Chat Transcript - February 11, 2008
Posted on February 12, 2008
santo hi, mike
Mike_Summey Hi everyone!
Jeff S CPA Hi
LakhiUSA Hi
Jeff S CPA Mike, may i ask you a quick question before everyone gets going?
Mike_Summey Hi scoty
Mike_Summey Jeff, sure
Jeff S CPA I was looking to refinance my house to get cash, i was told by a lender that since i had a line of credit that was the best way to go.
Mike_Summey Hi Vetran
scotyl10 Hello ereryone
VeteranInvestor Hello Mike. Everyone
Jeff S CPA What do you think, you don’t like variable rates right?
Mike_Summey Jeff, what do you plan to do with the cash?
Jeff S CPA Real estate purchase
Al Lee HI, Mike, everyone
santo hi, Al
Jeff S CPA Hi
Al Lee Hi, santo, how are you?
Mike_Summey Jeff, I’ve always used adjustable rate loans, but what I use are a bit different from what most people think of as ARMs. I use fixed payment adjustable rate financing. The payment stays the same and as the rates fluctuate it just changes the amount going to principal & interest.
Mike_Summey Hi Al & Roger Dawson
Roger Dawson Hi Mike and Al and everyone
Al Lee I hope all is well with you, Mike.
Al Lee and Roger, of course
Jeff S CPA Ok, thanks Mike. I’m self employed now, apparently it’s tougher to get good loans when you are self employed.
Mike_Summey Things are great here Al. I understand Rhonda called you about your show.
Mike_Summey Hi David
santo Al, my wifes health and mine have taken a nosedive– i will just listen tonight
DavidOro hola
Mike_Summey Jeff, I’ve been self employed for over 40 years.
Mike_Summey Hi Sparky
Roger Dawson Santo, I’m sorry to hear that.
Al Lee Mike, yes. We need to set a date to record a show. We do not have to do it at the Sunday 2pm time.
sparky37 Hi Mike
Jeff S CPA Have you had troulbe? well especially starting out, I’m sure you have no problems now
Al Lee I need to get soem of my equipment set up and working, though.
Mike_Summey Hi broadway
Mike_Summey Hi Mac
broadway Hello Mike and all
sparky37 Mike, whatever happened to the cruise idea?
Mac Hi, Mike
Al Lee I had to move my studio from the DFW Real Estate offices.
Mike_Summey Jeff, in the beginning I was just like everyone else. Always struggling to find financing. It takes time to build banking relations.
Mike_Summey Sparky, the promoter cancelled it. He couldn’t get enough people to sign up months in advance.
Roger Dawson I was 42 when I first became self employed. That first six months without a paycheck is traumatic but once you’v done it you’
Roger Dawson ll never go back.
sparky37 Oh
DavidOro Hey Mike, I asked you about keeping records on your property last week. I don’t think I asked it properly as your answer was related with bookkeeping. I’m interested in how you file all the paper work that comes with a rent property - deeds, management agreements, insurance papers, good faith estimates, all that. Do you keep one file on each propery? You must have a massive file cabinet.
Jeff S CPA Yea I love self employment so far… it’s so much better!
Mike_Summey David, yes I have a separate asset file for each property and a separate file for income and expense receipts for each property each year.
DavidOro Is it a massive file cabinet, right Mike?
Al Lee I have been “self-employed” for decades. I like the fact that I can work whatever schedule I choose. Any 18-hour period of the day is OK.
Roger Dawson David, Mike has a walk in vault that rivals Fort Knox.
DavidOro I’ve been self employed for four years. My whole goal in life is not to go back to “work”
Mike_Summey David, deeds, capital improvement receipts, etc are in the asset files. Yearly operating items are in the yearly files.
Jeff S CPA wow.. 18 hours, i guess i’m not sure how much i’ll like that, if it gets to that level
Mike_Summey Hi maria & John
John Hi everyone
DavidOro Thanks, Mike.
maria Hi Mike
maria Hi everyone
Mike_Summey maria, how are things down under?
Roger Dawson Mike, that’s a bit personal don’t you think?
DavidOro ha! good one roger.
Mike_Summey Hi Tony & ccna
John Mike, if you had a choice between a higher appreciation vs higher cashflow, which would you choose?
tonyseattle hello first timer
John possble higher appreciation to me seems like a gamble
John Hi Roger!
maria Mike, pretty good thanks, having great summer weather at the moment
Mike_Summey John, I don’t think one is mutually exclusive of the other.
Al Lee Jeff, it WILL get to that. When you come to the realization that you must make hay when the sun shines, you will gobble up all you can when you are able. In yoru line of work, that migt be “tax time”. You need to salt some away for the “lax time” that happens in between the annual tax times.
Mike_Summey Tony, glad you could join us. Feel free to jump in any time.
tonyseattle thanks i will
John would you say that in the beginning of your career, go for higher cashlow?
Jeff S CPA true good point Al
Al Lee You don;t want to pass up a chance to earn money because you might wish you had that money later on.
Al Lee I wouldn’t have it any other way, though.
Roger Dawson John I think the answer depends on what you’re going to do with the cashflow and what you would do with the increased equity that comes from appreciation.
tonyseattle roger do you still have your property up here in the nw
Mike_Summey John, cash flow is first with me. If a property won’t cash flow I don’t care how much it appreciates. Appreciation only comes into play if you want to sell. I’ve never sold a property.
Mike_Summey Hi Jason & eric
Jason C Hi Mike
Al Lee I was in computer software and consulting and my giant equivalent of tax time was Y2K. I worked 18-hour days, oftern 7-day weeks for several years. Then I retired young.
Jeff S CPA just wait until y3k
John Mike, thanks for your input. I was thinking the same thing. It seems as though the extra cashflow from a property would be higher than appreciation and you don’t have to apply for HELOCs to get access to it
maria I have a friend wanting to get into the r/estate market she is not sure wether to sell a property or wait till prices go up again (australia) or borrow to start buying ?
Mac I have a property manager for all my rentals. I’m not happy with some of the results, especially maintenance not getting done and tenants trashing the place. I’m considering taking it over, but don’t want the calls for stopped-up toilets and malfunctioning heating systems. Anybody have any experience outsourcing the maintenance and repairs?
Roger Dawson No, Tony. At one time I owned 123 acres just west of Mount Rainier in Eatonville. My dream was to spend summers in Washingtonand winters LA. Then I married this Hollywood wife and realized that she would never go along with that.
John Roger, it seems as though cash flow would be better for me. As I eventually would like to have it replace my income.
DavidOro John, I prefer the cash flow over appreciation. appreciation is bonus. cash flow is here and now. and you want postive cash flow.
Mike_Summey John, appreciation will build equity much faster than cash flow will build your bank account, but you have to leverage the appreciated value to make use of it.
John DavidOro, thanks for the advice. I was thinking the same thing.
tonyseattle i was listening to one of your programs today and was just curious
Roger Dawson Maria are you in a buyer’s or a seller’s market in Australia?
Mike_Summey maria, why doesn’t she start making offers that ask for seller financing. She might be surprised at how many people will finance the purchase of their property, especially in a tight market.
Mike_Summey Hi Sandy
John Mike, ohh I see, but it seems as though the appreciation bonus I’ve been getting from agents is a maybe… I’ve heard stories of up and coming neighborhoods that never happened.
DavidOro john, one sleeps better knowing that the cash flow is flowing positive.
maria Roger a buyers market at the moment
Sandy hello
maria Mike I am not sure banks here would agree to that
broadway John, to me cash is king. If you have cash, you can deal with any appreciation or depreciation. It won’t matter then. I like what Mike says about that.
John Cash flow seems like king, and taking the word of an agent over supposedly higher appreciation seems like a gamble
John broadway, you just took the words out of my mouth!
Mike_Summey Mac, stick with a property manager. If you aren’t happy with the one you are using, try another. Your job should be to manage the manager, not the property.
Mike_Summey Hi alex.
alex Hi mike, and all
tonyseattle how do you approach a seller when your offer is 60
tonyseattle % less than they are acking
DavidOro john, don’t take an agents advice or a mortgage broker’s advice. do the cash flow numbers yourself. numbers don’t lie.
Mac Mike, thanks. I agree that property management is not a good use of my time. I could do more due diligence on selecting and managing the manager.
John DavidOro, thanks for the advice. That’s something I defintely need to stick with
Mike_Summey maria, banks don’t have to agree to anything if the seller will finance.
maria Mike How does that work then ?
Roger Dawson Tony, the key thing is to explain to them why you are offering what you’re offering. That way they don’t think you’re just trying to steal their property.
Roger Dawson Hi Penny!
John Mike, with your offers. Do you always make two offers. One with regular financing and one with seller financing, just to see?
Penny Hi Roger!
Mike_Summey tony, you simple write up the offer and present it. Many sellers will be offended, but some will counter and a few will accept your offer. Don’t decide what a seller will do. Let them make that decision.
tonyseattle what if you get the realator that won’t let you talk with thier client
Mike_Summey Hi Penny
Penny Hi Mike!
Jason C How does everyone get your leads? I’ve found quite a few in the MLS but there are alot of other investors seeing the same leads.
John Jason C, I’ve found a good agent very helpful
VeteranInvestor Good question Jason
Mike_Summey John, I try to get as much information on the seller as I can and let what I know dictate the type offer I make. I use the two offer method mainly when I don’t know much about the seller. I’ll offer a very low cash price or a higher price with favorable terms, usually asking for seller financing.
Roger Dawson Tony, let the agent present the offer but reserve the right to meet with the seller if they can’t get your offer accepted. You may need to find an agent to represent you that doesn’t mind presenting low offers.
Mike_Summey Jason, have you read Weekend Millionaire’s secrets to Investing In Real Estate?
John Mike, do you usually add some kind of downpayment with your seller financing?
Jason C Mike,
Jason C I’ve listened to the audio book a few times
Mike_Summey John, that all depends. If I don offer some amount down, I usually ask the seller to take a second position and then get 20-40% from one of my banks.
Mike_Summey Jason in the book, we give you a step-by-step way of finding properties that we’ve found to work best. It involves riding a group of selected neighborhoods on a regular basis. I check mine weekly.
John Mike, how can I find more information in reagrds to sellers taking a second position? Or would you be able to explain it a little more? Seems a little unorthodox.
Al Lee Sorry, I was away for a bit. Back now. I am multi-tasking today.
Mike_Summey John what is unorthodox about it? Just because it doesn’t fit the mold of bank financing doesn’t mean it’s unorthodox.
tonyseattle i have read the entire series and have the OG (love It!!) and have rogers coures i have bought 2 properties and am looking a 5 right now.
tonyseattle courses
Mike_Summey tony, good for you. Doesn’t the Offer Generator take all the guesswork out of it?
John Mike, well there’s nothing wrong with it, it seems creative and I like it. But it’s something I’m not familiar with is all.
tonyseattle i like it because i am able to crunch numbers in minutes and decide to go on or look else where. very time managable
Al Lee Mike, when we do the radio interview it might be good if we talked abut negotiation with sellers for seller financing.
Mike_Summey John walking was a bit unfamiliar when you took that first stem, but it probably didn’t take long before you were driving your parents crazy running everywheere. Making offers that ask for seller financing is the same way. The more you do it the better you get.
Mike_Summey Al, good topic. Especially since the Negotiating book has just come out.
tonyseattle i am going to go out and practice my negotiating skills tonight when i go to sign up for a gym membership
John Mike, that’s true. I’ll be needing to make offers and get some practice! How do I approach banks if a seller does agree to a second position though?
Al Lee Yes, I received my copy; but have not had time to read it yet.
John tonyseattle, those gym clubs always have alot of deals to shoot at you… should be fun!
ericl Mike, I’m thinking about getting the offer generator. Do I run the options in front of the seller on the software or only let the seller see the paper offers generated from the software?
Mike_Summey eeric, you can do it either way. It’s mainly what you feel comfortable doing. Personally I just submit the offer letter and then have the program as a backup if the seller wants to know how I arrived at the offer.
tonyseattle how do you judge when it is time to step up the game a little. go for bigger deals. i am looking at 5-4plexes right know and they are all for sell by the same seller. i am going to call my agnet to set up an appointment to look at them this week
Mike_Summey John, you put the bank financing in your offer to the seller and make the offer contingent upon being able to obtain the financing. The lower percentage of the purchase you ask the bank to finance the easier it is to get approval. If you can fog a mirror, you can get 20-40% financing when the bank has a first position.
ericl Do you believe in giving an offer at the first meeting to “get it under contract” or do your work then submit it to the seller?
Mike_Summey tony, let your own comfort level dictate that. Keep in mind that getting some experience with smaller deals is always helpful before tackling the bigger ones.
Mike_Summey Hi Corey
Corey Hi Mike
John Mike, thanks for clarifying it for me. Makes much better sense to me now.
Mac Mike and Roger. I’m reading the new negotiating book. It’s great. I noticed, though, that it’s heavy on negotiations with the seller. Any recommendations of books, courses, etc. on dealing with buyers?
tonyseattle i am comfortable with the risk. if the numbers work then i move forward i guess its that simple
Corey Mike is there a reason you haven’t bought large apartment complexes?
Mike_Summey eric, I make one trip to inspect the property. I use the inspection form you can get on this website under “downloads.” It’s FREE and you can print it as many times as you want. Once I conduct the inspection, I prepare an offer and submit it.
Roger Dawson Mac, we wrote the book that way because our program is buy and hold. If you buy right, you never have to sell.
Al Lee If one guy is selling 5 5-plex’s, I would look into WHY first. He may be in an area that is a lot of trouble. Those areas can be very profitable; but only if you are equipped to manage in them.
Al Lee 5 4-ples’s, I meant to type.
Al Lee ples’s
Al Lee plex’s
Mac Roger. I hear you, but I do lease/options and owner financing for some of my cash flow.
Al Lee this keyboard is gonna kill me!
broadway al, careful with that wine glass
Mike_Summey John, banks won’t finance 70% or more and then let you get seller financing for the difference. They will finance 20-40% and let the seller finance the balance. By doing that, they effectively have the seller guaranting your loan because the seller is not going to let you default and the bank forclose and wipe out their loan.
Al Lee Problem is, I haven’t started drinking wine yet.
tonyseattle i know the area and its in a medium to poor neghborhood but it is moving up
Al Lee I need the fruit of the vine to settle down my typing.
Roger Dawson It’s very hard for us to see things from the seller’s point of view. Psychologists call it “socio-centrism.” But every day millions of people sell real estate they don’t want to own to buyer’s who think it’s a bargain.
broadway good point al
Al Lee I also got a new wireless keyboard and the key spacing and feel is a bit different form the old one.
Roger Dawson Al, it spells better than the old one.
tonyseattle how long do you think that the mark in going to be going down for
Mike_Summey Corey, the most I have in any one comples is 42. I like to spread the risk around and not get one property that can bring down all the rest. As the old country farmer would say, I don’t want the tail wagging the dog.
John Mike, thanks for the added info, now I can see why it’s done that way.
tonyseattle market
Al Lee Roger, you need to put spell checker on the chat room.
Mike_Summey Al, it seems to spell and type better than the old one.
John Mike, when you bought the 42-unit. Was that late into your career so you had the cashflow in case anything happened?
Al Lee Mike, I think it is because I am aware it is new and am being more careful.
tonyseattle do you think that it might be wise to wait and see how far down it is going to go
Mike_Summey tony, my prediction is late 2009 or early 2010 before it stabalizes and then maybe 2-3 more years before it starts to really heat up again.
tonyseattle i smell more deals on the horizon
John Mike, so it seems as though we have 2-4 years of good deals ahead of us
John It seems as though there is no need to rush now, when there’s still a few years left
Mike_Summey John, from the beginning, I set a limit on myself. I would not buy a property that represented more than 20% of the aggregate total of what I already owned. As I acquired more the size of the properties got larger.
Mike_Summey John, I agree with that.
Al Lee John, You should never rush; but don’t let too many opportunities pass you by, either. 
Mike_Summey John, now or later, when you can find a property that will cash flow with a legitimate NOI buy it.
tonyseattle my portfolio will be filling up fast if i get one or more of the 4plexes what do you suggest when the banks won’t lend me anymore money
Mac John, one thing I would add. While it doesn’t make sense to rush, if a deal looks good, take it. Don’t wait on something better.
Mike_Summey Rents will continue to climb while prices are falling. When people can’t buy they have to rent and that demand pushes up rents.
John Thanks for the tips Mike, Al, Mac
Al Lee tony… Why woudl the banks not loan you mroe money if you have bought things that are making you more money? It is if you buy negative cash-flowing stuff that you will run out of borrowing power–and cash.
Mike_Summey tony, either slow down and give what you have some time to mature or look for seller financing that doesn’t require the bank’s to be involved.
tonyseattle rents are on the rise it was the main topic in last weeks sunday paper
tonyseattle thanks some lenders think that if you are getting into debt to fast that it is a bad thing
Roger Dawson I’m beginning to wonder about this “recession” that we’re supposed to be in. I went to the mall Sunday to replace my iPod that had broken. I had to park 300 yards away and fight my way to the counter once I was in the store. If there’s a recession going on the people around here sure don’t know about it.
tonyseattle must have already recieved there tax returns
John Mike, when buying tenants already in place. What are some indications or steps you take to make sure they are keepers, or people you want to owners to ask to leave.
Al Lee Roger, that recession is a figment of the media’s imagination.
John Mike, sorry, I mean when buying properties with tenants in place.
Mac John, pretty simple. Find out their rent payment record and inspect the place and see how they’re keeping it.
Mike_Summey John, I would ask for a copy of the rental agreements and ask to inspect the properties. You can also ask the seller to provide the payment records for all current tenants.
Al Lee I remember the “recession” we were in in 1992 when Bush (41) was in office and running for re-election against Clinton. I was in Saudi Arabia watching on CNN. The moment they knew that Clinton had won, they started reporting positive economic news. The day before they were talking gloom and doom. Never believe what they say on the news.
tonyseattle mike or roger, are your wives active in your investing or do you do it by yourselfs
tonyseattle yourselves
Mike_Summey tony, I handle everything myself.
tonyseattle did your wife support you or was it something that she just stayed away from
broadway al, you are exactly right I think. That’s why all the talk of recession now too! Just my opinion though
Roger Dawson Depends on the wife I suppose but I’ve always done it myself.
Mike_Summey Roger, why don’t you tell everyone about your trip to China?
alex I want my wife and I to be a team. If anything happens to me, she can take over the investing bussiness.
Al Lee broadway, you are right on.
Mike_Summey tony, she never had any interest in real estate.
John Mike, do you agree with the statement, just because you wouldn’t want to live there, doesn’t mean you shouldn’t buy? I’ve seen some okay properties in decent neighborhoods, that cash flow well. I personally wouldn’t live there, but the people don’t seem to mind, and the cashflow good.
tonyseattle that is how i feel alex but i am having trouble getting her motivated we do everything else money wise together
Mac Alex, that’s an issue I’m dealing with. My wife and I support each other. But she doesn’t want to manage real estate if I die. The best thing is a succession plan that anticipates what to do in this case.
Roger Dawson It was a great trip Mike. I did three three day seminars. One in Gounzoe in the south, one in Shanghai and one is Beijing. Things are booming over there. It’s unbelievable what’s happening.
John I’m accustomed to nice neighborhoods with well manicured lawns and such, with no multi-family homes anywhere nearby.
Al Lee If you are using a good property manager your survivors should not have to do much at all to keep the cash flowing.
maria tonyseattle it is important for woman to become motivated about investing
tonyseattle roger how many languages do you speak
Mike_Summey John, you just described the best type of rentals to have. They are the ones that fit the middle segment of the rental market. Stay away from the top and bottom 30% and you will do well.
Al Lee maria, I run a property management comapny and we have a number of very savvy female investors as customers.
broadway mike, the top and bottom 30% of renters or property values?? Or, is there a difference??
Roger Dawson English, some American, and a few words in Spanish and French. Sometimes I order a beer and get a hooker, but it seems to work out.
maria Al , that is great. Mostly women dont know much as they were not encouraged to take care of themselves. This is slowly changing though.
John Roger, it seems as though you’ve visited alot of countries, what place would you pick if you had to move?
tonyseattle the funny thing is that my wife loves looking at realestate we even flipped a house together and fixed up our house together, very involved
Mike_Summey maria, in my area there are some very savvy female investors as well as some men who don’t have a clue. That’s probably the case everywhere. Real estate investing is not for everyone…only those who want to become wealthy.
tonyseattle my wife has the interest just not the motivation
tonyseattle yet
Mike_Summey broadway, the properties that would rent to the top and bottom 30 % of renters in a market.
DavidOro i know a female school teach in california who has 25+ house in the dallas area
Roger Dawson John, if I couldn’t live in the US, I’d live in the French speaker part of Switzerland. Vevey or Montreux. Fabulous life style but you ‘d need unlimited amounts of cash.
broadway tony, my wife is like that too but she makes it a little too personal sometimes
broadway Thanks mike
maria Mike, yes I guess it depends on what each individual chooses. From my own perspective I was not taught anything about money or investing but have chosen to teach myself how it all works
John Roger, wow, I know someone from Switzerland. I should talk to them about it… good think you have the funds in case you want to move out! =)
maria tonyseattle she needs different motivation then
Roger Dawson Mike are you appearing on a radio show late tonight?
alex maria-you go girl!
tonyseattle i taught my wife to be less emotional once and then she wouldn’t kiss me for a week 
maria tonyseattle no that is awful (lol) the poor women
alex that’s a good one
Mac tonyseattle, my wife is not directly involved in my real estate business, but she’s a big help contributing what she’s good at. She helps with selecting properties and figuring out what to do to fix them up. She becomes my eyes and ears on the street to tell me what will be attractive to potential buyers and tenants.
Mike_Summey Roger, no that will be on March 10 & 17. I haven’t told anyone yet, but I guess I willnow.
Sandy Tony, what part of Seattle are you in?
broadway tony, you took that just a bit too far it sounds like
santo nite all
John Mike, flipping popped another question of mine. How do you go about buying and renovating a fixer upper to keep and rent. It seems as though you need cash on hand for renovations, as I am sure banks won’t finance the purchase AND give you extra money to fix it up.
maria Mac that is great team work
tonyseattle renton highlands southeast seattle
Sandy I worked in Renton for a bit. Lived in Seattle….Built a house between apts.
Mike_Summey Garrett Sutton who was my guest a couple of weeks ago has invited me to be on his radio show which airs immediately following the chat on March 10 & 17. Everyone in the chat will be able to call in with a question and talk with me live.
maria I have been surprised at how cheaply you can do up a house
Mike_Summey Goodnight Santo
Mike_Summey Hope you get to feeling better.
tonyseattle sandy where are you now
John I remember reading on buying the ugly puppy at the pound, comment that Roger talked about
Sandy Long Beach, Ca.
John and buying those and fixing them up
tonyseattle good weather
santo thanks mike
Sandy Very
Sandy But Seattle has the beauty
Roger Dawson Goodnight everyone. Next week I’ll be speaking in Tucson but I’ll be hear again on February 25th. Good investing!
tonyseattle it was fun i will see you next week
Al Lee Goodnight. I have to run, also.
alex good night all, thanks
tonyseattle beauty in the summer
maria thanks everyone see you all next week
Jeff S CPA see you all next time
Mike_Summey I’ve got to run too. I’ll see you all here next week.
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