Chat Transcript – February 4, 2008
Posted on February 5, 2008
Mike_Summey Hi everyone!
broadway hello mike
Jeff S CPA Hi Mike
Mike_Summey Roger will be along shortly.
Mike_Summey Hi danko
danko Hi Mike. Hi Everybody
danko No “Mr. China” yet? lol
Mike_Summey danko, he should be joining us any minute
Mike_Summey Anyone make a deal last week?
broadway working on one
Jeff S CPA Not me, still looking to make my first one
Mike_Summey Hi Ted
danko I am working on two 4-plexes nearby. I hope to get the financials today yet or tomorrow.
Ted Hi
Mike_Summey I just received a committment letter from one of my banks to finance 3 Foru Unit buildings I plan to build this spring.
Mike_Summey Hi David
DavidO hola
Mike_Summey There he is!!!!!!!!!!!!!!!!
Roger Dawson Hi everyone
broadway hello roger!
Ted i have a question on buying a foreclosure…what are the possibilities of an actual short sale? When I attempt ..I hit banker and attorney stone walls…they say…sorry…you’ll have to buy at auction.
danko test…my ‘puter is screwing up
DavidO Hey Mike, while its still early, I thought I’d ask you a question related to organization. I’m starting to acquire properties. What kind of filing systems do you use for all the frickin’ paperwork? You must have a bank vault full of this stuff.
Ted Then…it’s a frenzy and too late
Mike_Summey Ted, that must mean that they feel like the property willo bring what they are owed at the sale.
Ted I know…they all wish for that apparently
DavidO Ted – I think they’ll change their tune in about a year.
DavidO I keep seeing the same foreclosed properties relisted for lower and lower amounts.
Ted If they had an independant appraisal…they would know different…but they don’t. They use 2 year old pie in sky #’s. Guess i will have to wait.
Roger Dawson I think that you’ll only get a lender to agree to a short sale early in the process. Once they’ve filed foreclosure they will go through with it.
Mike_Summey David, I make a separate file folder on each property in which to store all the receipts, etc. I have an EXCEL spredsheet on each property where I post the income and expenses month by month. At year end, everything that concerns a given property is all in one neat folder.
Mike_Summey Hi Mark
Ted OK Roger…tough to find them that early though
MarkNC Hi Mike, everyone
Roger Dawson Foreclosure auctions are not usually frenzies. The first trust deed holder will show up to bid the amount they’re owed. Possibly the second trust deed will bid their interest but it’s not like a car auction or a horse auction.
Roger Dawson Hi Al
Al Lee Hi, Roger, how is it going?
Al Lee Hi, Mike
Al Lee Jeff, are you really a CPA?
Mike_Summey Ted, I have a bank that is foreclosing on two houses in SC. They have already contacted me to let me know they expect to get them back at the auction in early March and want me to make them an offer to close quickly after they take posession. If they can get title to them in early March & sell them to me before the end of the month, they won’t have to report them on their 1st quarter report.
Mike_Summey Hi oz Al
oz hi all, and welcome back Roger, hope you had a great trip.
Jeff S CPA Yes Al I am, I got my license in DE I’d say about 7-8 years ago
Mike_Summey Jeff, do you have our Offer Generator program?
Al Lee Jeff, a lot of CPA’s I meet are not very familiar with real estate tax benefits. Are you?
Jeff S CPA No I don’t, I guess that would be a good start for me?
Roger Dawson Oz, it was a great trip. We got back on Thursday after 19 days doing seminars in China. Things are really booming there.
Jeff S CPA Al, I wish I was more familiar, but i have friends who know a lot about real estate tax benefits
Mike_Summey Jeff, the reason I asked is because I was going to let you give your opinion of it as a CPA.
Jeff S CPA Ah OK, well, maybe I’ll have to take a look at it.
Jeff S CPA I was thinking of buying it anyway
Ted Well Mike…how do I make such inroads…bankers seem to just tell me..”wait for the auction” and seem annoyed….and the bank attorney…forget it. I cal and cal on many homes…same result. Wait for aucton.
Mike_Summey Roger, I’m sure everyone would like a few tidbits of info on what’s it like in China.
Al Lee My CPA is also an investor and he has saved my lots of money over the years. I think real estate has the absolute best tax advantages of any investment.
Ted call and call I can spell! lol.
Jeff S CPA Yes, I would certainly agree with that statement from what I’ve seen so far.
Ted Sorry…we can talk later…I too would like to hear about China.
Mike_Summey Ted, the only reason I get called is because the bank knows I can move very quickly and close for cash. I didn’t have that luxury for many years. When I first got started I experienced the same frustration you are experiencing.
Jeff S CPA A friend of mine has just purchased a liberty tax franchise, i may be assisting him in the future, he is pretty knowledgeable
Al Lee Jeff, you might enjoy a couple of books by Sandy Botkin. I have had him on my radio show to talk about real estate tax advantages and he is a true expert.
Ted OK….I too can close with cash…I will just keep trying…never never give up. Tomorrow #8.
Jeff S CPA Thanks Al, I have written down the name, I’ll take a look, any specific recommendations?
Al Lee When you look into the tax angle you might decide that making money in real estate is only one of the advantages. Not paying taxes can be just a great an advantage.
Al Lee Jeff, Sany has only publishe d2 books, Real Estate Tax Secrets and Lower Your Taxes-Big Time. He used to be legal counsel to the head of the IRS.
Mike_Summey Hi Diane
Diane hello
Jeff S CPA Ok Thanks Al
Al Lee You will conclude that you can;t afford to NOT own investmetn real estate.
Jeff S CPA I know, I’m really anxious to get started myself, i’ve got good credit but no experience!
Al Lee We all had no experience once.
Jeff S CPA True, very true
Mike_Summey A year or two ago, I couldn’t find any deals. Sellers felt like they were in complete control. Wow have times changed. I currently have more deals to look at than I have time to go see and it’s only getting worse…or better as the case may be.
Diane Wish that were the case here in Nevada
Mike_Summey Diane, if it’s not already, it will be soon.
Ken Roger I just picked up some of your CDs. Very nice. I like listening to them when I’m in the car. I am terrible at negotiating
Mike_Summey Hi lily
Mike_Summey Ken, don’t you just love that English accent?
Ken LOL yeah, I didn’t expect that
Mike_Summey Hi santo
Al Lee Hi, santo
lily hi,this is my fisrt time in this chat area
santo hi, everyone
Diane bunch of us had taken classes and did everything by the book and were able toget houses under contract for 60 cents or so on the dollar, but no buyers. Now we recently bought some of your cd’s and we’ll see what happens
Al Lee Hi, lilly. Don’t be nervous.
Mike_Summey lily, everyone here had a first time and some here tonight are probably here for the first time. We’re all friendly, so feel free to ask whatever you’d like and don’t worry about asking a dumb question. It’s better to ask a dumb question than to stay dumb because you don’t.
Mike_Summey Hi Sandy
lily thanks Al lee
Mike_Summey Danko, did you hold prayer with the computer.
Sandy Hi Mike
danko Whew! Finally. Computers…can’t live with ‘em, can’t kill ‘em
Mike_Summey Hi daisy & Penny
santo al, what happened to your show yesterday
DaisyNH7 hey there
Sandy Hello Mike
Penny Hi Mike & everyone.
danko No, but my ‘puter could use some prayers
Roger Dawson Hi Penny
Penny U2 Roger
Mike_Summey Who is here for the first time tonight? Besids lily.
Mike_Summey Wasn’t last week’s chat informative?
Al Lee santo, I have taken a break for doing the live show because I had technical problems on the computer that does the broadcast and have been wrapped up in the new property management business and unable to get to figuring out what is the problem.
danko last week was great.
DavidO Al, you mentioned Sandy Botkin’s tax books; I much prefer the books from Nolo Press. They have a couple of real estate books that are much more detailed and provide better examples.
santo thanks Al
DavidO Hey Roger, I lived in Beijing for 2 and half years. I’m sure your speaking tour was full of big banquets and copious amounts of food you didn’t know existed.
danko I didn’t realize it, but I had a book on hold at the library…”Rich Dad’s Real Estate Advantages”. I picked it up and whose name is on the title? Garrett Sutton. I think it was a good omen. I didn’t realize it was Garrett’s bok
MarkNC Mike, last week was great. I finally fell as if I am understanding the structures I need to use. Sorry am slow tonight, I am preparing lecture notes while I watch the chat.
Mike_Summey danko, Garrett is one of the Rich Dad/Poor Dad authors & Robert Kiyosaki’s legal advisor for the Rich Dad project.
Al Lee David, I haven’t read them. I am sure they are good, also. I just know that I have always been very good at minimizing my taxes by having real estate and a business and when I read Sandy’s books I found things I did not even know. I actually saved thousands of dollars just because of a few simple tips I got from his books. If I gat a chance I will look for the Nolo Press books, also. You can;t know too much about lowering yoru taxes.
MarkNC fell = feel I hope I am typoing better on the lecture notes.
Roger Dawson David, you’re right. When I wasn’t speaking I was being hosted at lunch and dinner at huge round tables that spin the food around. My favoriet was Beijing duck.
Mike_Summey Mark, did you talk to anyone at the school about having me up for a presentation?
Mike_Summey Hi Linda
danko I decided to change how I make my offers based on last week.
Al Lee Taxes are the single largest expense for the average American. Larger than Food, Clothing, Shelter, Medical–COMBINED!
DavidO Al, I agree. I realized recently that after paying for my house, taxes was the second biggest expense. I vowed to learn more about it and become an expert on it. the more I know the more i save
Ken I am working with a few guys that got nailed by the IRS. Scarey stories
MarkNC Mike, I haven’t yet but hope too. It has been a crazy few weeks. Lots of tenant problems. I guess to remind me that I need to quit amnaging my own property.
Mike_Summey There are so many tax breaks for real estate because the government wants you to own properties rather than it having to own them.
Ken Mark I was in the same boat. I hired a PM and it was the best money spent.
Al Lee David, if you tally all the taxes you actually do pay, you would find taxes are MORE than your house payment. Of course, you can’t avoid the hugh gasoline tax, sales tax, etc.
Mike_Summey Mark, keep on managing them yourself if you like to do $10 per hour work with $100 per hour time.
DavidO Right, Al.
Al Lee You CAN avoid, or at least minimize income taxes.
DavidO Roger – I don’t miss much about China (the pollution, the crowds, the culture) but I miss THAT BEIJING DUCK!
Mike_Summey Al, you can’t avoid taxes, you can only defer them. Eventually they have to be paid, but maybe you can live long enough to defer the burden to your children.
Ken Mike how is the water supply in your neck of the woods?
Al Lee Mike, I beg to differ. You can “defer” them until your death and then, through something called “stepped up cost basis”, you will have avoided them permanently. Your kids will never have to pay them and you never paid them–100% legal!
Mike_Summey Ken, we have plenty of water. Our water source supplies several times as much as we use. In fact our capacity of treated water is double what we use. Another reason why Asheville is rated #1 on many lists as the best place in America to live.
DaisyNH7 Amen
Mike_Summey Al, that’s merely another deferral.
Ken Good deal Mike. I seen the south east is hurting. I drove past a lake near Atlanta and it was way way down
Jeff S CPA Speaking of water, is anyone concerned about real estate in Las Vegas, i’ve been reading it’s a great place and time to buy now but i thought the water issue might be trouble some day.
Mike_Summey Ken, Atlanta is hurting.
danko Okay, I need some ideas about down pymts. With my HELOC and savings, at 20% down I can afford maybe 3 – 4 properties in my area. I will utilize seller financing, too. But I’m stumped about what to do from there. Can I use HELOC from the props I buy, even when they are 80% financed? I don’t think I will be able to pull my HELOC back out soon. I know it’s a loaded question.
DavidO Hey Ken – how long did you try to manage yoru properties before you hired a PM?
Al Lee Mike, if YOU never pay the taxes and your heirs never have to pay them, even when they sell the property, that is deferral into infinity (and beyond, as Buzz Lightyear said)
Ken 9 long months. I had a tenant just up and leave. thank god the neighbor called me to tell me they left or I wouldn’t have known
Ken I interviewed 3
DavidO where are you ken?
santo Al, some mortagaging guy told me he can take my 30 year fixed rate mortgages and make them 15 year fixed rate at almost the same price–don’t the bank lose money
DavidO and where were your properties?
Ken Central PA. Plus I travel lots for work
Mike_Summey Al, when the depreciation runs out you pay some taxes. I know! Since I’ve owned the properties for years, several of them are fully depreciated and the mortgages are paid off. But taxes are fine when you don’t have to pay interest.
MarkNC Wow Ken that was my August, then the replacement tenants I evicted, just to find out two of them were under house arrest.
Ken they are in PA as well
Roger Dawson David: the thing that fascinates me about China is the growth of their economy. I spoke in Guogzhou, Shanghai and Beijing and all three were booming to beat the band!
Ken Mark I have found out that the PM screens good sometimes to good. That unit was vacant for 4 months. but things are working out. live and learn.
Al Lee santo, if he can do that yo shoud instead have he refinance them for 30 years at LOWER payments. Why do you care about paying off a cheap loan to the bank? The reason he can do that is because rates have dropped. That is an opportunity to lower your payments. That is what I would do.
danko And if you own a snowplow in China, you can become a billionaire
Mike_Summey danko, if you use your HELOC to purchase, in a couple of years you can raise rents, pay down mortgages and then refinance to take out the money to repay the HELOC. You can borrow more on a property you have owned for a year or two than you can to buy one.
lily What is heloc
danko thanks, Mike. Have you ever used partners for downs?
Ken Mark I estimated the damage and clean up cost to be around $1200 after the tenant left. The PM got a guy to do it for $300. It was a guy trying to get in good with her.
danko HELOC = Home Equity Line of Credit
santo Al, he said i would build equity faster—is this true
danko lily 
Ken Usually HELOC are at Prime rate.
Al Lee santo, another way you might take advantage of those lower rates is to refi with cash out, recovering soem of the equity you have in the properties and giving you back your cash. I jsut did that with some land in Oklahoma and pulled out $100k cash and my mortgage payments are about the same as before.
MarkNC Mike, I have had a hard time with that recently. The lender I use used to refi at 90% LTV on deasoned propertiesd but now will only do 80% on investment properties. The same as what they will do for new purchases.
danko My HELOC is at 7.49% interest only
Al Lee santo, yes, but so what? you can’t spend equity unless you get it out as cash. Equity sits in your property making you zero return.
santo Al, I don’t own them long enough to get cash
Jeff S CPA Al that sounds interesting, i was thinking of refinancing myself and was considering 15 years but maybe cash out would help me get started on investment properties
Al Lee santo, you will soon!
Mike_Summey Mark, tenants are smart…especially the bad ones. They won’t even apply to rent from a professional management firm because they know they will be checked & rejected. What they do is scan the classifieds to find unsuspecting individuals trying to rent their own properties and prey on them. They can come acroos as the most upstanding people you’ve ever talked with until you put them in your property. Use a professional manager. It doesn’t cost, it saves.
Al Lee Mike likes 15 year loans, but I line longer terms. I liek to use the bank’s money as much as I can as long as I can.
Al Lee Take cash out with a refi and buy another property and you are much ahead of the game.
santo Al, oh me oh my–I am equity poor
Jeff S CPA I like the sound of that, i’ll look into it
Al Lee To avoid being over-leveraged, follow my 80/20 rule. You target is to have 20% equity and 80% leverage overall on your investments.
Ken Good advice AL I usually pay cash then refi pulling an extra $3k out for reserves
danko I am talking to property mgmt firms now, even before I have my first property. I’m not going to do any managing myself. The world is safer that way…I mean, safer from me…lol
Al Lee kenb, I have done exaclty the same and often fo rmore thatn $3k
Al Lee for more than
Mike_Summey Al likes owe as much as possible, but I like to own as much as possible. That’s one of our few differences.
broadway Surely, there’s a balance in there between Mike and Al?
DaisyNH7 Mike-with asheville as expensive as it is, besides seller financing, is there a way to finance if you don’t have the 20% to put down. Banks are requiring at leasst that. Should I look in cheaper places like Spartanburg or TN to get started?
Al Lee People worry about getting a property foreclosed on because they owe money on it. If you were a bank would you be quicker to foreclose on a property that was halfway paid off or one that was heavily mortgaged? The heavily mortgaged one might be safer. You have less in it to lose.
Mike_Summey Al, I have a committment letter on my desk that just came today. It reads 80% of appraised value or 100% of cost,
Roger Dawson Mike, I agree with you on letting the pros screen tenants. One of the worse tenants I every had paid me six months rent in advance in cash. I thought, “What have I got to lose?
Roger Dawson Six months later I started finding out.
Al Lee Mike, that is a particularly good offer. I doubt many people coudl be offered 100% of cost in today’s lending climate.
santo Al, I closed on my properties 2 in aug– 2 in oct— 2 in dec.–how long will I have to wait to get cash on an equity loan
Ken soon as you ask
Mike_Summey Al, the reaso I can get that is because I have a ton of equity. If I had everything mortgaged to the hilt, they wouldn’t consider it.
Al Lee santo, most lenders want your properties seasoned 12 months before they will do a refi with cash out. Some will do it in 6 months, but they are hard to find today.
danko If you have a property that has a parking lot, buy the property and the parking lot separately…but pay for the parking lot in full. Then if they foreclose on the property…you don’t let me park in the lot…lol. Just kidding.
Al Lee Miek myou make a good point. Tooshie.
DavidO I like Mike’s bank rule: banks are more than happy to lend money to those who don’t need it.
Al Lee Mike, you make a good point, Touche’
santo Al, thanks
Mike_Summey Thanks Al.
Ken Al it’s ok about the spelling we understand
lily I have a mortgage of 110,000 and I can borrow 200,000 at approx in equity but I also have 9,000 credit card debt I live in Melbourne Australia and a change of government and rising interest rates and skyrocketing property values I do not know if we have seller financing and on top of that I dont understant how to get another property. I worry about the repayments
Al Lee No wine tonight–yet!
broadway Al, on financing, I’m thinking about purchasing with CD loans, do my renovations, establish the rent then refinance. I’m thinking I’d have increased values given any renovations I’d have. Does that seem like a strategy that would work?
Mike_Summey David, getting to where I am today took time, but the rewards are tremendous for being conservative and letting properties mature.
danko Mike, I’m not 34 anymore…I don’t have that kind of time…lol. I have to buy a bigger discounts.
Linda@bostonbusinessadvisors.com Hello Mike, my husband and I have 4 income apartments spread over 3 Properties, we’ve always done the management ourselves *he’s in construction and can do everything himself* I’ve figured out that we are ahead of the game with one unit, but break even or a little in the hole with one *we refide 4 yrs ago and bought a vacation home that we also rent out in the summer as much as possible* I’ve not included the expenses or income for that one. Alot of information what would be a good rule of thumb to determine hiring a property management company??? It’s always been my job to keep everything rented, doing it all.
DavidO i hear that mike. having done this a couple of times, i’d rather own that owe. although i much further in the owe camp right now.
Mike_Summey lily, borrowing money is one thing, paying it back is another. I always focus on cash flow and let that determine how much I borrow.
Al Lee broadway, depends how much you spend on renovations. It is easy to spend $20k to increase the value $10k
santo mike, i’am 62–don’t have much time
Ken my cousin is 25 and compares himself to a 65 year old millionaire. he stresses out lots
Al Lee santo, as tough a guy as you are think you might have a lot of time left.
broadway Al, sure I understand that, I’m of the belief you make your money when you purchase it so I’d hope I would not purchase something that would not work financially.
Al Lee broadway, that goes without saying.
Al Lee santo I think
Al Lee OK, I just got a glass of red wine. Let’s see if my typing improves now.
Mike_Summey Linda, as I said earlier in the chat, why would you want to spend $100 per hour time doing $10 per hour work? A good property manager will more than pay for themselves. They tend to keep up with market rents better and raise rents wehn needed, they don’t fall for all the sob stories tenants can give, etc. Need to know more?
broadway Al, I’m just wondering if the second part of rolling over to a 15 or 30 year mortgage would work to free up the CD loan to do it again? I’d have to know going in that there would be enough equity to make it all work. I’m looking at borrowing 62% of the CD so there’s no cash out of my pocket while the property is empty!
DaisyNH7 Mike did you see my question?
santo Al, did 5 mile on the treadmill–used to do 7 miles—slowing down
Ken any of you guys seen banks closing down a branch office? Mine is closing in 2 months I wonder if thats cause of the credit crunch
Al Lee broadway, you have to look at the specific property adn deal to determine that; but structurally it is a fine plan. Of course, that assuems you are buying a good property at a good price.
Mike_Summey Daisy, sorry, I must have missed it. Send it through again please.
Roger Dawson Ken, probably you branch bank office is closing because it’s cheaper to operate and ATM
broadway Al, yep! I agree. I’ve analyzed the structure to death! The biggest unknown was the refinance part. That way, I can put as much or as little equity in the deal as I want! I like the control of that like crazy!!
Mike_Summey Ken, banks are moving toward fewer branch offices rather than more. Several here have closed.
Al Lee santo, I did 2 miles; but I was never an athlete. I just need to stay fit. A few months ago, though, I did a session with a trainer who asked me if I thought I coudl do push ups. I did 30 on my knuckles with my back as straight as a board. Never got that question again.
broadway Al, thanks for your response.
Roger Dawson Sorry for the spelling errors. I’m still so jet lagged from China I don’t know what day it is.
Mike_Summey broadway, do you have the Offer Generator?
Al Lee Roger, the year of the Rat
danko Relax, Roger…it’s Thursday
broadway Mike, I have not gotten that yet. I know I need that. I’m a software freek
Roger Dawson Thanks Danko. I thought it was Thursday
Linda@bostonbusinessadvisors.com Mike, I get that, the benefits to having the buffer in having a PM but I was wondering is there a formular?
danko lol
santo Al, years ago, did 10 push-ups with a 280 pound man sitting on my back
Mike_Summey broadway, using it will answer all the questions you are asking. It is very simple to use and it has popup help under the title of every entry you need to make.
danko Linda, if I can interject…I am shopping around for PMs. I got some referrals from our local REIA…and then I asked for proposals from all of them.
broadway Mike, ok thanks. I would expect you’ve covered a bunch of things like that.
Mike_Summey Linda, the Offer Generator prompts you to factor in the cost of management when you make an offer. It’s not guesswork.
danko Is it that time already?!
Al Lee santo, I hope you never gat mad at me. At least not from up close.
santo Al, your my friend
Mike_Summey Wow! Time has really flown tonight. I can’t believe we’ve been at it a full hour.
Al Lee santo, we will keep it that way!
Ken The generator has been a good tool for me.
MarkNC Good night all, I have to go make a list of PMs to contact tomorrow. Have a great week.
danko Have a good week, all. Thanks for the great chat again. Hope my computer works better next week
DavidO good night all. i’m rethinking this PM thing.
Roger Dawson Goodnight everyone. See you next week.
Mike_Summey Goodnight all. See you here next week.
Al Lee Goodnight all
broadway gotta run too. good night all. Thanks for the chat Al and Mike
Ken night all
Mike_Summey You can keep talking amoung yourselves as long as you want, but I need to run. Goodnight.
oz g/night all, as well…
santo nite all–must check my equity clock
Linda@bostonbusinessadvisors.com If anyone is still out there, what is this Generator Mike mentioned?
santo linda, the genarator is a program you put in your comper
Linda@bostonbusinessadvisors.com Where do you get it??? is there a Demo on a website? Is this a product offer by Mike?
santo linda, you buy it from this web site
santo linda click on to store
Linda@bostonbusinessadvisors.com How stupid of me,,,, thank you. Have a great nite.
Diane anyone here?
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