Chat 10-3-05
Posted on October 3, 2005
kimadison: Anyone there
ritchie: Hi Did I miss something?
ritchie: what time does the chat start?
Deadeye31: hello
Deadeye31: chat starts as 8:00, I believe
Deadeye31: and goes to 9
Deadeye31: hello
Al_Lee: Hi, I am in a little early. I need mto leave for a few minutes
and be right back.
Deadeye31: no problem
Al_Lee: BTW - the chats go to 9 Easter time, or a bit later if peopel are
still talking, as they often are.
Deadeye31: I’ve read plenty of the transcripts to wonder how they’re over
at 9
Ralph_Roberts: hi guys
Bob_Carr: Al - Great show yesterday
Al_Lee: Bob, Thanks. Hi Ralph. I’m back now.
Al_Lee: Bob, did you listen via webcast?
Bob_Carr: Al - Let me know when you have the mice juice ready for humans
Bob_Carr: Al- Yes i did
Al_Lee: Bob, I am going to hoard it for myself!
Bob_Carr: Al - You raised a lot of good points
Al_Lee: Diid the webcast wrok well? I have had emaisl form a few people
who said they could not hear anything, but I do not know why.
Bob_Carr: Al - It was great,no problem in baltimore
Al_Lee: Bob, the gas prices issue rang a bell with a lot of people. Maybe
they just filled up before they tuned in my show! 
Deadeye31: prices aren’t reall that bad. New York is suppose to be one of
the worst but it’s actually back down the 3.00 mark. lower in Jersey where I go
to school
Bob_Carr: Hi Gary
Ralph_Roberts: hi gary!
Al_Lee: Bob, infield real estate has been rising from the ashes for a
while now, but the recent jump in commuting costs is giving it another shot in
the arm
gary_mathes: Hello
Ralph_Roberts: Gary, the elephant missed ya dance
Bob_Carr: Al- I didn’t think about to you mentioned it yesterday
Fred: so what time does the chat get started
gary_mathes: Ralph, good to know I’m missed
Al_Lee: I have seen a chart of gas prices adjusted for inflatin and $3.00
is not really that high, but it seems high to us because we are not accustomed
to it.
Deadeye31: anyone have any opinions on New York City, and New Jersey real
Estate. Houses are pretty expensive up here.
Ralph_Roberts: Chat has already begun… we’re a bit informal. 
Fred: oh ok great
Ralph_Roberts: Mike and/or Roger will be along shortly
Fred: I see thanks
gary_mathes: Ralph, don’t forget the required IRS verbage
Fred: deadeye31 would you be interested in investment property in NC
Al_Lee: Deadeye, I coach people from all over the US who want to get
positive cash flow and I tell them to buy in Texas, especially Dallas/Fort
Worth. YOu can buy a nice new house for $150k and lease it for $1650 and make a
good positive cash flow
Ralph_Roberts: agin? … okay… REQUIRED DISCLAIMER: To ensure
compliance with requirements imposed by the IRS, we inform you that any tax
advice contained in this communication (including attachments) is not intended
or written to be used, and cannot be used, for the purpose of avoiding penalties
under the Internal Revenue Code.
Sandy: Hello. Finally got the right place at the right time this time
Ralph_Roberts: dance
Ralph_Roberts: the elephant likes the disclaimer
gary_mathes: Good elephant
Bob_Carr: Mike - The Panthers should put on a good showing tonight
Deadeye31: The book says stay within 50 miles. Oh, and guys, I’m only 19.
I need about 6 more months before I can even start saving. I might join the NYC
sanitation dept.
Ralph_Roberts: he’s dancing on the IRS heh, heh
Ralph_Roberts: there’s Mike Summey!
Mike_Summey: Hello everyone!
Al_Lee: Deadeye, that is not the only reason why I only buy in Texas, the
lawas are more favorable, there is no income tax, d/fw is the #1 corporate
relocation destination year after year, land cost is low so you get more
depreciation allowance, etc. etc.
Mike_Summey: I see Gary made it okay. He was having problems earlier.
Ralph_Roberts: I spent a year in West Texas, Al … there’s reasons the
land is so low
Mike_Summey: Hi Peter
gary_mathes: Mike, I had to do a little running around, but made it
happen
Deadeye31: hello, Mike. I love the books. I’m going to require my younger
sister and cousin to all read them both. And I’ll have my father read the
mindset one. THey’re both grade A.
Peter: Hi Mike and everyone else in the chat room
Mike_Summey: Gary, I never had any doubt about your abilities.
ritchie: Hi Make
gary_mathes: Mike, your a good man, technology is not my strong point
Mike_Summey: Thanks Deadeye. Would you go on amazon.com after the chat
and post you comments there?
Al_Lee: Ralph, Texas is larger than most of the countries of Europe. West
Texas has a lot of prairie and desert, East Texas has hills and woods, South
Texas has beaches and ports. You can not generalize about Texas, it is very
diverse. I am a New Yorker by birth, so you know I am not a native Texas.
Mike_Summey: Hi Magic
magik570: hello Mike
Ralph_Roberts: well, West Texas is nothing but miles and miles of nothing
magik570: I read your book 3 months ago and bought my first property last
month
Mike_Summey: Roger will not be joining us tonight. He is in Mexico City
giving a talk to an insurance company.
Mike_Summey: Magik, that’s wonderful.
Mike_Summey: Hi Mauggie
Mike_Summey: Hi JWF
magik570: its rented out, 100% financing
mauggie: Hi Mike
magik570: rent pays mortgage, life is good
magik570: working on another deal in MS
Al_Lee: We don;t invest in West Texas. We invest in major metropolitan
areas where there is growth and industry to attract more growth
Mike_Summey: Magik, if you con only do one of those a year, you’ll be
wealthy before you know it.
Ralph_Roberts: to complete that quote, Al… West Texas is nothing but
miles and miles of nothing but miles and miles.
Mike_Summey: Hi Rob
magik570: Mike, too many properties out there
Mike_Summey: Hi Dave
magik570: with the knowledge from your book…we should do more than 1
Rob_L: Hi
Deadeye31: what’s the most common way of getting financing for an
investment home? is seller financing that common?
ritchie: Mike, let me know when we are “officially” taking
questions. I have a few queued up already.
DaveVRichmond: good evnin.
Mike_Summey: Magik, that’s true, but just one will do it. You’ll find
that the more experience you get the easier it gets.
Dwayne_Wiseman: Deadeye31, the best way is to obtain a bank loan or
sometimes have the owner finance it for you.
magik570: thank you again, Mike
ritchie: Magik, what area are you in?
DaveVRichmond: Mike, have you done many lately? I know things have been
tight…just wonderin how it’s been for you.
Mike_Summey: We are oficially open for questions. Gary Mathes is our
expert CPA and Dwayne Wiseman is our expert banker. Both are sitting here
waiting for your questions. Go get ‘em.
ritchie: Question about bank financing. Suppose you have a property to
purchase and the seller is willing to take a second mortgage for a 20% down
payment. You’d like to finance the other 80% using conventional bank financing,
resulting in a zero down deal. How willing are banks to give loans in these
circumstances to a highly credit worthy borrower? The reason I ask is that an
investor friend told me banks don’t want to be bothered if you don’t have your
own money involved or they will charge a higher rate.
Peter: Mike I am getting a loan and for some reason my closing date is
keep on getting pushed….my broker is charging additional origination
fees….is it normal?
Mike_Summey: Peter, ask Dwayne that question.
Deadeye31: oh jeez. I need to get out under this 39% income tax in New
York. is the income from investment properties taxed at the same rate as income
tax or is it capital gains?
ritchie: only a novice, but it sounds like the broker is unprofessional
Mike_Summey: Everyone, please address your question to a specific person
so everyone will know what to answer.
ritchie: gotta pick your broker carefully, they are not all created
equally
Peter: is Dwayne around?
Rob_L: I was talking to a company called the Money Warehouse and they
were telling me about a program called the Cost Savings Index that maximizes
cashflow…where you pay below interest rate and interest increases slightly
each year for 5 years. What do you think about that form of financing???
Dwayne_Wiseman: Ritchie, Local community banks will do them. Need to make
a couple of good bankers from two local banks that way if one moves out of town
you don’t have all your eggs with one banker.
ritchie: thanks Dwayne
gary_mathes: Deadeye, the rental income is ordinary income not capital
gain
Mike_Summey: Dwayne and Gary are both here. Just start your questions
with the name of the person you are asking.
Deadeye31: damn. It figures I’d be born with a liking for real estate in
the 39% income tax state.
Dwayne_Wiseman: Peter, no charging additional fees are not normal.
Nothing against brokers but do you have local bank in your area?
Al_Lee: Deadeye: If you do it right, your income from rental property can
be essentially non-taxed because of depreciation allowance and other
expenses–even if you make positive cash flow
DaveVRichmond: dwayne if I have a college student child can I get regular
financing putting them on the mortgage and in a multi (duplex, triplex, quad)?
Mike_Summey: Deadeye, the taxes may be high on ordianry income, but real
estate offers a lot of tax advantages.
gary_mathes: Deadeye, remember you get depreciation, interest, taxes,
insurance and the like as deductions before you have any net income
ritchie: Peter, I had a bad experience with a broker once. They can ruin
a deal if you are not careful.
Al_Lee: Deadeye: I’ve been doing it for 30 years using a CPA and I’ve
been audited 3 times. It works!
Fred: dwayne - what are some things we should have prepared and ready so
the banker will be interested in our time.
ritchie: A broker is a key player in your “dream team”
Dwayne_Wiseman: DaveVRichmond, You should be able to.
ritchie: (or banker)
magik570: how can I find a good CPA in my area (NY)?
Mike_Summey: Hi Bryant
Deadeye31: oh, I’ll throw this out there and you all can check my math. I
calculated the max morgage you can have on a home using noi, interest rate, and
paying it off over 20 years. it’s on the forums.
Bryant: Hi Mike
gary_mathes: Seek referrals from other people that are real estate
investors
ritchie: Gary, If I invest in resort land solely as an investment (not a
second home) is the interest deductible?
Deadeye31: there’s got to be thousands of CPA here in New York
Dwayne_Wiseman: Fred, You should prepared with a plan but also ask for
their advice. They may not always be right but they may look at it from a
different angle than an investor would.
Ralph_Roberts: Thanks for that, Deadeye… we encourage everyone to use
the Forums, it’s a wonderful tool.
magik570: How do I qualify a good cpa? What are right questions to ask
Mike_Summey: Everyone, on the forums that Deadeye is talking about,
please feel free to comment on any of them. I have limited time and only get to
answer a few occasionally, but the forums are available for everyone.
Ralph_Roberts: the Forums are like this chat, only 24/7
gary_mathes: ritchie, if you rent it the interets can be, if you use it
as a second residence it can be and it may be investment interest to the extent
of investment income. That’s a long answer to say yes
Peter: Dwayne: No the broker is in Texas
DaveVRichmond: Dwayne. I just finished a renovation. Extensive
documentation of costs, profit, etc. Pictures, etc. Showing a good profit. How
many times would I have to do this to convince a banker to back me with a
construction loan for a larger project?
Mike_Summey: Our new book Weekend Millionaire Real Estate FAQ has a whole
section on this website and how to use it … thanks to Ralph.
Fred: dwayne - I am useing mortgage brokers, can banks do no doc type of
loans as well.
Ralph_Roberts: REQUIRED DISCLAIMER: To ensure compliance with
requirements imposed by the IRS, we inform you that any tax advice contained in
this communication (including attachments) is not intended or written to be
used, and cannot be used, for the purpose of avoiding penalties under the
Internal Revenue Code. (Gary and Mike says I gotta say this every once in a
while)
Peter: Ritchie….how can they ruin a deal?
Rob_L: Gary, I am in FL and want to get setup with an LLC in a
cost-effective manner. Can you recommend a good service/company to get me setup?
I have the forms from courses that I bought, but wanted to make sure I do things
right.
Ralph_Roberts: thanks, Mike
ritchie: Gary, what if it produces no income for 2 years, but you pay
interest while it sits and you wait for appreciation. Is that interest
deductible?
Deadeye31: I guess I’ll send this to you, Mike. Is it best to try and pay
off a morgage in 15 years, 20 years or 30 years? Or should be just make sure the
noi is positive?
gary_mathes: Rob L, I could probably help you find someone, but I don’t
know anyone there at this time.
Dwayne_Wiseman: DaveV, Documenation of cost will probably always be
required especially if you got “deal/steal” on the property.
gary_mathes: ritchie, possibly as investment interest, but there are
limitaions
Dwayne_Wiseman: Fred, local community banks do No Doc Loans.
Mike_Summey: Deadeye, that all depends on your age and circumstances.
When I was younger I used longer mortgages. Today I try to pay them off as soon
as possible.
Deadeye31: hmm, I’m 19. I guess I can wait 30 years for that morgage.
DaveVRichmond: dwane, yes but what I’m wondering is how long should I
expect it to take to prove myself so that I can aquire funding for a larger
project. I have my eye on some multi’s that require extensive renovation.
Mike_Summey: Deadeye, at age 19 I didn’t even know what real estate was.
You’re way ahead of me.
Fred: Mike - some guru’s say to keep a equity loan open on them so that
you want get sued. What are your thoughts
DaveVRichmond: Mike buy any recently?
Peter: Yeah at 19 I didn’t knew it either
Deadeye31: I’ve been watching Sheet’s infomercial since I was 12. I’m
glad he did the foreward for your book. Despite what ppl say, you really can
make money in Real Estate, I’m talking to ppl who have proven it.
Mike_Summey: Fred, you can get sued no matter what. Forget all that
nonsense, insure yourself well, conduct business properly and don’t worry about
getting sued.
Mike_Summey: Dave, I’m working on one right now.
ritchie: Peter, the closer you get to the closing date, the more
dependent you are on the broker to come through on time and with the terms you
asked for and were promised. You are at their mercy. If you get documents the
day of closing and they have slipped in fees you did not expect, what do you do?
In my case, I had intense negotiations with the seller to get the price I
wanted, and I gave a good faith promise to close by a certain date. The mortgage
broker never missed an opportunity to bungle something along the way, and at
closing the rate was not what I expected, there were hidden fees, and there was
a pre-payment penalty on the loan. I learned a slightly expensive lesson early -
find someone you trust (banker or broker).
Deadeye31: wow
Dwayne_Wiseman: DaveV, it depends. The project you are working on should
be able to cashflow itself. The more loans you do with a banker he/she knows you
will pay them back even if the numbers always don’t work.
Mike_Summey: Deadeye, Carleton is a long time friend of mine and one of
the few real estate gurus that I respect.
DaveVRichmond: Gary if I put my college age child on a mortgage for a
multiunit property that they will live in while attending school, how do I split
the liability, tax wise?
Deadeye31: I noticed you don’t need his course for the tenant agreements
and stuff. You can get them right online by doing a google search.
Peter: Ritchie exactly that is what I have been getting…..hidden fees
at the last moment….I guess if I still have time I can still negotiate…since
the broker also has put lot of time and efforts to get the loan approved….I
can negotiate with him if we still had time
Mike_Summey: Hi Penny
gary_mathes: Dave, I would allocate based on the square footage occupied,
by your child to total square footage
DaveVRichmond: Mike…on insurance. if I have a 70-100K property would
300k Liability be enough or should I increase that….and what about umbrella
policies?
Penny: Hi Mike
Penny: I’m a little late, but here.
DaveVRichmond: Thanks Gary…my business partner’s kid is in school near
me…we will do one with his kid and one with mine in a few years. many benifits
for everyone involved.
Fred: deadeye be carefull and make sure that you get a really good
agreement and not a dude. I got mine from someone who has been in the reatal
bussiness and it has been tested.
Mike_Summey: Dave, the amount of liability insurance you carry should not
be based on the value of a particular property, but rather on the value of your
personal assets … all of them.
gary_mathes: Dave, I’ve known several people that have done that. It
generally works pretty well
Deadeye31: I was wondering, how do the lender closing costs get paid by
the person who needs the money? is it tacked on the end of the morgage payments
or deducted from the morgage you get? Or do you have to pay the 7K or so?
Mike_Summey: Just a heads up for everyone, I will have to leave the chat
at 9:00, but Gary and Dwayne can stay as long as they want. I haven’t eaten
tonight and I’m going out to get some food and watch the ballgame.
Peter: Dwayne and Ritchie another question for you….my Loan Documenge
GFE says if I pay off early I may not be entitled to a refund of part of the
finance charge (I think this is standard in the form what does this
mean)…..when I asked the broker I was told that I will be entitled to refund
of any finance charge I have already paid? Please help me understand this
gabi: Hi Mike, and everyone
Bob_Carr: Mike- The Panthers should put on a show tonight
Al_Lee: Hi, gabi
Dwayne_Wiseman: Deadeye31, both ways. Sometimes the borrower pays out of
pocket and other times they are included in the loan proceeds.
gabi: Hi Al
Peter: sorry typo Document and the broker told me I will not be entitled
to refund from what I have already paid (does this make sense)
Fred: oh Bob thanks for the reminder I forgot
Dwayne_Wiseman: Peter, which state do you live in?
Peter: I am in CA and the loan is for TX
Mike_Summey: Hi Bob, I didn’t see you come in. Yeah, I think I’m going to
go watch the game at one of the local sports bars and get some food. I worked
all afternoon in my yard and I’m hungry.
ritchie: Peter, you have much more leverage before closing. Don’t be
afraid to use your power if you feel the broker is not showing integrity. This
is your party. Call the broker’s boss if necessary. Also find out who the
commisioner of banks is in your state and call their office and ask questions.
In North Carolina brokers do not want a complaint with the bank commission. But
it is much easier to resolve this before closing. Do not be afraid to pull the
plug if you have to, just make sure the seller trusts you.
DaveVRichmond: mike what’s your low end cut off as far as cost/rent that
you go after these days?
Mike_Summey: Hi gabi
Mike_Summey: Hi Mark
Mike_Summey: Lots of people joing in tonight
MarkCT: Hi Mike
Dwayne_Wiseman: Peter, it depends what the state laws states.
Al_Lee: Howdy, Mark
Peter: Ritchie I want to make sure what the Broker says is correct…can
any experienced people help me
MarkCT: Hi Al
Mike_Summey: Peter, you do have some leverage with the broker. If you
don’t close, he makes nothing.
Peter: Al what does the TX state law says
Peter: Mike what do you mean by some leverage with the broker?
Al_Lee: Peter, pleaes be mroe specific on the question. I am not sure
what law you are referring to.
Peter: I paid him $395 for the application….I guess he already spent
that for the Appraisal and credit
ritchie: Peter, sorry, I can only share info from the perspective of a
burnt customer. I learned more about banking regulations the hard way than I
care to admit, but it was an early education.
Rob_L: Mike, I know you recommend using prop mgrs but I haven’t found any
good ones here in my city that are recommended by other investors and I have
asked many. For those that I’ve talked to, I didn’t get a sense that they’ll
take care of the property as well as I could. What would you suggest?
Bob_Carr: Gary - What do you think most investors overlook buying
properties, that gets them in trouble from your exper.
MarkCT: Rob_L what city do you live in?
Rob_L: Jacksonville, FL
Mike_Summey: Peter, if the broker starts jerking you around and adding
fees, tell him to go take a hike and find another lender. YOu don’t ahve to
accept unexpected fees that you didn’t figure into the deal. No one ever lost
money on a property they didn’t buy.
ritchie: Peter, you have leverage in terms of getting hidden fees removed
if they were not disclosed in the beginning.
Peter: Al my GFE says the following two things 1. If I pay early I will
not have to pay a penalty 2. If I pay off early I may not be entitled to a part
of the finance charge refund ( 1. means there is no prepayment penalty, what
does 2 mean)
DaveVRichmond: great question Bob
Peter: And now my secondary loan he hiked up the rate to 7.75% ( it
appears high to me)
Mike_Summey: Dwayne is on a bucking horse. He keeps getting buck off …
so should I say kicked out.
gary_mathes: Bob, probably the most common thing is failure to allocate
the purchase price between land and buildings in the contract. land is not
depreciable. So, allocate all that you reasonably can to the building
Al_Lee: Peter, in Texas when a broker issues you a gfe, it must be in
“good faith”. If you canmake a credible case that they
“low-balled” you on the fees and later jacked them up, you coudl issue
a complaint to the Texas Savings & Loan administrator in Austin and get an
investigationinitiated. The broker coudl lose his/her license
MarkCT: Rob_L I own properties in 5 cities throughout the US. There are
some great ones out there and some real stinkers. You have to do your due
diligence when looking for them but once you find a good one they are
invaluable.
DaveVRichmond: Mike and Peter…I took it bad when I bought my current
residence. sprang huge increase in fees at the last minute.
Al_Lee: Peter, a rate of 7.75% on a second loan is not high at all.
Mike_Summey: Gary, good point! In the contract I use, I allocate the
land, buildings and personal property.
Bob_Carr: Gary - Thanks,Great point
MarkCT: As Mike says you don’t want to burden yourself doing what they
do.
DaveVRichmond: Gary…you mean specivy the value of each in the purchase
contract?
Al_Lee: Peter, 2. means that you will not get a refund of any of the
interest you have already paid because you are paying in arrears, not in
advance.
Rob_L: I’ve attended meetings for 3 of the biggest real estate clubs in
town and all the investors manage properties themselves. The president of the
landlord association couldn’t even recommend any to me.
Al_Lee: The only time you pay interest in advance is at closing when they
take out “prepaids”
gary_mathes: Dave, that’s right. If the buyer and seller agree in the
contract, It’s mighty hard for the IRS to challenge it
ritchie: Peter, if you are doing a piggy back loan, 7.75% is about right.
Also, with heloc loans, you can usually shop around after closing and find a
better deal with no expense, but check your state law to confirm. Some helocs
require you to keep them for one year.
ritchie: that is, 7.75 is about right for the second
Mike_Summey: Dave, thats correct. On a $100,000 purchase if both you and
the seller agree that you’re paying $5,000 for the land and $95,000 for the
building, it makes it hard for the IRS to argue otherwise.
Rob_L: markct, I think that would be awesome…I just thought that I
could get them through referrals instead of costly “trial and error”
to find the golden “PM’s”
Peter: Al exactly that was what I was told so is that normal for first
and second loans?
DaveVRichmond: gary really?? I thought I was at the mercy of the city or
county assessment.
DaveVRichmond: holy crap.. Now that is gold information.
Peter: Rithchie it is a second lien ( I guess piggyback is another term
for it) please correct me
Mike_Summey: Hi Bruce
Al_Lee: Regarding allocating price to land and to improvements, in Texas
you can get the tax appraisal online for proeprties in all the major counties
and it will give exact values fo rland and improvements. Those numbers will
always stand up with the irs.
DaveVRichmond: heard that in ANY if the many many many books I’ve read
gary_mathes: Dave, the allocation is your best evidence. I’m really
speaking of the irs. The counties have a way of doing their own thing sometimes,
they tend to dance to a different drummer
Bob_Carr: Al - Ralph just told me in west Texas you can watch a dog run
away,and still see him running after acouple of hours
ritchie: Dwayne can correct me, but I’ve heard of “piggy back”
as a term to describe when you split 80/10 or 80/15 to avoid paying pmi.
Ralph_Roberts: REQUIRED DISCLAIMER: To ensure compliance with
requirements imposed by the IRS, we inform you that any tax advice contained in
this communication (including attachments) is not intended or written to be
used, and cannot be used, for the purpose of avoiding penalties under the
Internal Revenue Code.
Bruce: Hi Mike
Dwayne_Wiseman: Richie, that is correct a Piggy Back is genreally second
mortgage.
Peter: Yes Ritchied exactly that is what I am doing to avoid PMI
DaveVRichmond: Mike I looked for “mindset ” at books a million
this weekend. Not there.
Al_Lee: Peter, the rule sfor second loans are not as rigid as for first
loans. There are many options. You shoudl not worry too much about oa loan that
is for only 10% or so of the value, though because the interest is negligible.
ritchie: Gary, If I create an LLC for land investments, is the travel and
other expenses associated with scoping for deals fully deductible as a business
expense?
DaveVRichmond: ve to order it. and now you wrote another one.
Deadeye31: There’s another book?
Al_Lee: Bob, those West Texas dogs run pretty slow in that heat.
gary_mathes: ritchie, yes it should be
Peter: Agreed Al…got your point
Mike_Summey: Al, what I was talking about is making the allocation in the
purchase contract. If I buy a property at a discount and the seller and I both
agree that the land was discounted not the building, whose to argue with that?
Mike_Summey: Hi Fred
Fred: Hi mike
DaveVRichmond: Gary how much is that travel deductable. I drove a couple
thousand miles lookinf at houses that were coming up for auction before
successfully buying my first house. drove my family nuts.
Peter: Al so the terms for my loan is normal in TX (the clause 1 and 2 I
gave)
Al_Lee: Mike, I understand. I was just addign that you can get the values
that the taxing authorities arrived at and use them if you don’t have other
figures to use. IF you can get the selelr to stipulate that a larger than normal
share of the price is for the improvements, you are golden.
Peter: Al or do you get loans with some other terms?
Bob_Carr: Dwayne - Do you run into problems after a certain point on the
amount of loans you will give on a single investor
Fred: to the cpa - there is meals that are 100% dudectable and some are
50 % duduct. What is the difference
gary_mathes: Dave, the mileage rate is now 48c per mile. We can get into
a long discussion on actual expenses, and other limitations
MarkCT: Rob_L I usually rely on my interviewing skills more than
referrals when finding property managers. I’ve been burned by referrals in the
past.
DaveVRichmond: darn I wish I knew that a few weeks back
Bruce: Gary, how does the IRS determine if I’m a dealer in Real Estate
with today’s rules?
Dwayne_Wiseman: Bob, Yes do you mean total exposure to one borrower?
MarkCT: If you can’t find a good PM in Jacksonville why not consider
other areas in Florida?
DaveVRichmond: I should have stipulated the value of the house I just
bought.
Al_Lee: Peter, so far as I know the loans you describe are normal anywher
ein the US, not just in Texas. I prefer to use 80% LTV 30-year loans with
fixed-rate interest and (when possible) interest-only optin for the first 10
years.
Mike_Summey: Al, I understand. No one will argue with the taxing
authorities, but their allocations don’t favor investors. That’ why it’s
improtant to put it in the contract and have the buyer and seller agree on the
allocation of what is being sold and bought.
Peter: Al, Thanks that helps
Al_Lee: Mike, I agree.
gary_mathes: Generally, if you are investing and holding for soem period
of time you won’t have a problem. If you are buying and selling frequently you
could. It’s all a facts and circumstances question
Bob_Carr: Dwayne - Yes,was wondering when you would tell me No,even if I
could support the loans
Peter: I would also like to know how can I continue to get more and more
loans on personal credit…wont the banks stop me at some point of time or ask
exorbitant interest rates?
Eddie-WV: Anyone have experience in the MD market…specifically between
Baltimore and DC?
Al_Lee: Mike, in Texas the land value is naturally only 10-20% of the
price of most houses, so I never bother with stipulating it in the contract. I
can certainly see how it woeul be a smart thing to do in higer-cost land areas,
though.
Deadeye31: In the real estate book it says each loan should be looked at
independently.
Dwayne_Wiseman: Each bank has a legal lending limit. Generally the amount
is 15% of capital; however, their board may set a lower amount.
Fred: gary - could you please explain the 100% and 50 % meal expensive
why two different %’s
Bruce: Dwayne, If I assume a commercial loan, what, if anything in the
original contract can I change?
Peter: Al so in texas are you allowed to consider 90% of the cost
allocated to structure or we need to get a letter from the builder stating that?
Bob_Carr: Eddie Wv - I look every day, just bought one last week
Mike_Summey: Bob, banks have official and unoffical lending limits to a
single borrower. In many cases the internal limit may be reachsed before the
legal limit. It all depends on the strength of the borrower. Dwayne may comment
on this also.
Bob_Carr: Mike - Thanks
Eddie-WV: Bob…congrats. Are you from that area?
Dwayne_Wiseman: Bruce, if you assume the loan you would be accepting the
orignal terns and conditions.
Al_Lee: Peter, what I said was that is is normal for the land value to be
only 10-20% of the total price in Texas. If you stipulate some other values (and
they are not unreasonable) that is fine. If you do not stipulate anyting, the
values that the tax appraisers use will apply.
Bob_Carr: Eddie WV - I live in between them
Mike_Summey: Bob, Dwayne doesn’t want to loan me any money. You know how
I know? His rates are too high!
gary_mathes: Fred, I think what you are referring to is the meals and
entertainment disallownace of 50%. Therefore only 50% deductible. If the meal is
charged back to a client it may be 100% deductible. It’s kind of fuzzy like a
lot of stuff in tax law
Bruce: Dwayne, that’s what I thought,but was hoping you knew of a work
around. Thanks,
Dwayne_Wiseman: Bruce,
Bob_Carr: Mike - What kind of banker is that !!!
Eddie-WV: Bob. Have you found a lot of bread and butter type
properties/neighborhoods around?
Dwayne_Wiseman: Bruce, You can always ask but if it is large bank trying
to get to the right person will be tough.
Fred: gary so if I take my electrician out to dinner to discusse a job is
that 100% deductable?
Peter: Al How do I obtain values from Tax appraisers….who are Tax
Appraisers? I havent heard of them before?
Bob_Carr: Eddie-WV - I have not. I’m looking at one this Thursday at a
auction
Mike_Summey: Peter, tax appraiser are the ones who value your properties
for property tax. Go to your courthouse to learn more.
Dwayne_Wiseman: Mike, If our rates are to high why have we loaned over
$127MM this year?
Fred: Gary also, I have been righting down my milage all year but have
not turned in an expense report to my company( which I own the corporation) can
I do it all at one time.
Peter: Mike that helps me understand….thanks
Al_Lee: Peter, the county that you house is located in will have a
website. Yo ugo to the website and enter a search argument of your property
address and it wil give you all the details, including a plat if you are in a
major Texas county.
Mike_Summey: Dwayne, because other people wanted it more than me!
gary_mathes: Fred, I beleive that would be 50%. The 100% comes in if you
are charging a customer for example and a part of your charge becomes the meal.
Sometime cpas do thatr, you got to watch them.
Mike_Summey: Dwayne, just picking at you!
Bob_Carr: Dwayne - Did you loan all of that to Mike
Dwayne_Wiseman: Mike, I know.
Dwayne_Wiseman: Bob, No we average about 55 loans a month.
Bob_Carr: Dwayne - Thats great
Dwayne_Wiseman: Bob our average loan size is $251,000.
gary_mathes: Dwayne, don’t feel like the lone ranger, I think I may have
heard that a time or two
Al_Lee: For example: if your property is in Dallas County, go to
www.DallasCAD.org and follwo the yellow brick road. It will give you lots of
informatin free.
ritchie: Dwayne, large bank or small?
Bruce: Gary, from a tax perspective, is it better to hold my properties
in a land trust, LLC or llp?
Bob_Carr: Mike - I think they are on to you
Al_Lee: btw: CAD stands for Central Appraisal District
Dwayne_Wiseman: Gary, I know. We follow Mike’s rule if you can’t make
money then why do it.
Mike_Summey: Dwayne and Gary both know me too well for me to be picking
on them. I know them well enought to know that my turn is coming.
Peter: I tried to do a search in Travis county
http://www.co.travis.tx.us/default.asp doesnt give me anything useful
gary_mathes: Bruce, from a tax standpoint the LLC and LLP are treated as
a partnership so no real difference. The trust taxation depends to some degree
on state law
Mike_Summey: How does everyone like having a banker and a CPA in the same
chat?
Dwayne_Wiseman: Ritchie, Our bank has total assets of $225,000,000.
Peter: Mike……It is really great….nothing can match that
Bob_Carr: Mike - It is very useful
ritchie: Mike, great idea
Eddie-WV: mike…great!
DaveVRichmond: mike a wealth of info. I usually miss it but read the
transcripts. couldn’t miss this one though.
Dwayne_Wiseman: Richtie, we will be opening our 9th branch near Charlotte
next month.
Peter: Al I guess I should be looking at some other site than
http://www.co.travis.tx.us/default.asp for the tax appraisal
Mike_Summey: Both Dwayne and Gary are very smart people and experts in
their fields. I rely heavily on both of them for their expertiese.
Eddie-WV: Gary…would you reccomend holding the property personally or
in an llc?
Sandy: Mike, my eyeballs are rolling around *)
ritchie: Dwayne, nice. Anything in Raleigh/Durham/Cary?
Dwayne_Wiseman: Not in the near future.
Bruce: Mike I like having both on.
Al_Lee: Peter, go to www.RentHouses.org and clcik on the Territory Maps
link. Then scroll halfway downthe page and look for the links for several
countis and “Other Counties” (or something like that). see where that
leads you.
Fred: Dwayne are u in clt?
gary_mathes: There are some good estate and gift reasons to use an llc,
maybe soem asset protection reasons, but talk to your lawyer on that one
Mike_Summey: Maybe we could talk them into becoming regulars. I think
they like the dialog as much as we do.
ritchie: All: Does anyone have experience speculating with
pre-development discounts on resort property?
DaveVRichmond: dwayne how can I put the property in name of my business
when I’m guaranteeing the loan personally? is that just a fantasy?
Peter: Al great let me do that right now
Dwayne_Wiseman: Opening in Stanley, NC around the new 485 in Nov. Know
any good bankers I can get from another bank?
Mike_Summey: ritchie, caution is the word!
Eddie-WV: Dave…good question. I had the same one.
Dwayne_Wiseman: DaveV, Most banks will want you to personally guarantee;
however, it sometimes done without persoanl guarantee but it is rare.
Mike_Summey: Hi mmoore20, I didn’t see you join us.
ritchie: Mike, Asheville has been hot recently, in terms of land for
second homes, yes?
Peter: Al I clicked on Austin…the link seems to be broken
(http://recenter.tamu.edu/mreports/AustinSanM.html)
Eddie-WV: Dwayne…I currently have property in my personal name. How
easy/difficult is it to switch that to an llc?
Al_Lee: Peter, I just tried it and got to a page where I coudl search for
a property by owner name, address, etc. That is true for any large county in
Texas. I do not know about the smaller counties. There are over 250 counties in
Texas
Mike_Summey: ritchie, Asheville has been very hot. Not far off NY and CA.
DaveVRichmond: dwayne personal guarantee is fine. but can I hold the
property in name of LLC or will the bank come after me for due on sale? how
would I get bank to be ok with that?
Al_Lee: Peter, you clicked on the wrong link. Go halfway down the page.
the one you clicked on goes to Texas A&M Real Estate center
Dwayne_Wiseman: Eddie, it depends on the Bank/Mtg. Co.
Fred: Eddie - you can do a quick deed but only do it after you have the
refi..Lenders do not like to refi when it is in a company name
Deadeye31: If you purchase a house that you got at a wholesale price and
there is still a morgage on it who is responsible for it? does the seller still
have to pay it off or has it just gotten dumped on you?
Mike_Summey: Eddie, jsut switch! Deed the properties to an llc, send your
lenders a letter letting them know what you did and why and keep making the
payments. They won’t have a problem unless your trying to pull something over on
them.
Al_Lee: Peter, halfway down the page you will see Dalls, Denton,and soem
other counties where our club invests. Then you will see “Other” for
other counties
Fred: Eddie also make sure you add your company name to additional insued
on your insurance policy for that property
Peter: Al yup I too got that form
Al_Lee: Peter, you have found the pot of gold at the end of the rainbow!
Peter: Al….yes I have
Mike_Summey: Deadeye, at closing, someone will have to pay off the
mortgage or you won’t get a clear title.
Eddie-WV: thanks all
DaveVRichmond: Mike is that what you do? quitclaim to company and send
letter to bank? has there ever been an issue?
Peter: since I havent bought it yet it doest show anything yet…it says
your search did not match any records
Eddie-WV: Mike…thanks again for an informative chat! Dwayne/Gary…hope
to see you again also!
Mike_Summey: Everyone, have you used the inspection form that you can
download from this site?
Dwayne_Wiseman: Eddie, you welcome.
Al_Lee: Peter, you ought to be able to search by the street address and
find it.
Peter: I tried that
Peter: I gave streen no and name
Dwayne_Wiseman: Mike, thanks for allowing me to particpate tonight.
DaveVRichmond: I’ve used it. you shoulid have seen the Realtor’s face.
They didn’t expect that much time to be taken.
Fred: good nite to all
ritchie: Mike, thanks for hosting these chats. I’m always looking forward
to them.
Al_Lee: Does it exist yet? Is it being built?
Mike_Summey: Dave, I had all my properties in my name personally until a
couple of years ago. Then I deeded them all to llcs, sent my banks letters
explaining what I did and why and no one has a problem.
Mike_Summey: Dwayne, your always welcome.
Eddie-WV: Mike…what do you explain as “why” you are switching
them?
Al_Lee: Peter, I routinely use these websties to lookup the tax value of
a house I am considering buying.
DaveVRichmond: Mike thanks for taking your time to host this. it’s been
great. That allocating tip is absolute gold.
Mike_Summey: Eddie, I did it for estate planning purposes.
Peter: Al….may be since it is a new construction is that the reason
DaveVRichmond: dwayne thanks for the inside tips. not often I get to pick
the brain of a banker
ritchie: Mike, I read in another book once that is the key words to give
the bank, “estate planning purposes”.
ritchie: should keep them from raising eyebrows
Dwayne_Wiseman: Call anytime 1-888-726-2435 ext. 209.
DaveVRichmond: gary thanks for the info also. I still can’t believe I get
all this for free.
Al_Lee: Peter, if it has not yet been built it will only appear as a
vacant lot in the tax records. You need to know the lot description to find it.
Ralph_Roberts: REQUIRED DISCLAIMER: To ensure compliance with
requirements imposed by the IRS, we inform you that any tax advice contained in
this communication (including attachments) is not intended or written to be
used, and cannot be used, for the purpose of avoiding penalties under the
Internal Revenue Code.
Peter: Mike and Al….One more question….when do we pay our yearly
property taxes….I decided to not to escrow it (my broker put addtional charges
to do this though)
gary_mathes: Dave, I appreciate the opportunity
Mike_Summey: Everyone, I’m going to leave you now and go get something to
eat. Gary and Dwayne, you’re welcome to stay as long as people still want to
talk with you. Thanks so much for joining us tonight and please know that you’re
always welcome.
Bob_Carr: Gary & Dwayne - Thanks, A lot of great idea’s & info
tonight
Deadeye31: Hey, Mike. At some time in the future could you or someone
else here post their tenenant agreements for download either with or next to the
inspection form? I would like to see that too.
Peter: Al got you….I guess I will have to look at my papers to put in
the lot description but knowing abt thta link helps a lot….thanks
DaveVRichmond: good night all. Gotta go shower some attention on my
bride…..or I get to start dating again in the spring.
Mike_Summey: Peter, I don’t understand what the broker has to do with it.
DaveVRichmond: later.
Deadeye31: bye
Peter: Mike broker says he has to pay to the bank to do it? (is it a junk
fee)
Mike_Summey: Deadeye, we’ll look into that.
Dwayne_Wiseman: Call anytime 1-888-726-2435 ext. 209.mnnm
ritchie: Good night mike. Thanks Gary and Dwayne. Hope to see you again
Peter: he says to get escrow waiver he has to pay the lender
Mike_Summey: Peter, bull
Mike_Summey: Goodnight all!
Al_Lee: Peter, I did what you are doing for a few years and accumulated a
bunch of properties for which the taxes and insurance were not escrowed. I had
to come up with $40k every January fo rproeprty taxes and soem more for
insurance. I changed my strategy a few years back and now escrow them on every
loan. If you exrow them, the bank is responsible for any errors or late fees. It
is also nice not to have that big bill every January.
gary_mathes: I think I will sign off for now also. Thanks for allowing me
to join you. If any of you would like to talk further, give me a call at
828-236-5745 or email at gmathes@dixon-hughes.com
Bob_Carr: Al- I need to fly down next month and check out what you have
going on
Deadeye31: well, good night all. This has been very informative. I wish
you all luck. Maybe I’ll stop in in the future. It hard to be here and helping
at boy scouts both on the same night.
Peter: Al but you lose on the earnings on that money..if you invest that
40K in mutual funds you coule potentially be making money? ( I know it will be a
lot of work though)
Deadeye31: ‘night
Dwayne_Wiseman: Good night.
Al_Lee: It is not uncommon for each house to have 4 or 5 taxing
authorities and if you do not excrow, you may need to write several checks to
pay all of them. That becomes a real hassle, so I like letting the bank do that
work. i also save a little on closing costs by not having to pay a fee for
non-excrowed loans.
Peter: Al ….yup I am being made to pay fee to not escrow
Ralph_Roberts: looks like an early night 
… chat transcript will be
posted shortly
Ralph_Roberts: good night, all
Peter: Alright since this is my first let me do it this way and when it
grows I will change my strategy
Al_Lee: Bob, before you fly down email me and I will try to meet with
you. Go to www.Renthouses.org and find a link that says “eMail Al” and
you can email me easily any time.
Bob_Carr: Al - I will,thanks
Peter: It has been a great chat…thanks Al Mike, Dwayne Gary, Ritchie
and everyone else here today
Al_Lee: Peter, I still have a few non-escrowed properties and, of course,
the ones that are paid off have no mortgage payemnt and are not escrowed; but I
have actively tried to sell or refinance the ones that were non-escrowed so as
to simplify my life (and my bookkeeper’s life)
Al_Lee: OK, time to kiss the kids goodnight.
Al_Lee: “See” you all next week, I hope.
Al_Lee: Good Night!
» Filed Under Chat Transcripts
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