Chat Transcript November 6, 2006
Posted on November 7, 2006
MJGanyone there?
MJGhey
latina417Hi
MJGEver been in this chat before?
MJGim new
latina417no,you?
MJGnope
latina417me too
MJGabout hald way through their book
MJGhalf
latina417I’ve read it twice
latina417love it
MJGhaha nice
MJGmyself as well, its great
latina417it’s like my bible
MJGhave you bought any properties yet?
latina417almost
MJGim just starting so im looking into neighborhoods, but havent purchased any yet
Al LeeHi, all
latina417hi
MJGHey Al
Al LeeHow is everyone today?
MJGNot too bad, yourself?
latina417good
Al LeeFantastic, of course! :/ 
Al LeeHi, Mike
latina417Hi
Al LeeNew chat room software, eh?
Mike_SummeyI see the new chat program is now operating
Mike_SummeyHello everyone
MJGHey Mike
latina417hey Mike! This is my first chat and I’m happy to be here.
Mike_SummeyHi MJG
MJGits my first time in the chat, but looks good to me
Mike_SummeyLatina, we’re glad to have you
Mike_SummeyRoger will be on shortly.
Al LeeMike, who won on Sunday?
Mike_SummeyAl, sorry, but we forgot to call. We were in an intense game.
Mike_SummeyHi Ken
Al LeeMike, that is OK. I had more material than I coudl fit into an hour
Roger DawsonGood evening everyone
Al LeeI will have to do a follow on show to cover some of the stuff I never go to
latina417Hi Roger
Mike_SummeyRoger & I are her3e together tonight. He is in the other office.
MJGHey Roger
Mike_SummeyAl, how did it go?
Al LeeIt went very well. I will have it on the webstie tomorrow or so.
Al LeeThere is so much you can say about it
Roger DawsonI live in Southern California but I’ve been visiting Mike in his beautiful mansion in Asheville, NC.
kenMike what bills do you pay for your properties, or does the Property manager pay everything.
Mike_SummeyAl, there will be a series of columns coming up in November aimed at how to teach children about money.
Al LeeAs a Californian, how do you like the States, Roger?
Al LeeMike I have a fat file of notes I have compiled to prepare for a book I am writing on that topic.
Roger DawsonWhen I come to stay here Mike gives me my own cottage on his estate. It’s the only private home I’ve ever stayed in where you have to dial 9 to get an outside line!
Mike_SummeyKen, I pay mortgage payments, taxes and insurance. The important stuff! The management firms pay everything else.
Mike_SummeyRoger is full of IT!
Mike_SummeyHi Rob
Rob_FLHi
Roger DawsonAl, California is the future. I knows that scares you but get over it.
Al LeeRoger, does he have tohsoe buttons on the phone for housekeeping, room services,etc.?
kenAl did you get your ranch yet?
MJGMike and Roger, do wither of you have an opinion on buying “Student Housing” near a large number of universities? The condition of the houses wouldn’t be something I want to live in, but they rent for about $2000 a month while the mortgage, taxes and expenses only add up to $1300 a month. I’m simply unsure of whether houses like this are good investments.
Al Leeken, I am approved for evberything and waiting for the slow machinery to gring it out. Appraisers work on Oklahoma time in OK. It is a bit like Hawaiin time
Mike_SummeyMJG, if the numbers work the deal is good. Do you have the Offer Generator software.?
Roger DawsonMJG, be sure that you get a 12 month lease and allow for extra damage, becuase you’ll get it. Have the parents co-sign the lease. Then it’s a good business.
Al Leegrind it out, that is
MJGi do not have the software
MJGokay thanks for the input
Roger DawsonAl, but OK time and Hawaiin time still beat NC time, right?
Mike_Summey MJG, the Offer Generator lets you input estimated income and expenses, computes NOI and then walks you through the process of balancing price and terms to create hundreds of offers that will all work with the NOI. It even lets you print the offer letters ready for your signature and presentation to sellers. If you don’t have it…get it!
Al LeeRoger, I have never doen much in NC, so I can’t compare. Everything on my ranch is waiting for the appraiser to deliver a forgone conclusion. It will take him a month to get around to it, though.
latina417I have done almost everything I have read, except closing a deal. Do any of you have advice about getting over the fear
Roger DawsonLatina, the first deal is terrifying. I still remember mine. After a while it’s like getting a shoeshine. It’s not that big a deal.
Mike_Summeylatina, just keep making offers that will work for you until one is accepted. Don’t stretch yourself just to appease a seller. Remember that you are the one who will have to pay for the property after the purchase.
MJGokay great ill check out the offer generator
Rob_FLIs it safe to say that most of you use your credit and your own money (or even borrowed money) for down payments to buy houses for long-term? I know you don’t have to, but from reading the millionaire book, it sounds like that is the norm.
latina417Thanks:)
Roger DawsonLatina, what we teach in our book is not a get rich quick scheme. If you’re buying based on the rules we give you in our book or audio program, it’s almost impossible to get into trouble.
Mike_SummeyMJG, the Offer Generator incorporates all of the teachings of our real estate investing book into a computer program that takes most of the guess work out of making offers.
Al LeeRob, I do it as you described.
latina417I have read your book twice…love it b
Rob_FLAl, from your perspective, that is the way to go? I would assume so if it is working for you 
MJGcool Mike, ill definitely take a look
Al LeeRob, I have been doing it since 1974 and so far so good. I guess time will tell if it will work out long-term.
Al Lee:p
Mike_SummeyRob, no money down deals that work are few and far between. If you don’t have cash, you have to find them, but patience is the rule. Don’t try to over extend yourself just to buy something. I’ve never heard of anyone losing money on a property they didn’t buy.
Rob_FLHow are you all finding your deals nowadays? Here in North Florida it is turning more into a buyer’s market
Mike_SummeyRob, I think you will find that to be the trend ofr the next couple of years. We are definately coming into a buyers market and that is where long-term investors make money.
Mike_SummeyHi sr33
latina417Question: I have a duplex I’m looking here in southern IL. It’s a forclosure, in great condition. Unfortunately the bank is asking a little bit over the amount we can purchase it for. I guess my question is… would I be crazy for offering much less then what the bank is asking?
Mike_SummeyI think we are being trumped by the CMA award show tonight.
Mike_SummeyHi gquick
gquickhi all… this is my first time in one of your chat rooms.., thanks for the morning reminder…
kenRob I get a kick out of a buyers market saying, I think home prices are still way way high I know owners are getting more flexible. still they are to high for the average person.
Mike_Summeylatina, I just bought 2 houses earlier this year from a bank and I got them for about 1/3 off of what they were asking.
Roger DawsonLatina, go ahead and make the low offer and explain why you’re offering that amount. If they get a better offer, they’ll take it. If they don’t, they’ll take your offer.
Rob_FLMike, did those houses need much work???
Al LeeI do not think it is ever foolish to offer below what any seller is asking. All they can do is say no. Then you can offer more, it you want to.
Mike_Summeyken, properties are still way overpriced in a lot of areas, but if they sit on the market long enough, the prices will come down and terms will become much more flexible.
Al LeeI have had the seller actually accept the first low offer. I was really glad I made it.
Mike_SummeyRob, they were basically new homes…just a year old.
Roger DawsonIn negotiating we say that you power comes from convincing the other side that you have options. It’s true for the seller too. They’ll tell you they have better options, but if it turns out they don’t they’ll take your offer.
Mike_SummeyHi Penny
MJGMike and Roger….I have some money I inherited, enough for about two down payments on houses im looking at. However, I’m considering taking on two partners to invest with me so that im not taking all the risk, and i have other people’s input. What do you think as far as partnerships like that?
latina417Thanks so much!! I really appriciate your advice.
PennyHi Mike.
gquickIs this the Al Lee from the Tortoise Club?
Roger DawsonHi Penny!
PennyHi Roger. I finally made it.
Al LeeThis is indeed that Al Lee form the Tortoise CLub, how are you?
gquickGreat thanks. I got your URL while looking at the archive of last weeks chat.
Mike_SummeyMJG, I’ve never had a partner nor an investor in a real estate deal. Maybe I’m paranoid, but I like to control my own destiny.
Al LeeI hope you found some worthwhile stuff on my websties
Roger DawsonMJG: a lot of people take on partners because they fear doing alone or think that partners share the risk. If you can do it without partners, do it.
gquickI’ll assume your investing strategy is similar to Mike’s, eh?
Mike_SummeyHi Scott
Al Leeqquick, we have very similar philospohies with a few differences in details.
gquickHat’s off to Mike and Roger. What a great book they’ve put together for the novice investor.
Al LeeIf Mike had only listened to me he wouel be wealthy today!
Mike_Summeygquick, the biggest difference Al & I have is that I like to get properties paid off as quickly as possible and he doesn’t.
Mike_SummeyHi Theo.
Theo_SCHi all
Theo_SChey Mike
Roger DawsonMike and Al have somewhat different strategies. Mike believes in paying off the loan as quickly as you can. Al believes in using the bank’s money as long as you can. They’re both right! What a great country!
Al LeeMike, I like to use OPM, Other People’s Money (the Bank’s) to make me money. I do not like having too much equity locked into one property
Theo_SChey Roger
gquickThat’s what puzzles me the most about the whole ROI thing. Got time for a question or 2 about ROI?
Roger DawsonHi Theo
Al LeeROI, sure!
Mike_Summeygquick, sure
Roger DawsonSure gquick. It’s aint’ that complicated.
MJGwhat do you mean Al? just using your cash to put the smallest down payment possible and then taking out a bigger mortgage?
Mike_SummeyRoger, ain’t in not an English word. Leave it to us Southerners.
Roger DawsonSurenuff
Al LeeMJG, I do not necessarily look fo rthe smallest down payemnt. I look for the smallest down payment that will get me a good loan rate and terms.
MJGi see
Theo_SCWhat happens when there is a lot of equity but the refi rates are high, how do you get it out?
PennyRoger I like the surenuff. I can just hear you saying it now!
Mike_SummeyTheo, the refi rates are always better than new purchase rates.
Al LeeWhen a proeprty has built up a lot of equioty because of appreciation and /or loan amortizatioin, I will refinance it with cash out so I can use the cash to buy more properties.
Roger DawsonWe haven’t had high interest rates since Reagan (my hero!) was President, Theo.
Al LeeIf I have more properties I am getting more apprecaition and mroe depreciation allowance for my taxes.
Mike_SummeyAl, have you ever tried building enough equity that the banks will loan you 100% of your purchases because they know you have the horse power to carry it?
Al LeeRoger, I owned a retail store when Carter was pres and rates went to 22%. It was devastating!
Mike_SummeyHi bigboy
DELhey its me Del from last week
Theo_SChi Del
DELsup
Mike_SummeyAl, I bought a lot of properties when the rates went to 22% because I had the equity to make the banks secure.
Mike_SummeyHi Del
Al LeeMike, I have occasionally done 100% financing, but only if I got a good interest rate and 30-year term. I want a loan that has a fixed rate for a long time so I do not have that ominous risk of rising interest rates hanging over me. A sword of Damocles (check my spelling, Roger)
gquickPages 148 and 149 or Secrets to Investing In Real Estate. I completely understand the ROI equation, and I completely under how you can buy a property for$100000 or $120000 and actually improve your ROI if you borrow money (Al Lee) as opposed to using all cash (from what you guys said Mike’s philosopy, but I don’t really get that from reading the book???). But when do you hit the I can’t borrow anymore money to invest in properties. Even if you are making a 21% ROI on the cash you’ve put out, don’t you eventually run out of money or credit or something?don’t you even
Roger DawsonI didn’t mean to blame Reagan for high interest rates. He was the one who cleaned up Carter’s mess.\
Al LeeMike when rates were 22% I have big troubles in the retail business and was not in a position to buy properties. If I had been smart I would have used my money to by houses instead of that store!
gquicksorry, forgot to erase the “don’t you even” before I sent it.
kenI know i’m ready for tomarrows voting
Mike_Summeygquick, yes you can run out of credit. When that happens, long term investors usually take a breather and let equity build up before pressing ahead with more purchases.
Al LeeBTW Everybody be srue to vote. Remember, Republican voting is tomorrow, Tureday. Democrat voting is Wednesday.
Al Leelol
MJGhahaha
gquickhmmm, that’s a good answer. so I would just need to sit back and collect equity on the properties for pushing ahead too quickly?
Mike_SummeyAnyone want to make predictions on tomorrow’s election?
Al Leeqquick, if you ar maiking money on each proeprty you buy, you will never get the “I can;t borrow more money” syndrome
kenREP keep it
Mike_Summeygquick, my advice is “Don’t hurry up to fast too slow!”\
Theo_SCRepublican all the way
latina417\
Al LeeMike, I think the R’s hold the House and Senate with surprisingly good numbers. The Liberal media run phony polls to discourage R’s form voting, but it doesn;t work
Theo_SCgood call Al
Roger DawsonGquick. ROI means return on investment. In real estate investors take the gross rents and deduct a vacancy allowance to get net rents. Then they deduct Maintance, insurance, taxes, utilities and management to get net income. Divide that into the purchase price and you get ROI. EG you paid a million, your net income is 100K, you’re making 10% ROI. Nobody’s going to pay cash for real estate, so the critical issue is what it costs you to buy the financing.
Al LeeMike, I do not get my nes form any of th eold media - I fI want to knwo what is happening I go to Drudge and get the raw data.
kenGod that stuff kerries says is killing the dems. I think kerry should just sit in a corner. oh well on with REI
Al LeeHeck, let Kerry keep talking!
DELhow often do u buy a property you dont make mooney in righ away
kenlol
Al LeeI very rarely will buy somethign that is neutral cash flow,but never negative
DELoh ok
Mike_SummeyAl, I’ll have to say I agree. the local newspaper has reported our Republican congressman to be behind in the polls, sometimes significantly, for the past 7 elections. He has won them all with an average 56% majority. They have him trailing again this year.
kenI’m finding it hard to find 10% cash flow
DELin terms of real estate who is better democrats or republicans?
kenor any cashflow at that
Mike_SummeyLetterman said that Kerry was the only politician who could lose a race he wasn’t even running in.
DELhow do you determine the value of your property
gquickI’m 37 and have wanted to invest in real estate for I can’t believe how long. I’ve really just started with Mike’s book and can’t wait to start my first weekend. Would a realistic goal be to purchase my first investment my my 38th birthday in February. I feel like I’ve got such a headstart if I follow my Weekend Millionaire book.
Al LeeMike, I have been involved with major news events and have seen the major media absolutely lie about what happened. I know for a fact that they did know the truth because the reporters were with me.
Mike_SummeyDel, I’m happy with a break even cash flow in the beginning because I know that the longer I own the property the wider the margins will become.
Roger DawsonKen, 10% was just a number for easy math. 10% would be a good return for any investor these days.
Al LeeCNN even admitted that they systematically lied about Iraq in order to stay on Saddam’s favored list. Now they do what they can to undermine our soldiers.
Al LeeOh, well Back to RE
kenRoger i’m seeing that I think I was shooting for 10 all along, now I’m settleing for a break even but still going for 10% we’ll see what happens
Theo_SCHey td_sc
Mike_Summeygquick, it took me a year to buy my first property. Then I bought 2 the second year and 4 the third year. You lear with experience.
Mike_SummeyRoger & I have played gold for the past 3 days. I’m about dead.
Mike_Summeygolf
Al LeeIF you use Fannie Mae, Freddy Mac loans you will be told that you may oonly have 10 such loans. That is true, B U T!
Roger DawsonPreditions? I think that the Democrats will control the house. That means San Francisco liberal Nancy Pelosi as speaker of the house deciding what will get a vote and Socialist Rangel heading the ways and means committee, controlling taxation. The Repubicans will hold the senate by 50 to49.
PennyRoger, isn’t Asheville beautiful this time of year?
Al LeeYoucan get good long-term loans that are not Fannie or Freddy loans and then the limit of 10 does not apply.
PennyA little cold at times, but really nice.
Al Leehave found lenders who will do as many as 20 loans to you, if you have a good record and good FICO
latina417AL I completely agree. I can’t stand what they are saying about our soldiers. I see what our soldiers have to go through in Iraq and when they come back fromthe war. It’s unfair for them to have to hear the nonsense the news is reportign.
Al LeeThat is 20 loas form each bank!
Mike_SummeyRoger, we may have to make a little bet on your prediction.
Al LeeYou guys play gof i snow drifts, don;t you?
Al Leeplay golf in
gquickI know someone that I met through a business networking club and he deals with pre-forclosures. I know it’s a good strategy bucause it works for him. Are pre-foreclosures part of the bread and butter properties you talk about?
Mike_Summeylatina, I spoke with an army MP last week who has already served one term in Iraq. He said that what we hear in the US is not at all what it is like in Iraq.
Roger DawsonPenny, these days in Asheville have been perfect. Unbelievable fall colors and great views of the Smokey mountains.
Al Leelatina, I was in the Air Force during Viet nam and they did the same then. It is disgusting.
Pennyso glad you enjoyed the Blue Ridge Mountains
Mike_Summeygquick, preforeclosures are just one of many startegies long-term investors use to find properties thay can buy at wholesale.
Roger DawsonAs volunteer Webmaster, I think we ought to stay out of politics and religion and focus on real estate investing.
Al LeeRoger, you are so right!
Mike_SummeyAgreed
Al LeeWho started that, anyhow?
Mike_SummeyI think I did. Sorry!
Al LeeBut, do vote tomorrow!
gquickMike/Roger…I saw on the website that chats are almost everyday of the week. Is Monday the day that you 2 are most likely to attend?
Al LeeI believe that if you are buying cash flowing properties you will never run out of borrowing power. If you buy non-cash flowing properties, you will soon run out.
latina417I am prior enlisted in AF and I currently work as a civilian on AF base. I can’t stand hearing people disrespecting our military or even disrespecting our fallen soldiers. It crazy!
Mike_Summeygquick, we are in the chat room on Mondays at 8:00 PM Eastern, wut the chat room is available all the time ofr anyone who wants to talk real estate.
latina417sorry
Al Leelatina, never be!
latina417should have kept up with threadlol
Al LeeRoger, what is happening to the RE market is CA?
Al LeeI have a frien dwho joned my investor club in 2002 living in CA and has bought 7 houses an dnow moved to TX to pursue RE full-time.
Al Leefriend who joined
latina417I guess I’m running into some issue when running the numbers. How do you deal with high taxes?
Roger DawsonAl, it has slowed considerably after years of incredible rises in prices. A friend of my is a top real estate agent in San Diego. Always very successful. She hasn’t made a sale all year. LA is slowing but not as dramatically. Nobody’s too concderned yet. There’s is almost always a high demand for CA real estate because of migration and immigration. Swargeneger is very popular and will get reelected easily.
Mike_Summeylatina, I strongly recommend that you get the Offer Generator if you don’t already have it and use it to run the numbers. You won’t get in trouble if you follow the advice it gives you.
Pennygoodnight all, I have some things to take care of before bed, so….. see you all in the comics.
Roger DawsonNight Penny!
latina417Great! I will do that.
Mike_SummeyGoodnight Penny
PennyRoger, have a safe trip home tomorrow and be sure to give your lovely wife a kiss for me.
Roger DawsonThanks Penny
Mike_SummeyTheo, tell latina about the Offer Generator. Theo uses it all the time.
Mike_Summeylatina, where do you live? What city?
gquickAl Lee (I guess this would be for Mike and Roger too since it’s about their book)… you typed up ” if you are buying cash flowing properties you will never run out of borrowing power… ” That was basically my earlier question about ROI… In the example in Mike and Rogers book, you could get 21% cashflow is you bought a house for $120000, put $12000 down and financed $108000 at 6%. The ROI was $9000, after interest on the loan being $6480, Mike and Rogers book states that still leave you with $2520 or a 21% return on your money. Maybe it’s just me thinking that’s not enough in my pocket to pay for my investment, but how exactly does that work?
latina417Belleville IL
Mike_Summeygquick, the $2520 is the return you make on the cash you invest. The tenants pay the rest.
Roger Dawsongquick: what you’re missing is that the ROI just applies to the first year. It gets better every year as rents go up and the loan pays down.
Theo_SCLatina…the offer generator is a must have tool. It will let you see where you need to be in price, interest rate & on terms, it’s great. Must get it. No guess work. Straight forward numbers and than it print the offer out. It GREAT….
Roger DawsonNeed to leave you now. See you next week!
latina417Theo…Thanks! That sounds great:) I just mentioned to my husband that I was going to give myself an early christmas gift:):)
Al Leeqquick, I have a spreadsheet I use to compute ROI. You can download it free from my website http://www.turnkeyinvestments.net/ if you click on “Spreaddsheet” at the top of th epage and follow the instructions. It will show you exactly what you will net. The Offer Generator, on the othe rhadn, approcahes it from the opposit eperspective. You tell it how much you want to make and it concocts offers that will meet that goal. Then you make those offers to sellers.
Mike_SummeyI’m going to have to sign off also. Goodnight everyone.
Theo_SCgoodnight all…see you next week
Al LeeMy daughter just informed me that it is time to log off here, too.
latina417Thanks a lot and good night
Al Leegoodnight all.
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