt. My comment incited the locals and the zoning did not pass.
20:47:52 Al_Lee: I like to uwe OPM (Other People’s Money, even on my own home
20:48:53 Steve: You should run for Mayor of Asheville
20:49:36 Roger_Dawson: I wish Mike would run for Pope, then the only thing I’d have to kiss would be his ring!
20:50:05 Mike_Summey: As I said earlier, I’m not a fan of zoning. I think it is legalized stealing by those who already have theirs and want to stop anyone else from doing anything with their property that does not conform to what’s already built. If you want the protection zoning offers, then buy where there are restrictive covenants and pay for the protection when you buy … don’t try to steal it from those who haven’t built yet.
20:50:31 Dean: Mike, I can’t vote for city elections but if you would run for county though?
20:50:36 Bruce: Al, with I/O rates your payments will obviously be much less than a 15 yr. fixed. Is a first year break even on cash flow acceptable? Or do you look for a better return first year?
20:51:02 Steve: Summey for President!
20:51:04 Mike_Summey: Dean, I’m not a politician. I’d probably get assinated.
20:51:47 Steve: Roger would make a good VP
20:51:54 Roger_Dawson: I hear you have a lot of assinations in Asheville.
20:52:21 Al_Lee: I usually get better, sometimes much better
20:53:08 Mike_Summey: During one of my prior bouts with the Asheville City Council, I blaste the mayor and he told the audience that I was about as subtle as a turd in a punch bowl. That was rather rude of him I thought.
20:53:14 Mike_Summey: Hi Jimmy
20:53:15 Roger_Dawson: Mike, can’t resist this one. It’s your assignations that are going to get you shot!
20:53:44 Steve: Rude but funny!
20:54:03 Mike_Summey: Roger is just giving me a hard time because I’m not a push over in negotiations.
20:54:12 TT: Charles Worley said that?
20:54:38 Mike_Summey: TT, no it was years ago. Dick Wood.
20:55:21 Mike_Summey: TT, it was during a debate of sign control.
20:56:02 Mike_Summey: Has anyone bought a propety this week?
20:56:16 Bruce: Al, Does your down payment reflect the type of return you’re looking for? Or do you have a stringent formula, such as 20% down, a cash on cash return of 15%
20:56:37 Bruce: Mike, no but I made an offer on a HUD and lost by $4,000.00
20:57:01 Steve: I made an offer today but I am still waiting for the proverbial laugh.
20:57:30 Mike_Summey: Bruce, don’t let that discourage you. Keep making offers. No one ever lost money on a property they didn’t buy, but many have lost on properties they paid too much for.
20:57:47 Kim-OH: Amen Mike
20:57:48 Bruce: Mike, amen
20:58:01 Kim-OH: ^5 Bruce
20:58:18 Mike_Summey: Kim & Bruce, you guy are on the same wave length.
20:58:27 Kim-OH: Hi Ralph, I didn’t mean to ignore you, I got a phone call right as I entered the chat
20:58:29 Bruce: Kim,^5 back at ya
20:58:54 Ralph_Roberts: that’s okay, Kim… I’m just here to fix anything Roger and Mike break. ;_)
20:59:11 Kim-OH: Al you were talking about commercial lending when I came in, can one get an owner occ commercial loan on a multi?
20:59:16 jimmy: hi everybody
20:59:22 Kim-OH: LOL @ Ralph
20:59:28 Roger_Dawson: Hi Jimmy
20:59:28 Bruce: Hi Jimmy
20:59:31 Penny: Oh my goodness, what happened?
20:59:35 Steve: I am starting to realize that a good source for finding properties is other investors in my area. There are many of them looking for foreclosures to rehab and resell.
20:59:52 Mike_Summey: I am amazed at the people who will end up paying too much for a property just so they can say they bought one rather than being patient and making offers until a good one is accepted.
21:00:12 Kim-OH: Mike and Roger do you have the text in large print on your screens?
21:00:17 Mike_Summey: Penny woke up … finally.
21:00:19 Roger_Dawson: Yes, I do
21:00:29 Mike_Summey: Yes
21:00:48 Penny: Yes, but I seem to be on delay
21:00:53 Kim-OH: I just looked at a home listed by a realtor, woman is buying it on a land contract for 135K and is selling it now for 89K
21:01:20 Mike_Summey: Kim, sounds like she paid too much!
21:01:49 Kim-OH: Mike, I’ll say she paid way too much and I don’t know what she is planning to do with that situation
21:01:50 Penny: On my screen it just flashed large then went back to smaller script
21:02:09 Mike_Summey: You’ve all heard it said that patience is a virtue. You don’t realize just how true that statement is.
21:02:24 Kim-OH: Mike I know it very well
21:02:31 Roger_Dawson: If it’s on a land contract how can she sell it? With a land contract you don’t get title until you’ve paid it off.
21:02:38 Mike_Summey: Penny, ask Ralph for help.
21:02:39 Kim-OH: I waited for a long time to make my first deal and it was a doozy
21:02:56 Kim-OH: Roger, that’s the question on my mind
21:03:07 Mike_Summey: It took me a year to make my first deal, but it made money and is now making a killing.
21:03:09 Penny: Its okay now, its normal, was only abnormal for a second flash
21:03:12 Ralph_Roberts: I have no idea, Penny… did your power blip?
21:03:18 Penny: It did wake me up
21:03:42 Penny: no, but don’t worry about it
21:03:43 Roger_Dawson: She’s be better to just surrender the property to the seller. It’s unlikely that a defaulted land contract would affect your credit rating.
21:04:15 Mike_Summey: I’ve made several deals where the seller had to bring money to the closing.
21:04:24 Kim-OH: Roger, that is my thought exactly but I really don’t know what’s up at this point
21:04:43 Kim-OH: She paid nearly 14K cash up front for the property
21:05:05 Mike_Summey: The airplane I am currently flying is a good example. The seller had to put $60,000 with what I paid for the plane to pay off what he owed.
21:05:10 Kim-OH: I am seeing an interesting situation unfolding here in Cincinnati
21:05:16 zert: Mike/Al - could you describe a situation where the buying party would get money at the closing?
21:05:24 Roger_Dawson: Kim, when something doesn’t make sense it’s probable that something is going on that you don’t know about yet.
21:05:55 Penny: okay, my dinner calleth. Goodnight everyone! I’ll observe again next week
21:06:04 Kim-OH: Roger, I understand that and I’m a bit wary, there are a lot of scams going on here right now and one lender in particular keeps showing up
21:06:34 sermiex: Mike/Al: Ditto Zert’s question
21:06:58 Mike_Summey: zert, I bought a property where I got an $80,000 first mortgage from an individual, a $140,000 second mortgage from the seller at 0% interest, yet I only paid $200,000 for the property. I walked away from the closing with $20,000 cash and a fully financed property.
21:07:54 Al_Lee: I was gone, I’m back now. I had a phone call
21:08:35 Al_Lee: I use 20% down most of the time to get the best interest rates. I use 30-year loans. I use interest-only for the first 10 years to get the lowest payments and highest cash flow.
21:08:36 Steve: I have to take off. Good night everyone - I hope to see you all next week…
21:08:36 Kim-OH: Al, I asked about the commercial side of lending and why you recommend using commercial lending? Can one get a commercial loan for an owner occ multi?
21:08:47 zert: Mike - so did the seller give you the 20K?
21:08:53 Kim-OH: goodnight Steve
21:09:06 Al_Lee: I have gotten money back at closing by negotiating for the seller to pay dollars to my management company at closing for upgrades or repairs
21:09:16 Mike_Summey: Another property I bought for $90,000. I got a bank loan for $30,000 (first mortgage) and seller financing of $75,000 at 4.5% interest. I walked away from that closing with $15,000 cash and a fully financed property.
21:09:43 Mike_Summey: Goodnight Steve
21:09:58 Al_Lee: It is not legal for the seller to pay cash to YOU at closing, but they can pay an invoce from your management company. They money goes to yoru account to pay for work to be done. If the work gets done cheaper, you get the difference
21:11:01 Al_Lee: Kim, you can not usually get commercial loans for under $1M, or some large number. I fyou are buying a sfh you will not likely be able to use a commercial loan.
21:11:06 Kim-OH: Al that’s very interesting, I need to learn more about that as I am looking at a 9 unit and I believe it’s going to need a boat load of work
21:11:06 Mike_Summey: Al, in the situation I described above, I considered the cash I got at closing as being money from the first mortgage holder, not the seller.
21:11:15 Roger_Dawson: Al, the not legal part of it only applies to institutional financing, doesn’t it? Private financing you can anything all parties agree to.
21:11:25 Al_Lee: I do know of one lender that will do commercial for $500k, but that is the lowest I have ever seen
21:11:52 Roger_Dawson: I need to run folks. Good chat.
21:11:59 Kim-OH: Al, did I misunderstand you earlier when you said use commercial for anything over 150K?
21:12:00 Mike_Summey: I have been amazed over the years at what sellers will do if you just ask.
21:12:16 Mike_Summey: Most people are afraid to ask.
21:12:32 Kim-OH: Mike I think I will be asking the sellers to carry the financing total if I decide to buy the 9 unit
21:12:47 sermiex: Mike: Do you ask the seller to pay an “invoice” or an “estimate”?
21:12:56 Al_Lee: Roger, I believe the logic goes like this. You qualified for the loan based on your investing a certain amount of money out of your pocket (skin in the game). If you get cash, you didn;t really invest that money thatyou told the bank you would invest into the property
21:13:26 Mike_Summey: Kim, they may need some cash. If so, offer to take out a small 1st mortgage with a bank and ask them to carry the balance. It works out the same.
21:13:40 Al_Lee: Kim, we were talkingabout money in an IRA that is to be invested in RE
21:14:06 Kim-OH: Mike I agree
21:14:10 Al_Lee: That is where the $150k came in. IIt was not a loan amount, but the down payment amount.
21:14:16 Kim-OH: All thanks I will have to read the transcript
21:14:28 Mike_Summey: Al, the “skin” you are talking about is irrelavant if the 1st mortgage is less than 30%.
21:14:29 Kim-OH: oops Al not All
21:15:02 Bruce: Mike, it sounds like your not a big fan of Condo’s. Is that true?
21:15:03 Al_Lee: Mike, I am sure that is correct. I have never had one less than 30% myself. I use OPM
21:15:14 Mike_Summey: When the 1st is less than 30%, the banks consider the seller as carrying the bulk of the risk.
21:15:57 Al_Lee: I mostly buy newer stuff and use 80% bank financing
21:16:18 Mike_Summey: 30% bank financing and 70+% seller financing is very doable and works for everyone if the payments will fit within the NOI
21:16:35 Mike_Summey: And best of all it is a no money down deal.
21:16:47 Al_Lee: Mike, that sounds like a sweet deal. What is the amortization on the 70%?
21:17:19 Mike_Summey: Al, what’s the rate of return on 0 investment and $1.00 cashflow?
21:17:32 Al_Lee: Mike, infinity!
21:17:48 Bruce: Al, do you buy a lot from builders? What are their hot points? Showing the market an increase in sales price along with their roi? I ask because I’m meeting with a builder to discuss buying a few of his houses and want to get a good deal.
21:17:55 Mike_Summey: Al, the amortixation of the 70% financing may be 15, 20, 25, 30 years. Who cares.
21:18:05 zert: so I’m still confused where does the check to me come from, the 1st from the bank or the 2nd from the seller?
21:19:01 sermiex: And I’m confused about the seller paying an invoice for repairs
21:19:06 Mike_Summey: Bruce, I’ve made a local builder an offer to take several units at a deep discount if they are unsold by the time they are completed.
21:19:32 Kim-OH: Hi Doug
21:19:45 Bruce: Mike, deep discount meaning apx. 15% or greater?
21:19:46 Doug_in_CT: Is it better late than never?
21:19:49 Mike_Summey: zert, the check to you comes when you are able to structure a deal that has more financing than what you are paying for the property.
21:19:56 Mike_Summey: Hi doug.
21:20:03 Al_Lee: I do buy from builders. It is important to establish a relationship with some good builders. The good ones don;t like to sell to investors because they fear you will trash up their development while they are trying to sell new houses. You need to extablish a reputation for taking good care of the properties and maintaining the appearance the builder wants.
21:20:04 Doug_in_CT: Hey Mike
21:20:21 Mike_Summey: Where have you been?
21:20:33 Bruce: Al, very good point.
21:20:52 Doug_in_CT: Out working for a livin’ instead of letting me investment work for me.
21:20:53 Mike_Summey: Al is very correct on that point.
21:21:55 sermiex: Hey Mike - Me and Zert are waiting for responses…
21:22:01 Al_Lee: sermiex: If you negotiate with a seller that you will pay a certain price for the house, but you want the seller to pay for $10k worth of upgrades or repairs, you can arrange for your property manager to invoice the seller for $10k to be paid at closing. The maony is paid by the title company to you manager who deposits it to your account to be used for your property(ies).
21:22:21 Mike_Summey: Folks, I’m going to have to say goodnight. I’ve still got several things to do before bed, but we will be here next week … same time same station.
21:22:37 Bruce: Thanks Mike
21:22:38 Kim-OH: Goodnight Mike and Thanks!!!
21:22:39 sermiex: Thanks and good night Mike
21:22:50 Mike_Summey: Goodnight all!
21:22:55 Al_Lee: Mike, have a good night. Come visit us in Big D some time
21:22:59 Doug_in_CT: See ya next week.
21:23:00 Bruce: Al, are you buying anything in Calif.?
21:23:27 Al_Lee: Bruce, I only buy residential property in Texas. I do buy commercial peoperty elsewhere, though.
21:23:53 Al_Lee: property
21:24:51 Bruce: Al, you stated a few weeks ago you would only buy 100 X the rent. Why? What if you cash flow at 120X the rent.
21:24:53 Al_Lee: Well, i need to run, too. If you want to see more about my strategy, go to http://www.RentHouses.org and snoop around
21:25:08 Kim-OH: Thanks Al
21:25:18 Kim-OH: goodnight Al
21:25:32 Kim-OH: Ralph thanks for your hard work making this chat possible
21:25:38 Al_Lee: Bruce, you are right. Today we can get such good loans that they might cash flow at higher multiples.
21:25:43 sermiex: Here’s a note about RE craziness: a rehabbed brownstone here in NY had an assessment of $1600 in taxes - after rehab it was assessed $29000 in taxes!!
21:26:06 Ralph_Roberts: thank you, Kim… it’s people participating that makes all this possible.
21:26:22 Kim-OH: Ralph you are way too modest
21:26:31 Bruce: Sermiex, that’s crazy,
21:26:56 Al_Lee: I am a New Yorker who now lives in Texas. I know how crazy taxes are in NYC
21:27:21 Bruce: Goodnight all
21:27:30 Kim-OH: night Bruce
21:27:45 Kim-OH: Goodnight everyone, see you next week
21:28:03 Ralph_Roberts: I’ll have the chat transcript posted shortly… g’nite all!
21:28:11 jimmy: good night
21:28:25 sermiex: Ralph - really good info tonight - even though I was late - Thanks and good night
21:31:21 zert: Doug- perhaps I already asked you this question, but do you own property in Buffalo?
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