Chat Transcript - May 14, 2007
Posted on May 15, 2007
Roger Dawson Hi Kaweigand. How are you?
kaweigand great and you
Roger Dawson Fine thank you. Mike Summey should be joining us any minute.
Roger Dawson Hi Wood and JC!
wood hello everyone
Mike Summey hello everyone!
Roger Dawson Hi David
Mike Summey Hi David.
DavidOro hi there
Roger Dawson Hi Mike
Mike Summey Wood, I see you are with us all the way from China.
DavidOro i was intrigued by tonights topic and the fact that mike expects prices to come down another 50%
Mike Summey Hi Penny
Roger Dawson Hi Penny
Penny Hello Mike & Roger!
DavidOro for NOI to work in California, it MUST go down by at least 50%
wood what is the topic today?
Mike Summey David, I don’t think you will see prices in general come down 50%, but I do think there will be special deals for investors where the properties can be bought for 50% or less on today’s inflated appraisals.
Mike Summey Hi Sparky
Roger Dawson I don’t think meant to imply that all prices will drop so much, but that there will be some great buys out there.
sparky37 hi Mike and Roger
Roger Dawson Hi Sparky
DavidOro I hear what you are saying, but do you think a drop in 30% is unreasonable?
Mike Summey Wood, anything youwant to talk about. One topic is the falling real estate sales market here in the US
DavidOro Mike, appraisals have been inflated for four years
sparky37 Mike even though prices are supposedly going down here the Northeast NY/NJ prices are still too high
Mike Summey David, I agree. Appraisals are based on comparable sales and sales have been really inflated.
Mike Summey Sparky, I agree. I had a builder offer me some houses last week at $179,000. The same houses had been selling for $249,000. The $179,000 was still too high for this market.
Mike Summey Epelle
Mike Summey HI
DavidOro Mike, in your email you mentioned that you’ve been part of four cycles in RE and that the upside mirrored the downside. Do you think it mirrors it in the length of time as well?
Mike Summey Hi steve.
Roger Dawson I think that California, Nevada and Arizona are special cases. Almost a land unto itself. Immigration is so high that the market continues to bubble.
sparky37 Houses here that were on for 1.2 million were lowered to 1.15, not much of a deal
Roger Dawson Hi Bill
Bill Hi
DavidOro In Cali banks own a lot of homes but aren’t giving much of a discount
jcblythe yet
Mike Summey David, that was what I was talking about. My experience is the down side tends to mirror the upside in both price and length of time. Often the downside comes in the form of a slight decline in price for a longer period of time when prices are not keeping up with inflation, but waiting for inflation to catch up with over inflated prices.
Mike Summey Hi Bill
Mike Summey jcblythe, you’re right on that point. NOT YET!
Mike Summey Hi Ken
ken Hi
Bill Hi will the topic be apprasied valuw tonight
DavidOro Mike, if that’s the case….inflation is going to take a long time to catch up with today’s house prices
Bill *value
DavidOro like 10 years!
wood i just left school for one years ,i dont know much about rel estate ,any suggestions?
ken I read in a magizine I get I think it’s called money. Places like pheonix, vegas won’t see appriciation till 2010
Mike Summey We may see prices hold steady or just show slight declines for several years until inflation catches up. During this time many people will be stuck holding properties they can’t affod to keep and it is from these people that the deals will come. Many will find themselves facing the choice of losing the property AND losing their credit or taking aloss on the property to salvage their credit.
ken is there a spell checker here?
Mike Summey David, in those markets, you will see prices fall.
Mike Summey Hi krepack
krspack1 Thanks for having me
Mike Summey ken, that is not only probable, but it may be even longer than that.
Mike Summey krspack, is this your first chat?
krspack1 Been awhile
ken Mike that article you wrote is scarey about the debt we have
krspack1 I usually just read the transcripts
Mike Summey ken, just do the best you can. We all type faster than we think in the chats.
Mike Summey ken, I’ve received more email on it than any article I’ve written.
ken My cousin just told me he will always have a truck payment. I was like man I wish I had your money
DavidOro do you have a link to that article, mike?
Roger Dawson Wood, if you’re just out of school try to buy a home to live in. Perhaps a condo. Get a room mate to help you with the rent if you need to.
Mike Summey ken, we all will always have a car payment…the question is do we mae the payment before we get the car by saving for the purchase or after we get the car by financing it. Big difference in what you can drive depending on which way you choose.
ken I feel for people just getting out of school.The cost of tuition and homes not to mention a car is crazy high
Mike Summey David, it was in today’s email reminder email or you can ait until Friday and it will be posted on the website.
DavidOro oh…i see it. thanks, mike.
wood at present i dont need a room,i want to save money ,but it is slow
Mike Summey Hi Eddie
Mike Summey Wood, Roger is right about that.
Mike Summey wood, if you have a place to live that is not costing you, you would be better off saving money first.
wood i rent a room in school where is cheap than usual
Mike Summey Hi kaweiqand, is this your first time in one of our chats?
kaweigand yep i’m listening and learning
Mike Summey everyone, wood is a young man from China. I’m sure he would appreciate any help anyone can give him.
wood i buy fund to save money , i want to some ways to invest now
krspack1 Mike, I need to go back through your info, but a couple of questions: 1) do you have a fairly standard rental agreement and 2) how do you go about finding and qualifying tenants
DavidOro Ni hao Wood. Wo shi DaiWei.
wood �� 好
wood hi DavidOro
Mike Summey krspack, I hire management companies to handle all of that. They have the rental agreements and they do the qualifying of tenants. Most of my tenants do not even know who I am.
kaweigand as real estate falls, does rent drop during these times as well?
DavidOro Mike, how long did it take you to acquire 100 properties? Curious.
krspack1 Geez, I knew that now that you say that. Did set anykind of standard for the management company? Income requirements, pets, etc
ken Mike did you say you use Quiken or Quickbooks?
wood what can i invest now
Mike Summey kaweigand, rents typically go up when prices fall. That’s why the down side of a sales bubble is good for investors. The fewer people are able to buy, the more renter there are andthe competition for limited properties pushes up rents.
wood fund ,stock?
Mike Summey David, it took me about 10 years, but I only worked on it on the weekends. I worked a fulltime job in advertising the rest of the time.
kaweigand would that hold true for commercial?
ken Wood my funds are doing about 8% I was hoping for 13% I guess it’s better than nothing. Right now I was told to stay way from stocks. But I just listen to the guy at meril lynch
Mike Summey ken, I use Quicken because I don’t have nyone else doing my books. Quicken is a single entry bookkeeping system, which is fine if you do things yourself. If you have someone else keep your books, I’d use Quick Books which is a double entry system that provides a better audit trail.
EDDIE-NC Mike, were you ever a member of an ivestors club?
wood i just open an acount of stock,i wanna try
ken Ok I just picked up Quicken from an Ebay auction for $40 shipped I think Quickbooks is more than I need and lots more money
ken Yeah wood don’t be afraid, just be smart
DavidOro Mike, thanks for that. I bought my first investment property last month! 99 more to go. I’m in PR so it’s related, but different to advertising. At what point did you quit advertising?
Mike Summey Stocke are hot now because many people are bailing out of real estate as the market cools and putting their money in the stock market. That will cause it to overheat jsut as the real estate market did and then stocks will fall, people will pull money out of stocks ad come back to real estate. That is when the real estate market will start to recover.
wood the stockmarket is flourishing now
Mike Summey Eddie, no I’ve never been a member.
kaweigand mike - u said rent goes up when prices fall because people can’t afford to buy. But isn’t it more affordable to buy for folks when prices fall?
krspack1 Mike, In regards to tenants, Did you set anykind of standard for the management company? Income requirements, pets, etc
EDDIE-NC I was just wondering because I was thinking of trying to start one downeast
Roger Dawson Ken, I bought Quick Books and found it far to complicated for me to use. I use Quicken.
ken For some reason companies like Florida Power and Light are up 30% YTD most other utilites are aswell Who knows
DavidOro Stocks are kicking but right now. But the time to put moeney into stocks was a few years ago. I think you go against the grain and put money in real estate if the numbers work.
Al Lee Hi, Mike, Roger, everyone.
Roger Dawson Hi Al!
Al Lee Just got in from a trip and waw that time, so I thought I’d pop in to say hello
ken Dang Roger I am frustrated with Quicken
Mike Summey David, at age 20 I set the goal to become a millionaire by age 30 and retire by age 50. I made the first goal by 28 and I left the advertising business right on time at age 50 with a substantial 6 figure monthly income.
Mike Summey Hi Al, I wondered where you were tonight.
Al Lee HI, David
DavidOro Hi Al
Al Lee I just got in from Kansas City
DavidOro Barbeque is good in KC!
Al Lee Better in Texas!
krspack1 Mike, when you were in the advertising business, where you self employed?
wood i wonder how to begin to earn money
wood i am working now ,but the pay is not high
Mike Summey krspack, I do not tell the management companies how to manage. I evaluage their performance on the big picture. If they don’t screen well, it shows up in past due rents and high maintenance. If that happens they know they will lose my business to another company so they do a very good job of screening.
Al Lee David, did you get the email message I sent out a week or so ago about appreciation and property values in Dallas?
Mike Summey Al I was in San Antonio yesterday. I flew down there Saturday afternoon and back yesterday.
Mike Summey Hi ncretiree & Kelly
krspack1 Thanks Mike
DavidOro Al, I can’t remember. I’ll send you my new email now and you can send again.
ken Al what about McAllen TX. I hear that is booming
ncretiree Hey
Al Lee Mike, yo uneed to stop in Dallas one time when I am here. I will show you around.
Kelly hi all.
Mike Summey wood, the most important quality you can develop is patience! Building true wealth takes time.
krspack1 Mike/Roger, any recommendations on management companies in the Charleston,SC area
Al Lee ken, I don’t knwo much abour McAllen, but I understand prices are low. It doesn’t do you much good if rents are also low, though.
wood thank Mike
ken I think they are pretty good. The taxes in TX are high
Al Lee McAllen is not one of the MAJOR metro areas, so it is not that interesting to me. I like larger, diversified areas that will weather any (economic) storm.
Mike Summey krspack, I don’t know any companies there. I suggest you interview several. Make a list of the things important to you and see how they respond to them. Read about how to interview in our real estate book.
Kelly Mike do you recommend depreciating your rentals starting day one or waiting until they are more cash flow positive?
wood Mike Summey ,but u make your money before 30,i want to make it too
Kelly or not at all?
Al Lee ken, that is a common misconception. The tax RATES are higher than most other places, but the valuations are lower. The total tax on a house that yields, say, $1500/mo rent are lower in Texas than most other places.
Mike Summey wood, my first year after setting that goal, I only made about 3,500USD. Even way back then, that wasn’t much money.
krspack1 Mike, when you were in the advertising business, where you self employed?
Mike Summey Kelly, you start depreciating immediately. If the depreciation causes a tax loss you can use it up to a point to offset taxes on your earned income. Check with your account about this.
Mike Summey krspack, yes I was. I started a small sign company. Nearly starved to death the first couple of years. 
Al Lee Depreciation allowance is a gift vrom the IRS to you. You should take it as soon, and as long as possible. there is no reason to delay receiving such a terrific benefit. Has nothing to do with whether the house cash flows or not. Nor whether you have debt on it or not.
Kelly Mike, We are not allowed to offset other income with this loss so it seemed it may make more sense to hold off until the rent rises or the note is payed off.
krspack1 So, when you started investing in RE, was your income more stable from your business?
Kelly Since we would not be very positive early on anyway.
Al Lee NO need to delay taking depreciation, as if you can not use it this year, you carry it forwrad indefinitley until you CAN use it.
Mike Summey wood, I said I build a net worth of over 1,000,000USD by age 30. I did that because I was investing every bit I could. I had very little spending money until I was over 40 because I kept investing everything. Roger used to feel sorry for me because he thought I was broke!
Al Lee forward
wood thanks Mike
Kelly Thanks Al, I did not know it would carry forward indefinitely.
sparky37 Mike how long do you know Roger and where did you meet?
Mike Summey Kelly, you are able to offset other income with certain limits. Even if you can’t use all the loss now, it will carry forward for use in the future.
wood left for a moment
Mike Summey krspack, when I started, I had no money to invest. My business was taking everything I could make. I had to find ways to buy real estate with little or no money down.
krspack1 Wow, that takes guts
Mike Summey krspack, when I started, it took me an entire year of making offers to buy my first property.
Roger Dawson Sparky: Mike hired me to speak to the Outdoor Advertising Group about 20 years ago. He was the conference chairman. We’ve been friend ever since in spite of the fact that we live 2500 miles from each other.
krspack1 How many offers and at what age did you start?
Al Lee There is nothing wrong with, and no penalty for, accumulating tens of thousands, or hundreds of thousands, or dollars of “carry-forward losses” to be used in some future year when it will do you more good. It is common practice. I have often had $50k in carry forward. You never lose it.
ken Al how is that ranch doing. I hope you closed on it
MarkCT Hi Mike. Hi Al
Al Lee ken, not yet, but we will. those deals take longer than a siemple house deal.
Al Lee HI, Mark, How are things?
Mike Summey krspack, I probably made over 60 offers before buying the first property because I made at least one per week and some weeks I made 2-3. That’s why I hate to hear all of the excuses people make for why our method of investing won’t work. If you don’t have a lot of money and good credit, it very slow in the beginning.
ken what state is that ranch in
MarkCT Good thanks. How about you Al? Any new projects?
Mike Summey HI Mark, where you been lately?
Al Lee ken, Oklahoma
Mike Summey Mark, are you on you new job now?
MarkCT Busy with the new job.
Al Lee Ken, go to www.ranchOK.com and you can see it. Trophy deer, turkey, 7 ponds, 5 are stocked, catfish, bass, great stuff
MarkCT Yes Mike. I’m on my 4th week there. Still getting acclimated.
Mike Summey Mark, email me your new contact info tomorrow.
MarkCT OK Mike. I’ve been meaning to do so. Just keeps slipping my mind.
Mike Summey Anyone have any questions about the Offer Generator? MarkCT is the programmer who wrote it.
Kelly Thanks Mike and Al for the info. I’ve got to go early.
kaweigand is there an update for it?
Al Lee Mark, our webstie for the new-construction rental hosues is being rebuilt form the ground up by real professionals. Go look at www.buyRentHouse.net now and then again in a few days. Wow! the new look is a hundred times better and will be much more user-friendly
MarkCT Mike is the true architect behind the program.
Mike Summey Mark, I had a builder in my office Friday wanting to sell me some house that were way overpriced. I sat down with him and ran te deals through the OG and he almost had a stroke. He couldn’t argue with any of the numbers we put in the calculations and once he saw the results he could hardly believe it.
MarkCT OK Al. I’ll check it out.
DavidOro Gotta go guys, talk to you soon. Al, email me that appreciation article on Dallas. We’ll be in touch - and keep me on the list for the Ravenswood release!
Mike Summey Goodnight David
Al Lee Goodnight, David
MarkCT Very good Mike. The deals that the Offer Generator helps you avoid are as valuable as the deals it helps you buy.
Mike Summey Mark, he left with an entirely differen perspective about how investors look at properties.
Mike Summey What happened Penny, did you fall off your chair?
MarkCT It has saved me from a number of investments that look good at first glance but once you run the numbers it turns out to be an alligator.
MarkCT Did he buy a copy of the program?
Roger Dawson Al, I’m going to be speaking in Dallas July 12th. Hopefully we can get together.
krspack1 Mike, does the OG have the capability of accepting downloadable upgrades as enhancements are made
Penny not exactly, AOL kicked me off.
Mike Summey Mark, he said he plans to buy our entire package, but I guess he needs to sell a house or two first.
Penny the computer, not the chair
ken Mike did you ever build row homes for rental houses?
Al Lee Roger. I think yo uhave my cell#, I’ll buy you dinner at my club and show you what we are doing here. Definitley want to get together.
MarkCT Mike I’m a month or two away from owning my second house free and clear.
Mike Summey krspack, the program will not need any enhancements. It is simple and straight forward and relies of basic common sense prnciples that don’t change. It’s not a fad program like some things on the mrket are. It will be as accurate in 10 years as it is today. It incorporates principles I’ve been using for 35 years.
MarkCT It feels good to put a loan to bed and keep all the rent (minus expenses) for myself.
ken Al what is the averager cost for a 1400sqft home and what are the rents estimated
krspack1 Mike, how old were you when you started investing in RE and how long had you been self employed?
Mike Summey ken, no I haven’t. I’ve built several small apartment buildings though.
Mike Summey That’s great Mark.
Mike Summey krspack, I was 26 when I bought my first house. I started my business at age 20.
krspack1 Thanks Mike
Roger Dawson That sounds great Al. I’m speaking in a place called Plano, which sounds like the end of the earth to me.
Mike Summey Roger, it’s the fishing tackle capital of the country.
Al Lee My son, Curtis, lives in Plano, I live in far North Dallas, adjacent to Plano.
wood i come back
Mike Summey wood must have fallen off his stool too!
Mike Summey Wood, what time is it in China now?
Mike Summey Is it already Tuesday morning?
wood because i have to work , it is my work time
MarkCT Mike, Roger how is the new book on negociating coming along?
wood 8:58
Al Lee ken $125, 000 for 4-br, 2-bath, 1-car garage, ready to rent with all appliances, including washer, dryer, refrigerator–all brand new. Rent $$1100-12000. We guarantee $1050 after managemetn fee and leasing costs!
Mike Summey 8:58 AM Tuesday, right?
wood yeah
krspack1 Boy, that brings back memories. I used to live in Malaysia
Mike Summey Mark, we plan to have the manuscript finished by the end of June. Release date will probaby be in the fall.
Al Lee Roger, what is the exact venue in Plano? I may know people there.
MarkCT I’m looking forward to it. The tactics from the 1st book have saved me a great deal of money and I’m ready to learn some more tricks.
Mike Summey I will have a new book out next year. the working title is “Wealth Building Tips for Working People: 50 ways to improve your finances”
wood what do you suggest yo invest now ,i only have a little savings
Mike Summey Hi Theo
Theo_SC Later late…hi all
wood hope to read that book
Mike Summey wood, you will probably have to invest in small stocks, bonds or interest bearing bank accounts in the beginning until you can build up a little money.
Mike Summey Theo, where have you been all night.
Roger Dawson Al, it’s at the Marriott Legacy Town Center for a Dallas building supply company.
Theo_SC working a deal, just got in
MarkCT Got to run. Nice chatting with you.
Al Lee Roger, the site is not too far from me, but I don’t think I know anyone there. Much nearer thatn downtown Dallas, like last time you came here !!!
Roger Dawson I’ve got house guests so I have to run. I’ll be on the road in Kentucky next week but Mike will be in the chat.
Mike Summey wood, it’s important that you build up a cash reserve if possible before getting into real estate investments. Just to be safe, you need at least enough to carry your property(s) for 2-3 months if they are not rented.
Mike Summey Goodnight Roger.
Al Lee I need to go unpack form my trip. Goodnight all.
Al Lee from
Theo_SC Mike…I will send you an email tomorrow
Mike Summey I need to run too. I’ll see everyone here next week.
krspack1 Thanks Mike
sparky37 night all
Mike Summey e rest of you are welcome to stay and talk with each other as long as you like.
Mike Summey goodnight all.
Theo_SC ok
Theo_SC hello penny
Penny Hi Theo from SC
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