Chat Transcript - April 16, 2007
Posted on April 17, 2007
Mike_Summey Hi Leigh, looks like it’s just us for now.
santosleigh hellohello MIKe
Mike_Summey I’ve been enjoying the articles you have sent.
Mike_Summey How’s the weather in NY?
santosleigh yes i hoped you would
santosleigh we got 8 inches of rain in central park
Mike_Summey We’ve had high winds here. Last night we had winds that hit 75 MPH
Mike_Summey Hi Kelly, welcome to the chat.
Kelly Hello, thanks for having me.
Mike_Summey We may not have too many tonight. I was very late in getting out the chat reminder email.
Mike_Summey Hi Penny
Penny Hi Mike.
Mike_Summey Roger just called and he is delayed a few minutes, but he will be here shortly.
Penny Looks like I’m early tonight.
santosleigh i was looking into the carleton sheets coaching program and it is similar to the john beck scam that cost me $12,000 what do you think mike
Mike_Summey Penny, you’re earlier than usual, that’s for sure.
Mike_Summey Leigh, Carleton is a friend of mine, but I know very little about his coaching program. You’ve had experience with Beck. Personally, I think you are doing very well by yourself. You’ve made a couple of good deals already and more will come.
santosleigh mike, my real estate broker is paying for my title insurance as long as i buy houses from him
Mike_Summey Leigh, the $12,000 you spent with Beck would have made a nice down payment on one of the deals you’ve made on your own.
Roger Dawson Hi everyone. Sorry I’m late.
santosleigh hello roger
Mike_Summey Leigh, that sounds good. I’ve never had one offer to do that for me. What’s important is that you’re getting title insurance.
Mike_Summey Hi Roger
Penny hi Roger
Mike_Summey Hi pepyne, welcome to the chat.
Roger Dawson Hi Pepyne
Mike_Summey Kelly, any questions?
santosleigh mike, beginners luck maybe
Mike_Summey Pepyne, is this your first time in one of our chats?
Kelly Mike I went ahead and started setting up an LLC with Sutton Law. Is his fee average for what you have done in the past. I have not set one of these up before. Sorry I typed this in then somehow lost it for awhile
Mike_Summey Kelly, setting up an LLC can cost anywhere from $400 - $1,000 depending on what you have done. It varies from state to state. You can actually set one up yourself without a lawyer, but I don’t recommend it. I always use an attorney.
Mike_Summey Hi Ken
ken Hey guys
ken Mike do you think it would be better to talk to the CPA as well for setting up the LLC for tax reasons
Mike_Summey I was without power last night and it has flickered on and off all day, so if I suddenly disappear, that’s probably why.
Roger Dawson My wife went to a seminar where an attorney put the fear of God into anybody who bought property outside of an LLC. I disagree. I don’t think the chances of getting sued are great and an LLC won’t protect you.
Sol (Cali) Hello All
ken Your right Roger, Your talking about someone with the intent of sueing you
Roger Dawson Hi Sol
Kelly Roger, why wont and LLC protect you?
Mike_Summey Personally, I think LLCs offer more options for estate planning and ownership transfer than liability protection.
Mike_Summey Hi Sol
Mike_Summey Hi Shoe
santosleigh mike, if i stay with this broker i won’t have to make offers, he is 30 yaers old and has 17 rental homes so far, and he offers houses to me before he puts them on bid4assets
Mike_Summey Leigh, that’s great. Everyone needs someone like him to do a lot of the legwork. Good for you. You’re lucky to find him.
santosleigh mike,like i said before beginners luck
Mike_Summey Ken, I’ve just set up a new LLC that I plan to transfer a property into and then gift some ownership to my sons.
Sol (Cali) Santos, have you used bid4assets? Te county in my farm area uses it and I was curious about it.
ken Yeah mike I read your article of passing funds down to children
ken has anyone seen real estate market adjustments in their areas
Mike_Summey ken, the property I plan to put in the LLC is not yet developed. I plan to build an office building on it and by gifting an ownership to my sons now, it will let a substantial portion of the equity build up in their estate, therefore bypassing inheritance taxes when I pass on.
Sol (Cali) Mike or Roger, I’ve been making offers and I had a concern. What if you offer a high price with low terms, but the seller calls the loan in 5 years and you’re stuck with the high price?
ken Mike smart move, that death tax and kill you
Mike_Summey ken, they’re taking place all over the country…some areas more than others, but even areas where the market is still relatively strong, properties are staying on the market much longer before they sell.
Mike_Summey Sol, don’t sing a note with a short call in it.
Roger Dawson Good one Ken:D
santosleigh sol, i never bought from bid 4assets i buy from the broker so i don’t pay the auction fee, so far $5000. on one house and $3500. on the other, i saved $8500
ken Mike Yes I have seen that, but it seems owners don’t want to drop the price any
Kelly Mike do you purchase properties in the name of an LLC or in your name and then transfer the property into the LLC. I have heard some lenders wont make a loan on a property in an LLC.
Sol (Cali) Mike, so I simply stipulate in the note that it can’t be called early?
Roger Dawson Ken, here in CA sales are off by 30% but prices are still rising in most areas. A strange market.
Sol (Cali) Santos, how did you meet the broker?
Mike_Summey ken, no seller wants to lower the price, but if they receive an offer less than the asking price they have a decision to make…give them the opportunity to do so.
ken Roger I sold my house in 5 weeks last May, My neighbors house started at 270,000 and i seen it was still on the market for over a year and it’s down to 220,000 they must of trashed it. or something weird
Mike_Summey Kelly, my experience is that taking ownership in the name of an LLC is not a problem unless you aren’t willing to guarantee the note.
Mike_Summey Hi Cypher
Cypher There’s a 5-family that’s 100% occupied that’s for sale. Only problem is that there is no parking except on the street. It does cash flow well, but without a driveway would it be something I regret in the long run?
Cypher Hi Mike!
Mike_Summey ken, maybe they are experiencing the cooling market.
Roger Dawson Sol, there are four factors to a note. The amount, the interest rate (if any) the payment schedule eg amortized over 30 years, and the due date (eg payable in full in 15 years). You don’t have to specify that they can call the note earlier. However, you want to avoid a prepayment penalty.
Cypher Hi Roger!
Roger Dawson Hi Cypher!
Mike_Summey Cypher, why don’t to talk to the current tenants and see how they feel. If it’s fully occupied, they must be parking somewhere.
santosleigh sol, on bid for assets there are some real estate companies you have to call and ask the broker if he will sell to you be fore he puts it on the auction block,
Cypher yea, that’s what I was thinking, also there’s a bus route less than a block away
ken I called a realtor the other day about a house. Judging from the picture the home needed $around $20,000 for repairs. The house is listed at $80,000 and the Realtor told me it was in move in condition. I was confused. I asked even with the fuse box, and the new roof it needs? I am finding that Realtors or the owners over price there property. I could only offer him $22,500 for that home I has been on the market for 280 days from a divorce
Mike_Summey sol, just make the note for the length of time you want and don’t mention a call in less time. Unless the opportunity to call is in the note the seller can’t demand early payment.
Sol (Cali) Thanks Santos. I’ll look for the real estate company.
Mike_Summey ken, you’ll never get in trouble making offers that you know will cashflow. You might upset some sellers, but better they be upset at you for making an offer than for you to be upset because you paid too much.
Sol (Cali) Mike, so the notes that a bank would hold where they have the option to call the note early have that written in the note from the start?
Roger Dawson Some real estate agents list things for different reasons. An 800 square foot house near us sold for $590K a year ago. The buyer put it back on the market for $850K a ridiculous price. Turned out the agent was a friend of the seller and he just wanted a high profile for sale sign with his name on it.
Sol (Cali) Roger, so I can just leave out anything about calling the note early, but try to add something specifically about being able to prepay?
Mike_Summey Sol, that’s correct. The bank notes ( I just signed 5 of them today) have language that spells out interest rate, payment, etc. but also a clause showing the remaining balance due in 3-7 years. Usually that is just a formality so the bank can keep its loan portfolio on a shorter term. If you make your payments on time they will renew the note, but they may want to adjust the interest rate if it has been on a fixed rate.
Roger Dawson Sometimes lazy agents will promise the seller they can get them a high price knowing that they control the listing and can convince the sellers to drop the price later. It’s madness because the other agents resent agents like that and won’t work with them.
santosleigh mike, what do you think of those interest only loans for ten years, so the cash flow is better to buy more properties with, do you think that would be good for me, i was looking at al lee’s site today.
Roger Dawson Sol, just include “no prepayment penalty” and that covers it.
Sol (Cali) Thanks Roger and Mike.
Mike_Summey Sol, if you can get a seller to carry financing at 0% it’s like having a note with no prepayment penalty. However if there is interest on the note, you would want to retain the right to pay it off without penalty.
Kelly Does anyone know how to get access to the MLS system if you are not a realtor? Is there some place you can just buy access?
Mike_Summey leigh, I think they are getting a lot of people in trouble. They’re not much different from renting except that you get to deduct the interest and you benefit from appreciation. I like to get properties paid off as quickly as possible.
Roger Dawson Kelly, these days everything gets put on the web. Just go to www.realtor.com. It’s the site for the National Association of Realtors in Chicago. It’s a massive site with hundres of thousands of listings.
Mike_Summey Kelly, I think they control the MLS pretty carefully. I don’t think you can get direct access; however, if you have a good friend who is a Realtor you might use him/her to gain access.
Kelly Roger, there is a local MLS site here in Tennessee for listings but I would love to get access to the nitty gritty details that they do not make available to the general public.
Mike_Summey Kelly, see Roger’s posting. I was not aware of that.
Sol (Cali) Kelly, I have a couple realtors sending me listings from the MLS. It’s all the same info, but I don’t have to do the search. The agents seem happy to provide this info. In fact, I think they have it automatically sending me listings based on certain criteria.
Kelly Actually, my father in law is a realtor but he wont give up the access.
Mike_Summey Sol & Kelly, that’s why I like to use a buyer’s broker. Let them do the work.
Sol (Cali) Kelly, the only catch with Realtor.com is that it usualy doesn’t include as many pictures of the property and a few other pieces of info. The agent’s info from the MLs seems to be more thorough.
Mike_Summey Wasn’t the news out fo Va Tech today terrible?
Kelly Mike, I would love to use a buyers broker but making wholesale offers doesn’t lend much room for an extra percentage.
Roger Dawson This week I was writing a chapter (for our next book on negotiating real estate) on finding owners of property. Went to the LA county assessors site and noticed they have a place where you can Email in questions. Asked for the owner of a property that is abandoned in my area and got a reply in a couple of days. Didn’t know they would do that.
Sol (Cali) The world is getting crazier…
Mike_Summey Kelly, you might be surprised. A good buyer’s broker can make deals work that you can’t when dealing direct with the sellers.
Sol (Cali) Roger, that’s cool. Is it free?
Roger Dawson Kelly, a buyer’s broker doesn’t neccesarily mean that you pay more commission. Your broker gets a part of what the seller pays just like most other transactions.
pepyne Mike & Roger: I enjoyed my first visit to your chat room. I’ll come back again.
Roger Dawson Sol, yes, it’s free, or advertising supported as they say.
Mike_Summey pepyne, glad you could join us. We’re all friendly and are here to help.
Sol (Cali) Mike, I have been using a buyer’s agent and so far so good, but it seems like going through two agents makes it harder to learn about the seller’s needs in order to make good offers.
santosleigh mike, i am 61 years old so paying off the properties on a 30 year fixed loan is not in my thinking, like Al Lee said on his show, i don’t care if their ever payed for, i have to use the same thinking, buy as many properties with the time i have left, i bought 2 in 2 months, and looking at a third.
ken Good deal Santolsleigh.
Roger Dawson Does everyone know about www.zillow.com? A free site where you can information and airal pictures of every property in America.
Mike_Summey Sol, ask your broker to set up a meeting with the seller and invite the listing broker to attend. You might be surprised at what you can learn.
ken I havn’t bought a property in a year
ken Roger I find that zillow is not accurate. that might get you in the ball park of 20% +or-
Mike_Summey leigh, that’s a different philosophy from mine, but it works for Al and if you’re comfortable doing it, by all means go for it.
Kelly I don’t think I have found the right Buyers agent yet anyway because the ones I have talked to don’t want to make the lower offers. I have not heard of Zillow
Roger Dawson Santo: when my father was 88 he took out a 30 year loan. That’s positive thinking!
Mike_Summey Kelly, a good buyere’s agent works for you, not the seller. He/she should have no problem presenting your offers. If so find another one.
Sol (Cali) What I LOVE about Zillow is that it gives you the last set of sale dates and prices. This allows me to ball park how much equity a seller might have.
Roger Dawson Ken, yes, there appraisals are based on square footage and don’t take into account any other factors.
Sol (Cali) You have to dig a little deeper to find that info, but it’s worth it.
santosleigh roger, maybe when i reach 91 i will see one of my loans paid, i have to think positive
ken sol that is true
Kelly Sol, speaking of equity, it seems every offer I make that is rejected is due to sellers that have the house 100% mortgaged. Anyway around that?
Mike_Summey I had a wild ride yesterday. I flew to Fl & back arriving in Asheville about 7:00 PM. I landed with sustained winds over 40 MPH with gusts to over 60 MPH. Very interesting landing.
Sol (Cali) Kelly, my buyer’s agent was unconfortable with the low offers too until I showed him that I was submitting full price offers as well (the difference was that they were 100% seller financed at 0%). Then he felt better about submitting two offers (or more).
ken scared mike
Mike_Summey Kelly, find properties where the owners have equity. It’s almost impossible to make a deal when the property is 100% leveraged. About the only way is for the seller to bring money to the clsoing and not many want to do that.
Sol (Cali) Kelly, do you mean the sellers own it outright or you are asking them to carry 100% financing?
Roger Dawson You don’t know scared until you’ve have Mike fly you into a Florida thunderstorm!
ken Mike what is a good way to ask a bank for a loan when you just started a new job? I get that spill that you need to be employed longer but I have over a year track record on my properties and spending habbits with a credit score of 750
Mike_Summey Roger has feathers on his arms. I think he’s part chicken.
Kelly Sol, they already have a maximum mortgage so there is no room to work on price.
ken Roger I flew in from keywest to miami in a thunderstorm on a pound hopper. I was scaaarrrrrreddddd
santosleigh mike, be careful, i never fly unless the sun is out. i’am a scaredy cat.
Mike_Summey ken, I’d just present the deal to them showing how the income from the new property will cover the debt.
Roger Dawson Mike said, “Do you smell something?” I said, “Mike, I’m sitting in it!”
Sol (Cali) Kelly, if you go to Zillow.com, find the property in question and click on it. Then scroll down the page. On the right hand side you will see a box that says “Sale History & Tax Info”. That will help you decipher if they have paid down the mortgage.
ken Mike I was hoping to get an ok from the bank so I don’t waste time on a property. then presenting them the property. Do you know who I should talk to at the bank? branch manager? or someone at the main bank
ken the bank has 10 locations so it’s kidna small
Mike_Summey I had to make a short approach into Tallahassee with Roger onboard so I didn’t go into the thunder storm. He thought I was going to crash, but it was no problem, just not what he was used to doing in an airplane.
Mike_Summey Hi William, welcome to the chat.
Roger Dawson If the seller is 100% financed, they’re probably heading for foreclosure. Unless you can negotiate the second or third not holders to take a discount, wait for it to foreclose and try to buy it from the holder of the first note.
Mike_Summey ken, find out who handles investor loans.
ken mike investor loans? usually they flip me to the commercial guys
Kelly Roger, does a lender take a discount very often or is that a long shot?
Sol (Cali) Kelly, the offers I’ve made have been on houses where I could tell the owner had a lot of equity. Once I had an idea, I actually asked the agents if the seller owned it outright. Don’t be afraid to ask.
ken which is a higher rate
Mike_Summey ken, that sounds right.
ken ok
Mike_Summey ken, you will pay a little more for an investor loan than you will for a home mortgage.
Sol (Cali) Roger, when you say wait for it to foreclose and buy it from the holder of the first note, where do you get that info?
Mike_Summey Usually only 1/4 to 1/2% more.
Roger Dawson Kelly, at a foreclosure the second or third note holders need to bid on the property or loose everything, so they will be very flexible. The holder of the first is probably sitting pretty and won’t be so flexible.
ken Mike when was the last time you check rates on commercial loans and what were they
Mike_Summey sol, if it goes into foreclosure and there are 2nd and 3rd leins, you might want to go to the sale and see if the holders of those notes show up. If not, the holder of the first will be happy to let you bid in the amount of their loan plus $100 and let you have it.
ken Roger I was tracking a property in forclosure, it went to the court house steps, then to the bank. Then the bank sold it to another note buyer and I lost it from there.
Roger Dawson Sol, notices of foreclosure are published in the local business journal. Then get a preliminar title report to learn more about the encumbrances.
ken the not buyer was a national company big one,
Mike_Summey ken, I use fixed payment/floating rate commercial loans and they are usually priced at prime or prime +
ken Sol I have the court house mail me listings for delinquent mortgages once a month, from there it usually takes about 9 months to go to the court steps
Sol (Cali) Mike, when you say “go to the sale” do you mean at the courthouse steps?
Mike_Summey ken the buyer who bought the note from the bank could have been you if you had shown up at the sale and outbid the bank.
Mike_Summey Sol, yes.
Roger Dawson Ken, typically the bank will know an investor like Mike who they’ll call to take the property off their hands. Banks don’t want to own property, it’s a liability to them. They want to own good paper.
ken mike that house wasn’t worth it
Sol (Cali) Ken, did you just go down there and sign up for that service?
ken Sol Yes but believe me they get about 10 guys/girls a day asking for deliquent notice list. and they kick you to different departments.
Penny goodnight everyone
ken night
Sol (Cali) Goodnight
Sol (Cali) Mike or Roger, any tips on educating sellers on seller financing? Sellers and agents I spoke with hadn’t heard of it or worked with it, and those that did expected the rate to be higher than the going rate for CDs.
Mike_Summey ken, if the house is not worth what is owed, then let the bank foreclose, get good title and then make them an offer. I’ve bought several that the bank was willing to take 20-50% below what they had in the property.
Mike_Summey Hi TAS
TAS Hello.
Roger Dawson TAS where are you from?
Mike_Summey Where are you from TAS
ken Mike that was what I was planning on but it was a big lender and I could never talk to anyone so I was looking for it to go to a realtor but it was gone pretty fast
TAS Fort Worth, Texas
Mike_Summey Looks like Roger & I were on the same wave length.
Mike_Summey ken, don’t let that one deter you. I’ve lost many more than I’ve gotten. It’s a numbers game. You just have to keep at it.
Roger Dawson Sol, the rate for CDs is so low now, that it wouldn’t be hard to beat that.
Kelly Thank you all for your insight. Catch you next time.
ken my money market is higher than a CD 4.2%
Mike_Summey Everyone, I’ve been successful getting third party private financing by offering people with money in CDs a rate between what the bank is paying them and what it will charge me. Just a thought if you know anyone with money in the bank. You can secure the loan with a first mortgage on the real estate.
Sol (Cali) Roger, I don’t get it. If I’m making an offer and they want to make a higher percentage than CDs (which I’ve been finding at about 5%) that puts me at the same rate as the bank loans. Why not just skip seller financing then and go with the bank. I need to educate the sellers about holding a note for less than 5%.
ken MIke that makes sense, To easy I honestly never thought about it like that
Roger Dawson But the trade off for the lower rate is a higher purchase price.
ken Mike Roger when is the next book coming out
Mike_Summey Sol, sellers who are looking to convert real estate equity into an income stream are often willing to take a higher price for their property and finance it at very low or even 0% because by doing so they don’t have to worry about rates dropping a point or two and having you refinance and pay them off when it may not be good for them.
Mike_Summey ken, it should be out later this year.
Roger Dawson Ken, thanks for asking. We need to get it to the publisher by July 1st and it will be out in September.
ken can’t wait for it.
Roger Dawson I need to run. See you next week.
ken me to later guys
Mike_Summey Well everyone, I’ve got to run. See you next week. GO BUY SOMETHING…THE TIME IS RIGHT!
Sol (Cali) Mike and Roger, [i]I[/i] understand that. The problem is educating the sellers and their agents. They seem to think that the only reason they would carry a note is to get a rate higher than a CD or some other cash savings.
ken sol this is a business treat it like one.
Sol (Cali) Ken, what do you mean?
ken dont’ put up with there crap, or fictional numbers
ken do your homework and know what you have to do and be confident about it
Sol (Cali) It’s not a matter of putting up with anything, it’s a matter of getting them to understand the benefit in holding a note for a higher price.
Sol (Cali) What’s your strategy on educating sellers on carrying a note?
ken Yes, I guess they are scared about something they don’t understand.
ken I don’t have one I never came acrossed that. I usually just finance it. I guess I came into the same problem you came into.
Sol (Cali) Actually, I think it’s usually the old school agents that seem to think the note should have a high rate
Sol (Cali) Thanks anyways.
ken most likelly usually people just want out they don’t even want to deal with it
ken wish I could help me, good luck
Sol (Cali) Good luck to everyone! Goodnight.
santosleigh :} :} :} :} :{ :{ :{ :{ :{ :} :} :} :}
» Filed Under Chat Transcripts
Comments
Leave a Reply