Chat Transcript January 8, 2007
Posted on January 9, 2007
rolynproperties I have a lot more free time due to the fact I got laid off from my job.
Al Lee Are you an investor or just thinking about becoming one?
Al Lee What type of work do you do?
rolynproperties when I was working I didn’t have enough time to get on the chat but now I do.
rolynproperties already decided to become an investor but haven’t done a deal yet
rolynproperties I work in Information Technology
pineapple hello everyone
rolynproperties Hello Pineapple…welcome
Al Lee Rolyn, I hope you get a new job, but not one that keeps you from the chats. You will enjoy them.
rolynproperties where is everyone from
pineapple in my area, alot of out of state investors are buying up commercial properties… is this happening in your area too?
Al Lee I spent 30+ years in IT and retired in ’99 to live on my rents.
rolynproperties I have been to a few chats before and I enjoyed them.
rolynproperties Cool!!
Al Lee I deal mainly in residential. In fact, nearly exclusively in SFH
Al Lee i, Roger.
pineapple hi roger
rolynproperties You are lucky that was before the tech bust happened
rolynproperties And outscourcing became the norm
pineapple how come you never went into commercial Al?
ROGER DAWSON Hi Al, how are you?
Al Lee Roger, I am fan tas tic!
ROGER DAWSON Hi Pineapple!
rolynproperties Hey Roger I want to say you are awesome!! I picked up the course and I can negotiate better now.
rolynproperties How did you start AL?
Al Lee Rolyn, you are right. I finished off my IT career with a string of very nice Y2K projects.
pineapple Roger, is it just my area or are people trying to buy up commercial propertie sin little downtown areas across the country?
ROGER DAWSON Mike won’t be able to join us tonight, but we know each other so well that I ccan answer any question for him.
rolynproperties I love the “Ask for more then what you want” technique
Al Lee Rolyn, I have been investing in houses since 1974. I studied every possible investment that might get me from being poor to rich and decided that houses were the answer. It worked out for me.
rolynproperties I started using it in everyday life.
KenJ.onAI Hey everyone
pineapple since you were very confortable and making money with SFH, you never had the urge to go commercial?
ROGER DAWSON Pineapple. It’s a big thing in Los Angeles right now. The are “gentrifying” the old buildings and converting them into high end condos. It’s going to transform downtown LA
KenJ.onAI We probably have a lot of investors watching the BCS championship I imagine tonight
Al Lee I think that commercial RE is much riskier and the profits are actually not higher.
pineapple ahh ic ic
Al Lee I have known a lot of peopel who have lost big in commercial RE. I have never once lost money on a house.
rolynproperties Wow that is awesome congratulations AL, I will be there with you too!!!
Al Lee Thanks
pineapple that’s very good to know Al, it’ll keep me patient and not jump into the commercial bandwagon that seems like the hot thing to do in my area
ROGER DAWSON You need deep pockets with commerical property. That warehouse or office building may be vacant for a year or more until you find the right tenant.
Al Lee I now do a radio program about RE investing. You can listen live on the internet. I also have recorded shows online for free listening.
pineapple what are your thoughts on bigger buildings and converting them into lofts?
rolynproperties Hey Roger, in the course you mentioned that you started with nothing coming into the united states. How did you start out…you never mentioned.
Al Lee pineapple, you shoudl start out buying single-family houses and then decide if the added risk is worth what you think you might make in more complex projects.
ROGER DAWSON When we talk about commercial we mean warehouses, office buildings and shopping centers. We don’t mean apartment houses, which are investment properties.
pineapple ohh ic
Al Lee The thing about SFHs is that if you want out, you can always sell them to someone. Eithe an investor or an owner-occupier will buy them
pineapple that’s true, i remember reading that in their books
rolynproperties Hey AL would you start wholesailing to start out?
Al Lee With everything else you are mainly limited to finding an investor to buy. Investors always want a good deal. That means lower price to you!
pineapple roger, have you had any experience renovating a older building into apartments?
Al Lee Rolyn, no. I would find an affordable SFH to buy, buy it and lease it.
rolynproperties Why not AL?
ROGER DAWSON Rolyn, I migrated from England in 1962 to San Francisco. Worked nine months for BofA as a trainee and then Montgomery Wards for 13 years. They transferred me every two years or so. So I would rent out my home and buy another in the new city.
Al Lee Rolyn: Keep It Simple, Son (KISS principle)
ROGER DAWSON Hi Penny!
KenJ.onAI There have been a lot of folks jumping on the commercial bandwagon here in Florida, since it has remained hot after the residential boom recently. However, the residential deals are becoming riper here at the same time.
Penny Hi Roger!
rolynproperties Opps!!!You are right Roger is WAS in the course, I just remembered.
pineapple i’ve noticed that too, it seems as people kind of forgot about residential properties
Al Lee Another reason to start (or stick) with residential property is because you can get much better financing for them than for commercial properties.
ROGER DAWSON Pineapple, I once owned a nice 36 unit building that I thought would make a great condo conversion. Spent a fortune on attorney fees but I could never get the city to approve. That’s as close as I’ve come to remodeling an apartment house.
Penny Just signing in for a quick hello then I’m off to watch a football game.
KenJ.onAI The commercial boom has seemed to follow the residential. I think it will fade here pretty soon.
Penny You guys have a good chat.
Al Lee Are you leaving, Penny?
KenJ.onAI Go Gators Penny
Penny Yes, go sec!
pineapple ohh that’s interesting Roger, so you were mainly a SFH or multi-family kind of guy?
Penny SEC
Al Lee Roger, is Mike coming this week? I almost missed buy mydaughter remembered the time.
pineapple I think so too KenJ, alot of people bought many, many commercial properties and they are just waiting to flip them or have lease it and renovate the building for them
pineapple i’d say 90% are out of state investors who know nothing of the arewa except what their broker tells them
rolynproperties Does anybody deal with apartment buildings? wouldn’t apartment buildings be beneficial to owning then a SFH?
ROGER DAWSON I believe in owning a mix of rental properties. SFR for liquidity and appreciation. Multi units for cash flow.
Al Lee Rolyn, I think SFHs are better, to tell the truth
rolynproperties Why do you say that AL?
pineapple What are your thoughts on this Roger? 75
ROGER DAWSON Mike also believes in SFHs.
pineapple 75% SFH 25% commercial
pineapple or more SFH?
rolynproperties Mike did mention in the course that he brought a multi-family unit
ROGER DAWSON We’d stay away from commercial but apartment houses are good.
Al Lee If you are a new investor or do not have a lot of money, you need the stability of SFHs–and the ability to sell if necessary. With apartment buildings you have more volatility and need deep pockets to weather the storm sometimes. You can get washed out easily in a down year
rolynproperties With no money down
Al Lee I thinknyou ought to have ten SFHs before considering an apartment building.
rolynproperties that is a good point AL
rolynproperties When interest rates are low or falling you will tend to have greater vacancies
Al Lee When you are financially solid, you might want to go to more volatile investments that coudl give higher returns, but could require more staying power to hold onto them
ROGER DAWSON If you read Donald Trumps book Art of the Deal he got his start cleaning up a gang ridden drug infested apartment complex. Big money to be made doing that but it’s hard, dangerouse work. You basically have to evict all the tenants and start from scratch.
zert Al Lee – have you seen the tv show from the guys from San Antonio ? It seems to be made for tv and not realty (as in real world)
Al Lee Here in Texas when occupancy rates for SFHs move up or down 5% the occupancy rates for apartments might move 15-20%.
pineapple How do you approach and negotiatie with a bank with a proposition like that. Wanting to rehab a building into nicer apartments
Al Lee I know a guy who used to buy apartment buildings in the bad areas and remove the doors form the units so the people coudl not stay there. Then he renovated, re-leased, and sold them.
rolynproperties Hey AL: Did you start to hire a management company right away or did you manage your properties a while yourself.
pineapple of course you have to have a business plan, but is there anything you sugggest?
Al Lee Rolyn, Mike was smart and used professional managers from his first property. I managed them myself for 10 years before I realized that I needed a professional magement company. Then things started to get really good!
pineapple i hired a property manager with my very first property Rolyn. It helps you focus on finding great deals instead of fixing and dealing with tenants.
pineapple of course I just about broke even, but that
Al Lee That may be why Mike and Roger’s books have sold many times more than my book. They were smarter than I was!
pineapple ok
Al Lee People think they will save money by self-managing. They do not.
KenJ.onAI Roger, What do you suggest is the best way to find a local agent who can dig up deals on SFH’s?
rolynproperties That is SOOOO true.
Al Lee Rolyn, you mean that ROger and Mike are smarter than me?
pineapple Ken a good agent is always a bonus, but I learned early on that driving through neighborhoods and talking to people is the best way to find super deals
Al Lee lol
rolynproperties Laughs!!! No I’m talking about property management
ROGER DAWSON Ken, you’ve got to find an agent who enjoys working with investors and has the courage to present low offers.
rolynproperties I would never disrepect the teacher…..I have a lot to learn. Besides why would I go against a fellow IT employee. lol
Al Lee Mike and Roger have both been guests on my radio program and their interviews are on line for free listening. Go to http://www.RentHouses.org and click on “Streaming Audio”
KenJ.onAI Okay, pineapple & Roger, I see what you’re saying. I need to find an agent who understands where investors are coming from.
Al Lee IT was good to me. I would not go back to that for any money, though.
rolynproperties So now that you guys have a lot of property what do you spend your time doing?
Al Lee Rolyn, I now build houses in D/FW Texas that are designed to produce cash flow.
rolynproperties I don’t blame you AL I wish I could say the same thing…..to be quite honest it feels a lot like slavery.
zert Al Lee – can I copy past segments onto a CD and listen them on a cd traditional cd player ?
ROGER DAWSON Rolyn, my hobbies are golfing, sailing and skiing
pineapple Roger, are their banks that will give you a business line of credit if you present them with your long term goals and a plan of action? Lately, I’ve just been getting conventional loans and doing each house separately
rolynproperties Hey did one of my users follow me on here? lol
Al Lee zert, you can download them, but to listen you need Flash. You can download Flas for free on the website, though.
KenJ.onAI Al, How do you cashflow off new construction? What’s your angle?
Al Lee Flash
zert ahh ok thanks
zert gotta go – good night everyone
ROGER DAWSON Pineapple, I think you’re better off to finance each property separately. If you take out a line of credit you’re securing it with everything you own.
pineapple ahh ic, thanks for your advice
Al Lee Ken, I have a program that lets me lower the cost of building a house because of much better construction financing than most builders can get. I also devote a lot of energy to getting the cost of the land down so I can produce a house at a low enough price to cash flow.
Al Lee Ken, look at www.buyRentHouse,net to see soem photos and numbers.
Al Lee some.
Al Lee The thing about all those years in IT is that I type very fast, but I am used to letting the computer fix my typos. The chat room software does not fix my typos, it lets them through. I hope you can forgive me
pineapple I have been seeing properties where their current rents are below market, because the owners were giving them a huge break. I would to increse their rent another 100 – 200 to current rates. What’s the best way to handle this, because if I don’t increase their rents, the NOI won’t work
rolynproperties lol!!!
rolynproperties I think all of those chat rooms in the early days did it for me.
Al Lee If rents abe below market it is probably not because the owner wanted to give the tenants a break, it is probably because he coudl not get the higher rents. You may not be able to either.
pineapple however, the ones I have been seeing, are in far better condition that the ones are renting for more than they currently are
ROGER DAWSON Be cautious about raising all the rents a big amount at the same time. The tenants can gang up on you. Do a few each month.
Al Lee Do you really believe that all those landlords are so soft-hearted that they want to give everyone a break? I doubt it.
KenJ.onAI Thanks for the help Al, I’ll check out your site.
Al Lee One reason for lower-than-market rents might be poor management, though. Find a good property manager you can trust and have them tell you what the rent shoudl be for THAT property in it current condition.
KenJ.onAI I’m signing out, everyone. Thanks for the chat!
Al Lee Goodnight, Ken
pineapple oh i don’t intend to raise rents by a huge margin on my current properties, just adjust the onts that I am planning on purchasing.
pineapple the properties that are below market rents are managed by the actual owners and not by property managers
Al Lee If you buy a property based on anticipated rent increases, you are taking a huge risk. Tell the seller to raise the rent and then you will buy it.
pineapple but isn’t that essentially what you do with a vacant property? Anticipate what the rent will be?
rolynproperties I’m considering on buying apartment buildings because I need the cashflow for income. I have a sizable downpayment to purchase it 35k.
Al Lee Remember, if you try to raise rents the tenants might just bolt and you will have vacant properties. The question to ask is: “Why hasn’t the seller raised rents?” Does he not like money?
pineapple the property managers in my area agree that the rents are well below market though
pineapple well, the one I was thinking of in particular has a huuuuge balloon payment they can’t afford to pay
Al Lee Are the property coonditions well below standard also? How much deferred maintenance are you accepting if you buy it?
pineapple the conditions are actually a little above standard, and I ran the numbers through the generator with 10% maintenance at just a little below current just to give myself and edge and they worked out.
Al Lee I am just warning you to be careful about depending on rents being raised just because you bought the property. You may need to spend a lot of money on repairs and upgrades in order to get higher rent. If you are not prepared for that, you could be behind the eight ball.
Al Lee That all said, I wish you best luck on those properties. If it works out well, please report to all of us in the chat room how it went.
pineapple thanks for your advice AL, i’ll definitely keep that in mind =)
Al Lee Mike would surely tell you to be certain to have a cash reserve. I think ROger will second that, fight Roger?
pineapple oh yes, I do 6 months reserve
pineapple i remember that rule
ROGER DAWSON There are going to be some great buys out there soon when banks start foreclosing on people who took out no money down flexible payment loans.
Al Lee the best-laid plans of mice and men…
ROGER DAWSON Al, that’s a key, having a cash reserve. A lot of investors need to start out on a shoestring but need to buy reserves quickly. It takes a lot of pressure off.
Al Lee A huge number of loans that were made a few years ago are now reachng the date they start to adjust upward in rate and payment, or balloon. That will wash out a lot of marginal owners. They will all become tenants again, too.
pineapple i think that’s what was happening to that property I wan mentioning about, why they want to sell so quickly
pineapple Roger, I remember reading in the book if you own a property free and clear, you can keep on rolling it from one property to another. Would you be able to expand on this subject? Is it really as simple as it sounds?
pineapple borrowing form home equity to buy another house cash, and repeat the process with that house, and so on
ROGER DAWSON Pineapple, bankers know it as “substitution of collateral” They will always try to sell you on a “blanket” loan, securing by two or more properties but you should never do that.
pineapple than what would be the best way to take advantage of one free and clear home?
Al Lee Using residential real estate loans, ou can easily refinance a paid-off property and get 80% of the appraised value in cash. Use the cash for down payments of several new properties.
ROGER DAWSON The easiest way is to find a property that is owned free and clear by the seller. You buy it by placing the purchase price as a loan against your property.
ROGER DAWSON The big advantage is that the interest rate can be anything you can negotiate. You can offer them a high price as long as the interest rate is low.
pineapple ahh ic, thanks for advice Al
rolynproperties What is the best way to check to see if a property is going to be around major construction in the coming months?
pineapple Roger, I never saw it that way. I think that would be a great negotiating tool in the future
rolynproperties Yeah that technique is in the course….
ROGER DAWSON Rolyn, I don’t understand your question
rolynproperties If there is going to be major construction in a potential property that you are considering on buying how would you know BEFORE it happens?
rolynproperties I meant to say around the area of the property that you are going to buy.
Al Lee Rolyn, if you mean major repairs or renovations needed to the property, you can predict that by having a licensed house inspector inspect the house before you buy. They will give you a detailed report–usually computerized with photots.
ROGER DAWSON Rolyn, I would call your local building department. They would know if anyone has requested a building permit.
rolynproperties You are right AL…I’m sorry I’m not being too clear.
Al Lee Roger is right, too.
rolynproperties Thanks Roger that’s what I was looking for.
ROGER DAWSON I need to leave you now. Mike Summey and I will both be in the chat next Monday. Al, thanks for your participation.
pineapple thanks for your help Al, greatly appreciated
Al Lee OK, thanks all fo you. I need to run now too
pineapple have a good night everyone
Al Lee Good night.
rolynproperties Thanks Al you are awesome!!!!
Al Lee Rolyn, would you mind repeating that in front of my wife?
rolynproperties Ha!! I’m sure she knows but you have to get it out of her like I do my wife
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