Chat 2-20-06
Posted on February 20, 2006
berken_021: hiiii
berken_021: *bird*
bcurtis: has anyone had difficulty getting started?
Air_Force_Mike: hello
Bob_(vegas): too early
Air_Force_Mike: yep
Bob_(vegas): where from Mike?
Air_Force_Mike: originally FL but stationed in Lousiana
Bob_(vegas): test
Bob_(vegas): I used to live in Ft. Myers
Air_Force_Mike: been there several times
Air_Force_Mike: I lived in Ft Lauderdale in my youth and went to school
in Gainesville
Bob_(vegas): well I left there in 94 and now reside in ‘Vegas
Air_Force_Mike: big change
Air_Force_Mike: are you an investor?
Bob_(vegas): was trying to find the “offer generator” do you
know where it is at on this site?
Bob_(vegas): yes
Air_Force_Mike: I don’t
Bob_(vegas): and an electrician
Air_Force_Mike: Air Force officer (until Sept) and I own only 2
properties
Bob_(vegas): O-5?
Air_Force_Mike: In May i’ll be an O-3
Bob_(vegas): Happy collecting
Bob_(vegas): I am going to san antonio to look
Bob_(vegas): at real estate
Air_Force_Mike: perfect place to buy and hold, so many renters due to
military
Bob_(vegas): next month
Bob_(vegas): but ….high taxes
Air_Force_Mike: I’m moving back to Abilene, TX in the Summer
Bob_(vegas): Toyota is moving there too
Bob_(vegas): I hear collage station is the best value in the state
Air_Force_Mike: I work with an investor who owns a place there…he says
students are tearing his place up
Bob_(vegas): really…
Air_Force_Mike: well, Abilene is very inexpensive…I own a 1200 SF, 3 br/2
ba/2 CG and I bought it for 73.5k
Air_Force_Mike: pay 650 on it and receiving 1000 mo for rent
Bob_(vegas): that is so cool
Bob_(vegas): how mush in tax?
Air_Force_Mike: honestly, i’m not sure, I think 1500 a year
Bob_(vegas): for me that will be the hardest to overcome
Bob_(vegas): 3 % tax
Air_Force_Mike: i know…but if you are in the plus bottom line, it will
make you money
Bob_(vegas): I am upside down on most all my property in Vegas
Air_Force_Mike: the house I live in now, I bought last March for 117k,
and I will sell for 135k-155k this Summer
Bob_(vegas): maybe you should rent that one out too
Air_Force_Mike: upside down, how?
Bob_(vegas): the rents are soft here
Bob_(vegas): 1200 for a 300k property
Air_Force_Mike: I want to rent but I am getting laid off from the AF so
it is safer to put that money into a new home in TX
Air_Force_Mike: gross!!!
Air_Force_Mike: why can’t you get more in Vegas?
Bob_(vegas): how ever they were purchased prior to the 03-04 bubble
Air_Force_Mike: well, that is a benefit…so you shouldn’t be upside down
Bob_(vegas): propety was too easy to purchase
Air_Force_Mike: you can probably sell one and make 100% profit
Bob_(vegas): I am equity rich though
Air_Force_Mike: that is what is important
Bob_(vegas): that is why I need to add property to my inventory that will
cash flow to offset those that will not
Air_Force_Mike: how many homes do you own?
Bob_(vegas): 6
Air_Force_Mike: may I ask how you got the financing?
Bob_(vegas): stated income
Bob_(vegas): doing 80 15 5 loans
Air_Force_Mike: you had to put 20% down?
Bob_(vegas): more or less
Air_Force_Mike: or did you live in the homes?
Bob_(vegas): only 2 or them
Air_Force_Mike: that’s my goal, move in with 0 down, and relocate every
1-2 yrs and make sure the rents offset the mortgage
Air_Force_Mike: I guess that is tough in vegas at this time
Bob_(vegas): this offer generator that mike has come up with should help
you to make do able offers
Bob_(vegas): hey elba
elba_NY: hello everyone, hi bob
Air_Force_Mike: hi
elba_NY: hi AirforceMike
elba_NY: so, we are the first tonight huh?
Bob_(vegas): yup
elba_NY: did you make any offers this week guys?
Air_Force_Mike: I didn’t
Bob_(vegas): do you know where to get the offer generator?
elba_NY: I believe Mike will announce when it becomes available
elba_NY: hi advisor
advisor: Hello
Bob_(vegas): how about you? any offers?
Bob_(vegas): just finished 52 homes in 52 weeks
elba_NY: Not this week. We will rest for a while until we move to TX at
least
elba_NY: Nice Bob
Bob_(vegas): dolphs new book
Air_Force_Mike: do you like that book?
Bob_(vegas): what was great about it was they were all done in vegas
Bob_(vegas): yes
elba_NY: You meant a book never heard of it. How is it?
Bob_(vegas): elba where in Tx ??
elba_NY: Dallas
Bob_(vegas): the book was great
Bob_(vegas): wish I could do the same
Air_Force_Mike: After reading weekend millionaire Secrets, not much has
my interest even though I have read about a dozen
elba_NY: Is it about real estate purchases?
elba_NY: Hi Al.
Bob_(vegas): yes
Bob_(vegas): dolph de roo and gene burns
Air_Force_Mike: I am currently in Shreveport and going to move to
Abilene, TX
elba_NY: I feel you Air Force
Al_Lee: Hi, Elba
Al_Lee: Hi, everyone
Air_Force_Mike: HI
Bob_(vegas): a chalange they pulled off
Al_Lee: This week I am one minute early.
Bob_(vegas): congratsa
elba_NY: 
Mike_Summey: Hello everyone
elba_NY: Al I was not able to listen to the show this weekend
Al_Lee: Hey, Mike. What kept you?
Bob_(vegas): hey mike
Air_Force_Mike: Hi
elba_NY: technical problems
elba_NY: Hi Mike
Mike_Summey: I have been dealing with a slight problem today.
Al_Lee: Elba, that is OK, I was preempted by a basketball game
Bob_(vegas): bummer
Mike_Summey: I cought one of my tenant’s kids damaging one of my
buildings.
Bob_(vegas): plane wont start?
elba_NY: How you get him/her? mike
Air_Force_Mike: ouch, you give him a spanking?
Mike_Summey: Elba, thanks for the nice review on Amazon
elba_NY: MY absolute pleasure.
Mike_Summey: the little episode cost their mother $160 in damage
restitution.
elba_NY: everyone should invest in themselves
Mike_Summey: Elba, I guess you noticed that I shared it with everyone in
my email today.
Air_Force_Mike: are we talking about faq?
Mike_Summey: Air Force, yes!
Mike_Summey: Have you read it?
Mike_Summey: Hi Doug
Air_Force_Mike: I bought the previous two from Amazon, I just found out
today you had another book out
Mike_Summey: Hi Chas
elba_NY: I havent readmy emails yet
Doug_in_CT: Hello All.
Mike_Summey: Air Force, the FAQ book is a companion to the real estate
book.
elba_NY: Hi Doug
Doug_in_CT: Hi Elba.
Mike_Summey: It follows the real estate book chapter by chapter and
answers the questions we have been asked about each one.
Air_Force_Mike: As I was telling Bob and Elba before you arrived, after
reading secrets, all other RE books are plain
Chas: Hello All. First time chat’er
Air_Force_Mike: same here, 1st time
Mike_Summey: Ralph won’t be with us tonight. He is at a meeting I was
supposed to attend.
Doug_in_CT: What kind of meeting?
Al_Lee: Hello, Air Force and Chas
Mike_Summey: Thanks Air Force
Al_Lee: What do you do in the usaf?
Bob_(vegas): has anyone aquired property leaving previous owner on loan
and having it deeded over?
elba_NY: welcome Chas
Mike_Summey: Bob, that’s not usually legal to do if its a commercial
lender.
Air_Force_Mike: I am a personnel officer…about to be laid off (yes,
actually laid off)
Mike_Summey: laid off from the Air Force???
Air_Force_Mike: I know, its called “Force Shaping”
Chas: Are any of you professionals familiar with the Reno, NV area?
elba_NY: ouch
Bob_(vegas): only vegas
elba_NY: I did not know that was possible
Al_Lee: Wow, laid off in the military! I was a Titan II Missile
Electrician in the usaf from ‘65 to ‘69
Air_Force_Mike: I am a bit disgruntled but I loved serving
Mike_Summey: Chas, I have a brother in Carson City. That’s about the
extent of my knowledge.
Mike_Summey: Air Force, how many years have you been in?
Air_Force_Mike: I still hope to cash in on rentals in military areas….
Mike_Summey: Hi Steve\
Chas: Ok. Your still pro’s to me..
Air_Force_Mike: I have been in 7 years, 3 enlisted 4 officer
Al_Lee: I was an EM, so I griped every day and cussed the usaf, but after
I got out I realized it was a really fun time in my life
elba_NY: It sounds like a good option Air Force
Air_Force_Mike: So many skills and no job to go to.
Air_Force_Mike: Also, I will take a huge pay cut
Mike_Summey: Air Force, my youngest son Matt is supposed to report to Ft.
Rucker, Al June 18 for Apache flight school.
Bob_(vegas): well you can buy homes for a living
Mike_Summey: Hi Roger
Air_Force_Mike: Wow, you must be excited and nervous
Doug_in_CT: I just got back from my 2.5hr drive dropping off my son, his
roomate, and a Lithiawanian West Point cadet after hosting them for the long
Presidents’ day weekend.
Roger_Dawson: Hi Mike and everyone.
elba_NY: Hello Roger
Mike_Summey: A little of both. Matt already has his pilots license and a
multi engine rating. He will graduate furman University on June 3 and report to
flight school on June 18.
Air_Force_Mike: After reading secrets, I realized that your concept of
REI is perfect for military areas where members are forced to relocate very
often
elba_NY: Hey. people in people out
Air_Force_Mike: That is what I hope to profit on.
Al_Lee: AF Mike, another thing about military people as tenatns is they
will pay the rent. The base commander will have a talk wtih them if they don’t!
Mike_Summey: Air Force, I’m going to address you as simply AF from here
on as it’s quicker to type. Thanks for the nice comments on our books. We try to
help people understand the concept of investing in a way that won’t get them in
trouble.
Bob_(vegas): good dea
Bob_(vegas): l
Chas: Does anyone have anything to say on Interest Only Loans
Air_Force_Mike: Actually, it is me as a Section Commander who has words
with those that don’t pay bills!
elba_NY: Al loves those Chas
Air_Force_Mike: No Problem Mike!
Al_Lee: Chas, I do! I love interest-only loans so long as they are
fixed-rate loans, not adjustable-rate.
Roger_Dawson: In my workshops I do an exercise where I ask people to
close their eyes and think of the house in which they lived when they were 10
years old. It’s funny to see military people try that. They move so much they
can’t remember where they were!
Bob_(vegas): military of my parents….
Air_Force_Mike: Word of mouth is the best way to promote books and I have
sent 2 copies to friends as gifts.
Doug_in_CT: A good friend of mine is in the Navy, he was able to scrap
together a 5% down payment on a home in Hawaii where he was transferred about
three years ago. His home has increased in value from $450,000 to about $750,000
in three years. Now he is ready to retire and looking into getting into real
estate investing.
elba_NY: In a way that is sad Roger
Chas: Mine is an adjustable rate in 5 years. Any suggestions. Al
Al_Lee: Problem is that in California the terms interest-only and
adjustable-rate are so tightly linked that the idea of I-O loans has gotten a
bad rap.
Air_Force_Mike: Adj rate is good but like the book says, that caters more
to speculation that the property will increase in value
Chas: Al, mine is in Reno, NV
Air_Force_Mike: after 5 years, you haven’t paid off one penny
Mike_Summey: Al likes interest only loans. I don’t. I like to get the
properties paid off as quickly as possible. It’s amazing how the cash flow
improves when the mortgage is paid off.
Mike_Summey: i Penny
Penny: Hi Mike!
elba_NY: hello penny
Roger_Dawson: You need to be much more knowledgible about mortgages these
days. There are so many products that you really need to understand what you’re
doing. It’s not just fixed or adjustable any more.
Chas: Mike I agree with you on that.
Penny: Hi elba, & everyone!
Roger_Dawson: Hi Peny!
Air_Force_Mike: but, if you are in an area that will increase in value,
you are golden….more leverage!
Penny: Hi there Roger!
Al_Lee: Another way for cash flow to imporove is to save it up and
reinvest in more properties. That way yoru appreciation and yoru depreciation
allowance also get bigger and grow faster.
Bob_(vegas): only if you sell it
advisor: Hi..I am looking to begin in real estate investing…what book
should I begin with…Carlton Sheets?
Bob_(vegas): oops
Doug_in_CT: I have tried a bunch of different mortgage types and my
favorites so far are 10 year fixed interest only and good old fashioned 30 year
fixed.
Chas: Al, I received your email on Trump coming to Dallas. Outstanding..
Al_Lee: Doug, I agree 100%
Roger_Dawson: In England, most adjustable loans are fixed payment but the
length of the loan extends if interest rates go up.
elba_NY: I speak from experience advisor. Carleton Sheets program will
not let you fail.
Mike_Summey: AF, the increase in value doesn’t mean much unless you
intentd to sell. I look for increase in rents which often doesn’t happen when
prices are increasing.
Air_Force_Mike: agreed
advisor: How about in areas of US where property values do not
appreciate?
Al_Lee: Chas, Dallas/Fort Worth real estate is poised to explode in
value. There are so many financial indicators that all point that way it is
incredible.
elba_NY: Didnt the Donald say he may have a deal in FtWorth?
elba_NY: coming up?
Bob_(vegas): he is making a spill in Vegas
Al_Lee: advisor, both Mike’s book and my book pro0mote investing for cash
flow. Buying in hopes of getting appreciation is speculating (gambling). I go
for cash flow and accept the apprecaition as a bonus.
Air_Force_Mike: Right,that way you can’t go wrong
Chas: Al, I might call/email you this week with some questions. Is that
OK? I have to roll in a minute.
Mike_Summey: Advisor, Carleton Sheets material is good, but so is our. If
you’re truly wanting to invest, study the Weekend Millionaire series.
Al_Lee: Elba, Not exactly. He is hopin someone will make him an offer for
property in Fort Worth, but hasn’t anything planned now.
Doug_in_CT: Utah is heating up. I heard the Winter Olympics four years
ago caused them to be overbuilt, but that has finally subsided now. They had a
story on the hot Park City market on “All Things considered” tonight.
Al_Lee: He hsa 3 possible properties to develop in Dallas. His style is
to build the tallest structures in the city
Bob_(vegas): Hey Mike is the offer generator ready yet?
advisor: ok…i see the CD series is available.
Mike_Summey: advisor, often times rents increase when prices don’t and
vice versa.
Al_Lee: Chas, please feel fre to contact me hwoever you like
Air_Force_Mike: when the market is over priced, more look to rent which
in turn makes your rentals look better
elba_NY: Thats funny Al
Mike_Summey: Bob, the Offer Generator is ready and should be on the
website within days. We’re just getting it loaded on the shopping cart now.
Mike_Summey: Hi pscherer & m&e
Chas: Thank you Al.
elba_NY: Hello guys.
Al_Lee: Elba, a friend in Phoenix told me that he once tried to build a
very tall building there, but the people overruled him because they want to have
their view.
Chas: Take care all, till next time…
Al_Lee: Bye, Chas
Mike_Summey: advisor, visit the store on this website to see all of the
products. the Offer Generator program will be there shortly.
elba_NY: Do you think it may happen just the same in Dallas
advisor: I will order the cd’s from Nightingale Conant.
Al_Lee: Elba, no way. There isn’tany view!
Mike_Summey: Hi Rob
Rob_FL: hi
Doug_in_CT: I have a question for you Mike. I own this 4-Plex with about
$200,000 of owner financing @ 7.5%. I have spoken to the owner about
“substitution of collateral” where he would take a second position on
the equity in a couple of my single family homes and I would grant him an
interest rate increase. Then I will have the $300,000 property free and clear,
ready to get a 90% loan to use for additional property aquisition. Any dangers I
should be watching out for?
elba_NY: Maybe he’ll create one?
advisor: OK…will do.
Mike_Summey: advisor, that is fine. You might even get a better deal from
them.
Mike_Summey: i Chris & Mark
MarkCT: Hi Mike, Al
Chriss: hello everyone
Penny: Hi Chriss
Penny: and Mark
elba_NY: Hi Mark
elba_NY: Hi Chriss
Mike_Summey: Doug, why would you offer an increase in the interest rate.
Al_Lee: Doug, actually, the seller who is accepting a second lien
position in place of his first position is in danger. A second lien can easily
become worthless and unenforceable.
Mike_Summey: Hi oz
Al_Lee: Hi, Chriss
MarkCT: Hi Penny. Have you ventured off and bought your first rental yet?
m&e: I am looking at a self storage business to branch out from real
estate. 50K gross annually, low vacancy - good area. Does anyone have an
experience with these types of business? Do you use gross rent mutipliers or ROI
approach
Doug_in_CT: Mike, I didn’t offer the increase, he requested it based upon
the facts that Al highlights, his being in second position.
Penny: Hi MarkCt, No, haven’t taken that first step yet.
elba_NY: hi justin
Al_Lee: Doug, if the first lien-holder forecloses they can sell the
property to satisfy their loss without having to pay anything to the second
line-holder
oz: Hi Mike
Mike_Summey: m&e, a self storage property is more of a job than an
investment. It takes a lot of management.
Mike_Summey: Hi justin
Penny: wish I could say I have, but I haven’t
Al_Lee: second lien-holder, that is
MarkCT: Mike I received the FAQ book the other day and read through most
of it. I recognize some of the quotes and questions.
pscherer: Did the owner ask for a n interest increase or are you just
assumng he will want it
Mike_Summey: Doug, those type transactions have more to do with your
sales ability than most anything else.
Mike_Summey: Mark, they were probably ones you asked here in the chat.
MarkCT: Penny the first step is a hard one.
justin: hi
elba_NY: but also very rewarding Mark
Doug_in_CT: The current owner and I have a great relationship. I think I
could put the freed up equity to very good use. It isn’t really a
“blanket” that you warn about in the book.
MarkCT: The book is a great complement to the first. It was a nice review
for me of the first book.
MarkCT: I forgot some of those negociating tactics.
Mike_Summey: Doug, how many houses would you have to put up as substitue
colleteral?
Doug_in_CT: I am thinking 2 or 3.
Mike_Summey: Hi neilly
neilly68: hello
Mike_Summey: Doug, would he allow you to split the note into 2-3 notes
and secure each property with a separate property. That way you would avoid a
blanket encumbrance.
pscherer: What loan to value would you have on the house Doug after the
seconds
Doug_in_CT: I could ask him. I think that is probably a good idea Mike.
Al_Lee: Here in Texas you might have a first lien mortgage at 7% and a
second at 10-11% because of the added risk that the second lien-holder takes.
The term fo rthe second is likely to be 10 years while the first will be for 30
years–same reason.
Mike_Summey: Doug, bu splitting the note it would also make tax filing
easier as you would have specific financing for each entry on your schedule E
Doug_in_CT: Pscherer, LTV after seconds would be about 90%
Roger_Dawson: Doug, I’m very negative on blanket encumbrances. Avoid them
if you can. If you must be sure that you have written release clauses before you
go ahead. That means that it’s agreed up front how much it will cost you to
release a property in the event you need or want to sell it.
m&e: I know it takes more work but I have indentured servants (3
teenage sons) to help. How does one calculate the value of this type of
business?
Mike_Summey: Doug, what percentage would be 1st and 2nd?
MarkCT: Al I read a interesting column in a newsletter that my Dallas
property manager publishes. He’s saying the time of “free rent” (such
as a free month’s rent) is over and that there are more people looking for
rentals and less inventory than this time last year. Do you see this trend
occurring?
Mike_Summey: m&e, you may want to hold the properties in an LLC and
assign specific ownership to each son. this can be done in a way that you retain
control, but the equity builds up in their names.
Al_Lee: Absolutely. I have distributed articles and discussed that on my
radio show. Apartment oocupancy is at a 20-year high now.
Al_Lee: I am 100% leased also
Mike_Summey: Al & Mark, as the interest rates continue to creep up
the rental market will get stronger.
MarkCT: I’m almost 100% leased. I have a single family that is still
vacant.
Roger_Dawson: Mark: here
m&e: Thats an excellent idea and I have considered doing so. How
about figuring the value. It sits on a 1 acre piece of commercial property with
utilities at the curb (valuable without the storage business). I’m trying to
work the numbers for a fair offer.
Doug_in_CT: One of the houses I want to use as collateral has a loan of
$132,000 and has a current value of about $230,000. The other has a first loan
of $157,000 and also worth about $230,00.
Al_Lee: The cool think about real estate investing the way Mike and I do
it is that if interest rates go up, you win. If they go down, you win. If
inflation runs high, you win. If inflatin is low, you win.
Roger_Dawson: Mark, here’s what we wrote about blanked encumbrances in
our Weekend Millionaire book:
Roger_Dawson: ÃÃ
Al_Lee: Roger, that is not only profound, but also pithy
Doug_in_CT: If only we could disern the meaning.
Al_Lee:
MarkCT: I hear ya Al. It was great buying last year getting the loan
rates I did and now that I have a nice inventory of homes it will be nice when
they are all rented and cash flowing.
Mike_Summey: m&e, it’s hard to answer that without much more
information.
Roger_Dawson: Doug, I guess the ewemaster won’t let me send that much.
Email me at RogDawson@aol.com and I’ll send it to you.
Al_Lee: Doug, if you were in the know, you would understand what Roger
has so succinctly said
Al_Lee: Elbe, which one?
Doug_in_CT: Talk about “reading between the lines!”
Mike_Summey: Roger is pontificating!
Roger_Dawson: Thanks Al, I love it when people assume that I must be
smarter than I apper!
MarkCT: Al what percentage of your rentals do you own free and clear?
Roger_Dawson: Appear
Mike_Summey: English men are like that
Doug_in_CT: I gotta meet this ewemaster, he must take care of the goats.
Al_Lee: Mark, I own abut 20% free and clear, but I am slowly selling off
the free-and-clear and depreciated out properties and using the money to buy
more properties using leverage
Roger_Dawson: It’s kinda like Brokeback mountain. They were gay shephers,
not gay cowboys.
Al_Lee: Elba, Roger was typing in Chnese characters
Roger_Dawson: Shepherds. A shepher is a Jewish gay, if there is such a
thing.
elba_NY: welcome john
Mike_Summey: Hi John, welcome to the chat.
john: hello
Mike_Summey: Roger, Jason’s divorce became final today.
MarkCT: Al you get enough cash flow from your financed properties to live
on? I’m finding between vacancies and repairs that I’m just breaking even each
month.
Al_Lee: Elba, do you like Vee and Amanda?
Roger_Dawson: For real this time, Mike?
Mike_Summey: Mark, that’s about all you can expect for the first few
years.
Mike_Summey: For real
Bob_(vegas): how many do you have mark?
Mike_Summey: Mark, as rents increase and mortgages pay down the cash flow
will increase.
Al_Lee: Mark, I make positive cash flow on every property, I don’t buy
one that doesn;t produce positive. I retired from my computer software business
in 1999 to live on the rent income.
Roger_Dawson: Hi Ralph!
m&e: right - 50K gross, low to no vacancy, approx 12,000 in expenses
leaving approx 38,000 for debt service/NOI. I would like a seller financed
package that allows full ownership in 10 years
elba_NY: Hello Ralph
Mike_Summey: Thereeeeeees Ralph!
Ralph_Roberts: Mike Summey for Mayor of Leicester!
MarkCT: Al you don’t find that vacancies and repairs eat into that extra
cash flow too much.
Al_Lee: Mark, since retiring, my net worth has doubled and my monthly
cash flow has increased = and my hours of sleep are a lot more , too
Doug_in_CT: How was the meeting Ralph? Did Mike miss anything?
Penny: Hi Ralph! :p
Mike_Summey: m&e, does the expenses include management, taxes,
insurance, advertising, utilities, repairs etc.?
Air_Force_Mike: My father in law owns 5 duplexes free and clear, each
side brings in 600 a month and he just sold one duplex for 80k. I can’t see how
you would go wrong…80k mortgage=700mo. at most, so 500 in cashflow minus prop
manager. I hope I inherit them!
Al_Lee: Mark, if you use my spreadsheet, I factor in repairs to comput
cash flow
Ralph_Roberts: hi Penny! … yes, Doug, he missed the kick off of his
mayorial campaign
Ralph_Roberts: hi Al
Mike_Summey: Ralph was at a meeting about incorporating our area as a new
town.
Ralph_Roberts: it’s going to be a 66 sq. mile town… lots of room for
rentals
Al_Lee: Hi, Ralph. Haven’t talked to you in-let’s see-hours!
Doug_in_CT: Well he’s got my vote for Mayor, he owns all the property
anyway right?
Ralph_Roberts: pert nigh close, excepting a potato patch here and there
elba_NY: Those properties have so much more potential.
Mike_Summey: AF, why wait to inherit them? Why not offer to buy them and
ask him to finance them at 0% interest. That way he could have an income stream
and you could be building equity.
m&e: It includes taxes, insurance, utilities and vacancy 5%. I will
manage it
Air_Force_Mike: yes, ideally that is great but he has 6000 a month coming
in with no expenses
elba_NY: Where are the properties AF
Air_Force_Mike: Abilene, TX
elba_NY: beautiful
Al_Lee: Mike, I think that the IRS wouel consider a 0% interest loan as a
gift of, at least, the value of the interest at normal bank rates, and would
assess a tax on it. This because it is from a relation.
Mike_Summey: AF, he has expenses! Taxes, insurance, management, repairs,
etc.
MarkCT: I factor in repairs and vacancy as well but it seems that
something always unexpected occurs and eats away at my positive cash flow. Maybe
I’m not factoring in enough. Would you say that’s true or am I just experiencing
a string of bad luck?
Air_Force_Mike: they manage themselves…yes there are expenses but they
are minimal
MarkCT: Ever get a chance to look at that latest version Mike?
Mike_Summey: Al, it doesn’t make much difference unless the seller’s
income is over $94,250 taxable income.
Doug_in_CT: Mark, Time seems to be a great healer of the real estate
investor. So the goal in the early stages is to just “hang on.”
Mike_Summey: Mark, yes. We’ll talk in the morning. I think we’re ready to
go.
Bob_(vegas): well mark after you fix everything….
MarkCT: Yeah!
Al_Lee: Mark, luck has something to do with it. The think abut averages
(like afverage repair allowance) is that they work best with large numbers. If
you have 10 properties and allow 6% of gross rent, you will be high one year and
low another year. IF you have 100 properties you will likely be pretty close to
right on every year.
Al_Lee: Abilene is due West. Abilene, Abilene, prettiest town I’ve ever
see. Women there don;t treat you mean.
elba_NY: :p
MarkCT: I hear you Doug. When you get a string of vacancies and
unexpected repairs all at once it can be a bit dishearting.
Air_Force_Mike: and Abilene is growing, just built a second Wal Mart,
Chili’s etc. Plus, the base is supposed to expand.
Mike_Summey: Mark, you will find that expenses ebb and flow. If you use
averages, you’ll be high one year, low another and right on another. That’s why
we recommend that you build cash reserves as quickly as possible so you can even
out the ups and downs.
Al_Lee: Mike, OK. I did not know the threshhold ($94,240)
Doug_in_CT: But I have watched it turn around just as rapidly. My four
plex had three vacancies all of a sudden, but then they were all filled up and I
had raised the rent about $200 on each.
elba_NY: Thank you both.
MarkCT: Mike you mentioned during one chat that you will actually get
cash out of a home to build up your reserves. Is this true?
Mike_Summey: Al, that’s the point at which the tax on imputed interest
and the capital gains rate starts to separate. Even above this figure, the
difference is very minimal.
elba_NY: Mike when will the first expert of the year join us?
Al_Lee: Mike, nonetheless, if you want to make me a 0% loan, I will
accept it and risk the tax consequences. :>
Al_Lee: Elba, what am I, a potted plant?
Bob_(vegas): I thought we had several experts here tonight?
Al_Lee: :p
Mike_Summey: Mark, that is true. I never use all of my cash to pay off
mortgages. Even if I have to pull some cash out and pay the interest
differential, I’d rather have cash reserves and be secure than try operating on
the edge. That’s one of the things you learn after 35 years of doing this.
Bob_(vegas): a pot plant?
Al_Lee: Now, Now!
elba_NY: Let me refrase this. When will other experts join us?
Al_Lee: This coming Sunday I will have my own personal CPA as a guest on
the radio program to talk about taxes, real estate, and a business entity. He
has helped me achieve a 0% tax rate while making serious money. All perfectly
legal!
MarkCT: Do you still do that Mike? I figure with all the properties you
own free and clear you must always have enough cash flow to ride out the hard
times. Did you use the strategy of refinancing to build up your reserves only in
the beginning?
Al_Lee: Thank you, Elba. I was just a tiny bit hurt!
m&e: Al Lee I,m traveling to San Antonio in mid March - Do you have
any properties for sale ther? Is it a good market for investing?
Bob_(vegas): I am going to san antonio on the 3rd of march
Al_Lee: m&e, the Dallas/Fort Worth market is far and away the best
major metro area in Texas, and probably in the US. I have tried several times to
start investing in SA, but never was able to buy low enough or rent high enough
to make good cash flow.
Mike_Summey: Mark, yes I did that more in the beginning. Today I’m fine.
Mike_Summey: Al, would your CPA like to join us one Monday evening as a
guest expert?
Mike_Summey: Hi zert, your late again
Mike_Summey: i Eddie, you’re late too.
Roger_Dawson: Hi Zert!
Doug_in_CT: Hello Zert.
MarkCT: Thanks Mike. I think I’m going to try that. My reserves are lower
that I feel comfortable with at the moment.
elba_NY: Im reading all of this and I cant wait to start using all these
stratergies.
elba_NY: Hi Zert
Ralph_Roberts: hi Zert!
Eddie-NC: yea, I’ll be glad when I can quit my job
Al_Lee: Mike, I will ask him. He is not very outgoing–kinda CPA’ish, and
I had to convince him not to be afraid of being on the radio. I will see if he
will join us here.
elba_NY: Hi Eddie
zert: Hi everyone, better late than never
Al_Lee: You know what cpa’s use for birth control?
Al_Lee: Their personalities.
Eddie-NC: Hey Elba
zert: Al - very nice!!
Al_Lee: Hi, zedrt
Roger_Dawson: Elba: It is all so scary when you’re getting started. Once
you have a few deals under your belt, it’s so simple.
elba_NY: lol
Mike_Summey: Mark, if you can refinance and pull out cash to have as a
reserve and still keep your mortgage payments to where the properties will cash
flow, you will have the security of cash inthe bank and still have the tenants
buying the properties for you.
zert: I made an offer the other day
elba_NY: you are so right Roger
Roger_Dawson: I have to leave because we have house guests visiting us
from Malta. See you next week!
Mike_Summey: Al, let me know if he would like to join us. I’ve had my CPA
is a couple of the chats.
Bob_(vegas): do you guys have c corps?
Doug_in_CT: Yeah. Mike describes a great moment. It is the moment that a
big refi check hits your account and you realize all the money you invested in
the property is back to you but you still own a cash flowing property. Nothing
quite like it.
Al_Lee: Mike, I will do that. Let’s see how he survives being on the air,
then maybe I can get him to get in front of all these scary people online
MarkCT: I have one property that I own in which I can do that and create
a nice 30K in reserves. Having a nice amount in my reserve will definately help
me sleep better at night.
Mike_Summey: Bob, I hold all of my properties in llcs. I do have a C
Corp, but not to hold properties.
MarkCT: The downside of refinancing is that it will take that much longer
to pay off the property.
Bob_(vegas): my guy has my c corp file liens on all my properties so I
appear to be insolvent
elba_NY: Al I’ve had my questions lined up since last week.
Al_Lee: Elba, be sure to listen in this Sunday and feel fre to call in.
elba_NY: You know it.
MarkCT: Got to go. Great chat as always.
elba_NY: Hey Mark as long as your tenants do the paying.
m&e: markct I’m in NY and it is very hard to establish positive cash
flow due to taxes utilities management etc… I hope to see rents rise as they
have been stagnant for some time
Mike_Summey: Mark, yes it may take longer to pay off a property after a
refinance, but having a healthy cash reserve makes the wait much more plesant. I
try to keep enough cash reserve to pay at least 6 months of mortgage payments
and expenses with no money. That may seem like a lot, but I sleep very well.
elba_NY: Hey m&e where in NY?
m&e: upstate Albany metro
Mike_Summey: Bob, why would you want to do that?
elba_NY: Im in NYC
Doug_in_CT: It might be hard to get financing if you “appear to be
involvent.”
elba_NY: brooklyn, that is
Bob_(vegas): I co own a counseling office with my wife. the liens are for
“moneys owed” usuall larger than property could fetch……
Mike_Summey: elba, once again, thanks for the nice review of the FAQ
book. I hope some of the rest of you will post one on Amazon. That helps those
who are undecided make a decision.
m&e: Are you able to find and hold positive cah flowing properties?
Bob_(vegas): trying to bullet proof
Al_Lee: Bob, the idea of a C Corp is to insulat eyour personal assets
from liability resulting from a business action. By giving the corp alien, you
are movig yoru assets to the other side of that wall of protection, the
vulnerable side. That means that the corp must not actually do anything at all
or it wouel be exposing yoru assets to liability.
elba_NY: Thank you both for writing yet another great book.
elba_NY: Not here m&e. I invest in Dallas, TX
Mike_Summey: Good point Al
Penny: here’s saying goodnight to you all.
Penny: “goodnight”
Mike_Summey: Bob, what happens if the C corp is sued and it has all of
those mortgage assets to go after?
elba_NY: good nite penny
Al_Lee: IF you are the slole owner of the corp, then it itself is an
asset of yours and subjec tto being attached in a liability resulting from your
actions.
Mike_Summey: Goodnight Penny
m&e: Through AL Lee?
Al_Lee: m&e, I missed that, please restate
elba_NY: The next purchase? yes. right now. the Property manager
Bob_(vegas): the counseling office is an s corp. the c corp is an
umbrella. In nevada….
neilly68: how do you get lenders to lend money to you Corp without having
to sign personaly??
elba_NY: m&e was asking me if I got my property through the club
Al_Lee: OK, I get it now.
Bob_(vegas): I dont borrow through a corp.
Mike_Summey: Bob, I still think the best protection to to do things right
so you don’t get sued and insure yourself against frivilous lawsuits. Let the
insurance company fight them.
m&e: Al I was going to look in San Antonio. I know this is your area
so I would to pursue the Texas concept
Bob_(vegas): we have mal practice ins for the business however this is
another level of protection
Al_Lee: m&e, look at www.turnkeyinvetments.net and see actual deasl
in the Dallas/Fort Worth area than compare to what you might find in SA or
anywhere else. I think you will see that for cash flowing properties d/fw can
not be beaten.
elba_NY: m&e check out his websites. Read his articles. These will
help a great deal
Bob_(vegas): a c corp in nv can earn 60 k and only pay 15% tax
elba_NY: and of course do your own research.
Mike_Summey: How would you guys & gals like to see a book titled
Weekend Millionaire Real Estate Negotiating?
m&e: I will thank yu - The problem here in NY is that unless you want
to ro rehab work, nothing will cash flow. Particularly since interest rates have
risen
elba_NY: Al got me curious and I have not looked back since.
Bob_(vegas): well you all have a great night……as always it was a
great chat
Al_Lee: m&e, yes, and also listen to my radio program that is webcast
worldwide. On Sundays at 2pm Central time go to www.RentHouses.org and click on
the “Listen Live” link that crawls across the top of the page.
elba_NY: I would looooove it Mike
Mike_Summey: Goodnight Bob
Mike_Summey: elba, that’s what’s in the works now. Nothing finalized yet.
Al_Lee: Mike, Ralph, Elbe, everyone–goodnight. Gotta go do family
duties. It’s bedtime fo rthe kiddos.
Ralph_Roberts: good night, Al
zert: Mike - sounds great, would like to see some scenarois of actual
negotiations between buyers and sellers
Mike_Summey: Goodnight Al
elba_NY: well, keep working. It would be nice to have.
Mike_Summey: zert, that’s what I’m good at contributing. roger is the
negotiating teacher, I’m the student who puts the teachings to work.
Rob_FL: Mike, better than that is if we can hear actual negotiations
going on or actual live recordings talking to sellers
Rob_FL: You already go into negotiations in the first book, but real
role-playing would be useful, I think.
Mike_Summey: Rob, as you can imagine, that’s hard to do. Sellers don’t
like to be taped and used as guina pigs.
Rob_FL: They don’t need to know…just bleep out the pertinent info…I
have heard other cd’s/tapes that have such recordings…
Mike_Summey: If we do the negotiating book, Roger will write about the
techniques and tactics and I will contribute real life expamples of how these
were used.
elba_NY: Another great chat everyone. Good nite, All. Thanks again for
hosting Mike, Ralph.
zert: Mike - you could change their names to protect their identity, or
blur it out like on the Cop TV shows
Mike_Summey: Goodnight elba.
Ralph_Roberts: glad to do it, thanks
Mike_Summey: ‘m going to have to go also.
Mike_Summey: one next week.
Ralph_Roberts: good night, all… transcript will be posted shortly
zert: Doug_in_CT - you still here?
» Filed Under Chat Transcripts
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