Chat Transcript - August 20, 2007
Posted on August 24, 2007
Mike_Summey It’s been a very usy day. I just made it.
Mike_Summey Any questions tonight?
santo mike, the rumor in nyc is the rate will go down in 30 days, this after it just went down to 5.75%
Bill L Hi Roger
Bill L HI AL
santo hi roger
Al Lee Hi, Mike, Riger, everyone
Mike_Summey santo, the rate that dropped is not the rate that will cause prime to go down. I expect we will see a drop in the prime rate after the next FED meeting.
Mike_Summey Hi Roger & Al
Roger Dawson Hi Everyone. Sorry I’m late. I had trouble logging in.
santo hi al
Mike_Summey Had to change my color. Too much black.
Al Lee Hi, santo
Al Lee are all those NY properties doing?
wood Hi Al
Al Lee Hi, wood
santo doing great
Mike_Summey Wood, you gave Roger a disease in China. He’s been sick ever since he got back.
wood Roger,what’s wrong?
Roger Dawson I think it was just a headcold that I picked up on the long flight back. I feel better today.
Al Lee Travelling always has the risk of some sickness, doesn’t it?
Bill L Mike, I a proud owner of my own LLC, we did it with Garret Sutton. Thanks for the tip.
CBS Mike/Roger, I just finished reading Mindset and Secrets. I’m really pumped. I’ve done my first weekend farming. What’s the most important thing you would recommend at this point?
wood Roger,it seems that you should do more exercises!
Al Lee And green tea!
Roger Dawson Wood, you’re right. I’ll get up first thing tomorrow and do my Ty-Chi
Mike_Summey Great Bill, I just had another person tell me today that he had Garrett set up one for him. Would everyone like for me to invite Garrett back for another guest appearance in the chat?
Mike_Summey Hi alex.
alex.elsiete@gmail.com HI
Bill L Yes, I would like that….
Tina Mike, Yes
Mike_Summey CBS, keep at it long enough to get good at it and you will be successful.
wood Roger,one could buy real estate without using one’s ownmoney,right?
Mike_Summey Next week, if all goes well we will have Bob Roberts, President of First Citizen’s Bank’s Western Region as a guest.
Roger Dawson CBS, the key to getting good buys is to make low offers until you get one accepted. Don’t discouraged if your first 20 offers are rejected.
CBS You mean I can’t get rich in the next two months? 
Bill L MIke, Roger What do you see in the future for REI with the current claiment?
Roger Dawson Is Bob short for Robert? Is he Robert Roberts?
Mike_Summey CBS, you’ve got that right. Patience is the key.
Mike_Summey Roger, that is correct.
Roger Dawson Hi parents showed a lack of imagination in naming their offspring!
Mike_Summey Bill, I think the climate is only going to get better for the long term investor for the next couple of years.
Tina Mike, I finally understand how the NOI is computed
santo mike did you get the letter i sent you, and do you think that was a good idea what i said about the new project
Mike_Summey Great Tina. It’s not that difficult, is it?
wood what is NOI?
Tina It was a big DUH moment
Al Lee Tina, now you can start working on learning how to compute cap rate.
Roger Dawson Wood NOI is net operating income. What you have left after paying all expenses except the mortgage.
wood thanks Roger,and one could buy real estate without using one’s ownmoney,right?
Mike_Summey santo, I got the letter and all of the articles. Interesting! As for the banks, I think the project is too big and the market too small for a bank to want to go into the building. We’re still not going to turn away any interested companies.
Al Lee girls and boys: I just got a directive from a higher authority that I need to go to the store and pick up some food before she gets here with our daughters from their dance classes. I guess I need to cut it short tonight.
wade Hi guys - a newbie from Australia!
Mike_Summey Where is everyone tonight? Too hot in some areas, too wet in others, etc.
Al Lee see you all next chat.
Bill L BYe AL
Roger Dawson Wood, you can technically buy for no money down but it’s difficult to find property that will appreciate (go up in value) and cash flow when you buy like that.
Mike_Summey Hi alphonza
Roger Dawson Gooday Wade! Stick around and we’ll shout you a stubby (buy you a short can of beer).
Tina Mike, I think the return on the initial investment confused me a bit because it lowered the NOI
Mike_Summey Hi wade, glad you could join us tonight. What time is it there?
wade Mike - it’s 10am.
alphonzawill hello
Mike_Summey It may be a small group tonight, but we have representation from China and Australia.
Roger Dawson That’s 10AM Tuesday Mike. Get’s bloody confusing down under.
Mike_Summey Wood, it’s 8:15 AM there, right?
wade Mike / Roger - Do you know of anyone able to achieve pos cash flow in Aus cities from day 1?
wood Roger,I just don’t understand how you pay the money.how much you use your own and how much you lend generally speaking?
wood Right ,Mike and I am in my office preoaring to work.
wood preparing
Mike_Summey wade, I’m not familar with the Australian market, but getting a positive cash flow is the same everywhere. If you pay too much, either price or terms, you will probably have a negative cash flow.
Roger Dawson Wood, here it’s best to pay 20% down and borrow 80% from a lender. The interest rate would be around 6.6% with that much down.
Mike_Summey Hi GR & eryk
eryk76 hello Mike
GR Hello Mike and Roger
Mike_Summey Wade, the Offer Generator computer program in our online store will show you how to make offers that will cash flow.
TAS Mike/Roger, I have heard many “gurus” say go find the deals, and the money will come. Do you believe this approach, or do you have funds ready before even considering a property? If you have funds first have you done it that way since you started, or since you had more money from your properties?
wood Roger,do you get a seller financing often?
santo mike i think i am done buying for this year, i will build my reserves, and go for four 4 family properties next year to add to my 12 units i have now, what do you think
Mike_Summey Hi Theo
Theo_SC hey Mike & Roger
alphonzawill thanks for the welcome
Theo_SC Hey everyone
Roger Dawson Wood, a big difference between the USA and China is that here we buy the land under the house too. With the government owning all the land in China you’re just buying a lease on the land. We think that the land goes up in value while the building goes down in value. But the investment principles are the same.
Mike_Summey santo, I think that’s a great plan. Everyone needs to take a breather after several purchases and give them time to mature and for you to build up you reserves so problems don’t get you in trouble.
Mike_Summey Theo, how are things in South Carolina?
Theo_SC it’s steady & stable
Mike_Summey Hi Penny
Penny Hi Mike, everyone.
Roger Dawson TAS, if you hang around your local investment club you’ll run into investors who have money and are willing to partner with you on a good buy that you have found. If you can figure out a way to buy it without a partner it makes a lot more sense for you.
Mike_Summey Theo, are you still buying or are you taking a breather?
GR iMike and Roger, I just purchased a property in a small town in IL and am looking for someone to manage it. What is the best way to find someone. The town is Auburn, IL and it is 20 minutes south of Springfield, IL. I live in Los Angeles. Any suggestions?
wood Yeah,I believe it.do you get a seller financing often?is it nessary?
Mike_Summey GR, do you have our real estate book?
Mike_Summey Ther is a whole chapter in it on finding property managers.
Mike_Summey Hi Julian
Roger Dawson GR if you can’t find property managers listed in the classifieds or yellow pages try calling the local chamber of commerce and the board of Realtors.
GR I have the Weekend Millionaire book. I purchased it a few years ago. That is what got me interested in trying my hand at this.
Theo_SC I am actually in a breather mode. things are somewhat slow. Many investors are in trouble because they did not buy right a few years back.
TAS Roger, I guess my point is if I need 20% down, and at least 4 months reserve on a 80K house I need about 18K before I even make an offer. Are you suggesting that I have that much in cash before beginning, or try to find a partner or seller financing for that part?
Mike_Summey GR, in some areas you may have to work with a Realtor who both sells and manages. That’s not the best arrangement, but it’s better than nothing.
Mike_Summey GR, read Chapter 6
Mike_Summey Julian, are you having a problem? It looks like you keep getting booted out.
Roger Dawson TAS, I wouldn’t wait around until you’ve saved 18K. Figure out a way to make it work with what you’ve got. Four months reserve would be nice, but sometimes you have to take some chances.
Theo_SC Mike, I read the article on the building. It’s going to aweson.
TAS Roger, thanks, that is what my thoughts were, but wanted some unbiased advice.
Mike_Summey TAS, there are a number of ways of buying properties for little or no money down, but it’s difficult to get them to cash flow unless you can get a substantial amount of seller financing at very low or zero percent interest.
Mike_Summey Hi Ryan
Roger Dawson Yes, Mike I was impressed to see the architects rendering of your building after I first saw it put together with styrofoam cut outs on your dining room table!
Mike_Summey Theo, we are going into production with the marketing packages this week.
Mike_Summey Roger, you ain’t seen nothing yet!!!!
santo good luck mike
Mike_Summey We have a great presentation for the building including a computer generated video fly around and tour through the building.
Mike_Summey Hi Bob.
BobMassing greetings earthlings.
Roger Dawson Hi Bob
Mike_Summey alex, are you just watching tonight?
Mike_Summey Hi Lqatsu
Lqatsu Hi
alex.elsiete@gmail.com yes, I am just watching and learning.
Tina me too
Mike_Summey alex, feel free to jump in any time if you have a question.
Mike_Summey You too Tina
alphonzawill Hey, mike, i am looking at purchasing some rent houses
Roger Dawson Lqatsu, we have people here tonight from Australia and China, but you sound like you’re from someplace really exotic?
alphonzawill using hard money
alex.elsiete@gmail.com What us hard money?
Lqatsu Not to exotic North Carolina Ft.Bragg Fayetteville area
wade Mike, So I can compare to Aus, what gross annual rental would you expect on an appraised $100k property in US?
Roger Dawson Alphon, as in your hard earned money, or money from a hard money lender?
alphonzawill I’m sorry
wood MIke,it is hard to find a house to buy when the price is too hight,right?
alphonzawill from a hard money lender
Mike_Summey alphonza, using hard money is okay, but be sure you have an exit strategy to get rid of it. Most hard money lenders are looking for people who want to turn the properties quickly so they can make a good rate and get out.
alex.elsiete@gmail.com So, hard money lenders are into flipping?
Mike_Summey wade, a $100,000 property here will rent between $700 and $1,200 per month, depending on the market.
alphonzawill yes sir, i was looking to find some that i could either whosale, fix and flip or refi for cash flow
alphonzawill wholesale
Mike_Summey alex, most hard money lenders are looking to put money into a deal to help you purchase, expecting you to do the fixup and then flip it so they can get out with a quick profit. I don’t know any long term hard money lenders.
Roger Dawson Wade, Mike hates it when I use rules of thumbs like this, but if you buy a property for less than 120 times the monthly rent you can probably make it cash flow with a reasonable down payment.
wood Mike,it is hard to find a house to buy when the price is too high,right?In that condition, what can you do?
alex.elsiete@gmail.com thanks, Mike
Mike_Summey Wood, it is very easy to find houses on which the price is too high. The hard part is finding the ones that are priced right so that the number will work. Remember that price is only one part of the value. Terms is the other part.
Theo_SC I have been trying to look for good muti units, but the prices are not right in me market
Theo_SC I will start a market campaign soon for muti units
wood Mike.please tell something more about terms.
wade FYI - In Aus, you could expect maybe $500 max per month for a $100k property.
Theo_SC Do you suggest buying apts. out of your area? anybody
Mike_Summey Theo, just be patient. I’m seeing a rapidly softening in the market. Properties that won’t cash flow today may tomorrow. Two factors will make this happen. The softening market will drive prices down while strengthening the rental market causing rents to rise. The combination of these factors will make it easier to find deals.
Mike_Summey wood, terms refers to the way you pay back a loan; interest rate, number of months, etc.
Theo_SC OK,I am patient
wade Roger, thanks for the rule of thumb.
Ryan-NC I predict a very dark cloud for many homeowners with adjustable rate mortgages … with sky high foreclosures rates across the country
wood Thanks,Mike.
Ryan-NC I great opportunity for short sale investing
Tina Mike, please help my understanding on this… If buying properties are lowered, won’t that put people in a better position to buy than to rent if they can qualify?
Theo_SC Mike or Roger, have seen this type of market before…lenders tighten up, bad loans coming back, lenders closing the doors, etc…
Roger Dawson Wade, that ratio doesn’t sound good but one of the things that has always amazed me is how different the ratio of rents to values can be from town to town. You can have a town where it doesn’t make any sense to be a landlord and a few miles up the road, you’ll find a town that is great for investors.
Mike_Summey wade, here’s how adjusting terms can make a difference. A $500 per month payment to a seller for 20 years is $120,000. Some sellers will be more interested in the income stream than they would be in a low $80,000 offer for their $100,000 home.
GR Roger, I like the rule of thumb, but I live in LA. Even at $3K per month rental, that only affords me a property of approx $380K. Nothing like that exists in LA. Is there an exception to this rule?
Mike_Summey Theo, this is the 4th one of these I’ve been through. I remember back in the late 1970s when the prime rate hit 21.5% and mortgage loans were over 18%.
Roger Dawson Theo, real estate has always been cyclica. There are three elements: sellers who want to sell, buyers who want to buy and lenders who want to lend. Seldom do you have a market where all three are present.
santo mike, have you bought anything new lately, or are you too busy with the new project.
Theo_SC so it will turn?
Mike_Summey santo, the last thing I bought was two house several months ago.
Mike_Summey Theo, yes it will turn, but don’t look for it to do so for at least 18-24 months, maybe longer.
santo mike are they single or multi
BobMassing this is a great market for acquiring…
Mike_Summey Santo, single family.
Theo_SC this is my 1st cycle, next time I will be in a better position
Mike_Summey Bob, that is correct and it is going to get much better.
Mike_Summey Hi afropuff
Roger Dawson GR, you could look on the outskirts of LA, like San Bernadino. Or, you could put more money down. If you’d have put 50% down on a fourplex in Beverly Hills 20 years ago, you’d be in hog heavan now.
afropufff Hey Mike
eryk76 Mike isn’t that a good thing for long term investors.. (this down turn)
Mike_Summey qqqqqqq, are you just watching too? You’re welcome to join in any time.
Tina Mike, could you explain the prices lowered increases Rents
Mike_Summey eryk, yes is is good for long term investors. The harder is becomes for seller to sell, the more flexible they become.
Roger Dawson Rents will go up because entry level buyers won’t be able to get the financing they need to buy.
GR Thanks, but 20 years ago I was’t old enough to enter into a contract (That’s my story and I’m sticking to it!)
santo mike if i am going to catch up to you, it has to be multiunits all the way
gggggg Mike-Yeh, I always get in trouble when I open my mouth.
Roger Dawson Yes, but mouth like parachute. Nothing works unless you open it once in a while!
Mike_Summey Tina, when there are plenty of qualified buyers in the market, they tend to push up prices. When credit becomes more difficult to obtain or more expensive, it drives buyer out of the market and prices soften. When the number of buyers declines, the people have to live somewhere so they rent. This increase in renters reduces vacancies and enables you to raise rents.
Tina Roger, so the issue is qualifying to purchase, not necessarily being able to purchase in a price range you can now afford?
afropufff Mike, I am a first time investor, single parent, but ambitious and want to start. live in Metro DC and am waiting for a house to build (contracted already), do I have to wait (about 8 months) until I am officially approved for the mortgage before buying a rental property
Ryan-NC the housing market is flooded with marginal homeowners .. this shake-out is painful but good for the overall market
Mike_Summey gggggg, better to open your mouth and learn that to keep it shut and not. We’re all friendly here, so you don’t ahve to worry.
Ryan-NC afropufff .. .why do you have to wait 8 months for a mortgage
Mike_Summey afropuff, if you find properties that are owned free and clear, you can make offers asking for seller financing and not have to worry about qualifying. All you have to do is convince the seller that your are trustworthy and honest.
Tina Mike/Roger, Thanks for the explanations they both helped
Mike_Summey Tina, we try.
Mike_Summey Hi papa
afropufff The house is scheduled to be completed in 8months, so I only have the pre-approval, assuming my finances and everything are the same 8 mos..Mike, thanks…I guess that is the best to avoid “interfering” with my credit score, et al
Roger Dawson Tina, my motto is that every one should own real estate. Don’t buy a second car until you’ve bought you second piece of real estate. Because cars go down in value, real estate goes up. But when credit is tight, like it is now, marginal first time buyers have trouble getting financing and it ripples through the entire market.
Tina
Mike_Summey afropuff, every piece of property is different and every person is different, so theoretically there are as many different ways to buy properties as there are combinations of properties and people.
BobMassing Good words Roger….your second house will probably pay for your second car.
Mike_Summey Very true Bob.
Tina Mike/Roger I found out something very interesting today regarding CPS’s and Real Estate Attorney’s
Roger Dawson Tina, what’ a CPS?
Mike_Summey Tina, want to share it?
Tina they all don’t believe real estate investments is worthy investment
Tina oops - CPA
BobMassing thats why theyre working for a living
eryk76 Mike and Roger I have some cash reserves but I don’t have the down payment to make deals work unless I use my reserves. I feel that I will have to search for seller financing in order to secure a property. I would like to keep the reserves but don’t want to miss out on the market turn. What would sugest would be the best way to go about purchasing my first investment property.
alex.elsiete@gmail.com Yes, so are realestate agents.
Mike_Summey tina, ask my CPA and attorneys what they think.
afropufff Mike, I don’t have the 20% down for my home, but I have 10% and can struggle for 15%, aside from the minimal difference in mortgage cost, and amount of money, in this mortgage market, will it assist with easing qualification with a moderate credit score?
Tina so I’m not interested in them handling my finances
Tina I’m quite sure I know how they feel
Bill L Good Night All. Hope you feel better Roger…
Roger Dawson Thanks Bill, I do already
Mike_Summey eryk, hang on to the reserves and look for properties you can purchase with minimal down payments. You’d be surprised at the number of properties that are owned free an clear that sellers would love to conver the equity into an income stream.
wood Bye Bill L
santo nite all
Theo_SC bye all
Tina Good info tonight
Roger Dawson See you next week everyone. Good investing!
Mike_Summey afropuff, putting 20% down is the standard way to buy using conventional bank financing. Look for properties that offer seller or third party private financing. They’re harder to find, but they offer some great opportunities.
eryk76 good night
wade Signing off from Oz. See you next week!
Penny goodnight everyone
Mike_Summey I have to run also. See you here next week and don’t forget we are scheduled to have abank president in next weeks chat.
Mike_Summey Goodnight
Tina Good Night All
alex.elsiete@gmail.com good night
eryk76 good night all
papa hola!
maria am I to early or too late ??
Lqatsu late
maria have they just finished??
Lqatsu yes
maria I have missed it by an hour then?
Lqatsu yes it started an hour ago
maria ty I have been trying to get the international time right … at least I know when to start now
Lqatsu you’re welcome… hope you make it next week
maria now I know when to start I certainly will be …I will just have to read the transcripts again
Lqatsu they do come in handy
maria yes I have learnt a lot from them…..thank you Lqatsu well I guess I’ll go and next week I’ll be here for sure bye
Lqatsu Bye 
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