Chat Transcript – February 25, 2008
Posted on February 26, 2008
santo hi, mike
Lon Hi Mike
Mike_Summey Hi everyone!
Mike_Summey Looks like we’ve got some earlybirds.
Mike_Summey Hi David
DavidO hola Mike
Mike_Summey Hi Poboy
Mike_Summey Hi scoty
Mike_Summey Looks like we may have a crowd tonight.
DavidO Hey mike, what’s the most people you’ve seen in this chat room?
Mike_Summey Any questions before we get too big a crowd?
Mike_Summey There’s Roger Dawson
Mike_Summey Hi danko
danko Hi, Mike, Roger, all
Mike_Summey David, I think the most we’ve had at one time is about 70, but many chats have numerous people come and go throughout the chat.
Roger Dawson Hi everyone. From sunny LA.
scotyl10 Hello I am stuck in PHX airport my flight had a mechanical but I got a round tripvoucher for my next vacation
santo hi, Roger
Lon Mike, what’s the latest news on the “Free and Clear” vs. “Interest Tax Write-off” debate?
DavidO well, i’ll be hopping in and out as i have work going on right now.
Mike_Summey I did an interview on the Michael Dresser show today. I understand you can go to www.michaeldresser.com and listen or even download it.
Mike_Summey Lon, thats a good question. Al has suspended his radio show for a while until he gets his property management company going.
Mike_Summey Hi ggggg
gggggg HI
danko Mike, have you bought any properties “subject to” existing financing?
Linda What is free and clear?
danko I don’t know much about it, but it gets a lot of talk at our REIA meetings
DavidO hey mike you gave the wrong URL it’s www.michaeldressershow.com
Lon Free and clear means nothing is owed on the property.
Mike_Summey danko, no I’ve never done that. It scares me.
Mike_Summey Thanks David. I knew I was close.
scotyl10 Al has a great show there is a lot of info on the old pre recorded shows chack them out
Mike_Summey Roger, we spent most of Michael Dresser’s show today talking about the Negotiating book and various negotiating techniques.
scotyl10 Santo did yuor wife get that paper work problem worked out
DavidO mike do you know what hour on the show you were on? 1, 2, or 3?
Roger Dawson Danko: don’t buy subject to existing financing. You need to get permission from the existing lender, which is not hard to do.
Mike_Summey Linda, Al & I have an ongoing debate about whether its better to eventually own your properties free and clear versus keeping them financed to the hilt.
Mike_Summey Hi indiop
Mike_Summey Hi rggamel & sackos
danko Roger, I’m hearing both extremes. Our REIA pres does subject to almost exclusively
Linda Ok, thanks, I didn’t understand what you were talking about.
sackos hello
rggamel1 Hi Mike
DavidO Hi Mike, I agree with you. I’d rather go the free and clear route but I know what Al is saying.
Lon Danko, subject-to is a comfortability factor. If you’re comfortable doing them, great, as long as you don’t hide it from the lender and insurer.
scotyl10 Mike did you post that artical that was talked about in last weeks chat
danko no, no hiding
santo scoty, I’am getting sick over this s.s. mess—I spent 2 days last week in the hospital because of the stress–they thought I was having a heart attack–no progress on the matter
Mike_Summey David, I’ve never seen a recession bring down someone who owns properties free and clear or at least has substantial equity. I’ve seen many go under with excessive debt.
Mike_Summey Hi oz
oz Hi Mike and all
Roger Dawson Danko: a lot of people teach methods of hiding from the unerlying lender that the propery has been sold but it’s not ethical and you shouldn’t do it.
Mike_Summey scoty, yes I did. It is on the home page of the website.
Roger Dawson Hi Penny
Mike_Summey Hi Penny
Penny Hi Mike!
danko Roger, that’s why I’m shy of it, too. I want to be ethical on everything.
Penny Hi Roger & everyone
sackos Mike, do you believe rental rates will rise due to rising interest and how hard it is getting to own a home?
scotyl10 Santo time to call your congress person
Roger Dawson Interest rates are the lowest they have ever been. Why would you want to assume a loan with higher interest anyway?
Mike_Summey danko, the only reason I can see for buying subject to existing financing is because your credit won’t support getting a new loan. Most of the time if you are in that position and the lender finds out they will call the loan. I’d rather do it right to start with.
Lon Roger – no qualifying.
Mike_Summey sackos, yes I think rental rates will continue to rise. They’ve already risen since the start of the real estate decline. When people can’t buy they have to rent and that puts pressure on the rental inventory and pushes rents up.
oz Santo, you want to stay out of the hospitals, I too was taken in the ER for a very longday with a probably heart problem, awaiting a heart cath now, no fun, just necessary I guess.
danko Mike, I agree. I have very good credit, so I’m able to get a new loan. I just didn’t know much about “subject to” and all the ramifications. It’s not something I know much about
Mike_Summey Hi Rose
santo scoty, my local congressman is having his office with a picket line–they want him out for a drunk driving charge–oh me oh my nobody can help me
rggamel1 Mike, I’m self employed. Stated income loans not available. Any other suggestions on assuming existing loans without triggering a call?
Mike_Summey danko, some people attempt to sell using wrap around mortgages where they carry the purchase money mortgage at a higher rate than the underlying mortgage and then make a spread each time you make a payment. This is very dangerous because if they fail to make payments on the first mortgage after you’ve been paying for years you could be in a position where you have to pay off the first to salvage your home.
Linda I would think, with so many forclosures, unfortunatly, those people have to live some place, which puts them into the rental market as well? That’s my thought. In the Boston area we usually have a strong rental market, but with so much of the multi familys’ being converted to CONDOS’ and rehab’ed in the process they are on the higher end in quality of the rental market, making a normal non flashy place a little more difficult to rent.
danko Linda, the way I see it is that people are still having babies…and each year is a new crop of renters entering the market
Mike_Summey rggamel, why don’t you look for seller financing. Most people don’t think it is available, but I can assure you it is. No one says they are will ing to finance in the beginning of the negotiation. Make offer asking for it and see what happens.
Mike_Summey Linda, the normal, no flashy place will appeal to people who can’t afford the higher rent places.
Roger Dawson I think that with single family residences, rents will rise because of increased demand. Not so in the condo market where developers are unable to sell any more and are converting units to rentals, which increases the supply and forces rents down.
Mike_Summey Roger, good point! That’s one of the reasons I do not recommend condos as good investments.
danko Mike, I’ve been calculating some of my offers with your zero interest seller financing. Sometimes it doesn’t work with 15 years, but will work with 17 or 18 years, or even something like 200 months. Nothing says it has to be exactly 15 year or 30 years, right?
Mike_Summey danko, that is absolutely correct. I bought one property with 140 month seller financing, another with 188 month and another with 120 month.
Mike_Summey danko, there is no set number of months you have to make a loan.
danko creative financing 101
danko lol
Linda I just purchased the Offer Generator, and I’m playing with it to get used to how it works, is there anything special I should know about the program???
DavidO Mike, I know you say there is seller financiing out there. But what I see is that a lot of people are mortgage to the hilt or refinanced and are under waterThere just doesn’t seem to be much owner financing left. Or am I totally wrong?
Mike_Summey danko & others, when asking for seller financing, ask for what you want and forget about conventional type financing. There are no rules or regulations on seller financing and with seller financing, you don’t put your other assets at risk. With a purchase money mortgage, which is what seller financing is, the only recourse is against the property.
Linda Mike, When you ask for that seller financing is that something in the GENERATOR, or would you have a lawyer write it up with a P&S?
Mike_Summey Linda, any question you might have will be answered by placing the cursor on the label of the item on which you have a question. Also, there is a link at the top of each page that when you place the cursor on it it will tell you the purpose of the entire page. I like to say the program is idiot proof.
DavidO mike, for the seller in seller’s financiing part; if the buyer doesn’tt make the payments the seller gets to forecelose on the home and take it back, right?
danko mike, are you sure it’s idiot proof? I will let you know. 
Mike_Summey Linda, when you create offer using the Offer Generator, ther is a dropdown menu that lets you select bank financing, seller financing or other financing. You can combine two of them or all three of them in creating an offer.
DavidO And Mike, again on seller financing. If the seller dies before you pay them back, who do you end up paying back? The estate of the seller?
santo danko, I can’t get it to work for me
Mike_Summey David, that is correct. Their only recourse is against the property. With most bank financing, in the event of a foreclosure, if the bank does not get what owed on the property they can get a deficiency judgment and go after your other assets. If they write off the deficiency, it become taxable income to you and the IRS will come after you.
Mike_Summey David, if the seller dies, and I’ve had three who have, the payments continue to the estate.
DavidO hmm. the deficiency judgement is a great plus for seller financiing.
DavidO so mike, do you try to get seller financing first? is it your first preference?
Rod Speaking of deficiency judgement, wasn’t there a law passed recently that would do away with that called Mortgage Forgiveness Debt Relief Act of 2007…
Mike_Summey Everyone, you can combine seller financing and bank financing, but the banks will want to be in a first position and will probably not want to finance more than 50% if seller financing is involved.
Mike_Summey Rod, I’m not sure about that. I haven’t heard of it.
Rod I don’t know much about it but if I understand correctly, that law would help convince sellers to do a short sale.
Lon Rod – yes there was, and it’s only good through 2009.
Mike_Summey Lon, is that something to help during the current crisis?
Lon That’s exactly what it was created for.
Rod I found this: http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html
Mike_Summey I’ve used seller financing for more than 30 years. It works very well. No qualifying. Minimal closing costs. Easy purchasing.
Roger Dawson A suprisingly high number of older people own their homes free and clear. It was what people did in those days.
Lon The downside of that law is the 2 out of the last 5 year tax break on your primary residence. It now states that if you moved and turned your primary into a rental, the percentage of time it was used as a rental unit will be taxed as long term gains.
danko Mike and others, what is your mixture of single family unit and multi? I am very skittish about purchasing a single family rental. When you have a vacancy, you have 100% vacancy. What kind of mixture of SF/MF do you have?
Rod good question danko
danko and is it really that easy to rent a SF home?
Mike_Summey Roger, you are correct and many Baby Boomer have their homes paid off or have very high equity in them. Many of these will be attracted to seller financing as a way to convert real estate equity into a retirement income stream. If they finance at 0% or very low rates like 1-2% they never have to worry about rates dropping and the buyer getting a new loan and paying them off at a time when they have no place to reinvest the money.
Mike_Summey danko, whe you have just one SFH and it is vacant, you have a 100% vacancy, but if you have 10 it is only a 10% vacancy. Multi-Family works the same way.
santo danko, I have 2 singles–2 duplexes–2 threeplexes
Lon Mike, I know this probably goes against your beliefs, have you ever purchased a home with an interest only (or more) loan?
Mike_Summey danko, single family homes are the easiest of all to rent, they attract the best tenants, they are the easiest to finance and the easiest to sell if you ever decide to do that.
Mike_Summey Lon, yes I have, but I only did so for short periods when I thought rates were going to fall or to facilitate a quick purchase that I later refinanced with a permanent loan.
Mike_Summey Hi eric & Mark
ericl hi
danko maybe I just need to get over my *) and not just look at multi units
Rod The problem I find with SFH is that you have to buy it CHEAP to have the rent cover the debt.
Mike_Summey danko, I recommend starting with single family homes, buy a few, get some experience and then look at larger properties.
danko We have a lot of rehabs here…I could buy cheap, put a ton of money into rehab and still be able to finance with cash flow
Mike_Summey Rod, the word is wholesale, not CHEAP! 
Rod I stand corrected. 
danko No. I need to buy cheap!!!!!!!!!!!!!!! Lol
danko CHEAP!!
Mike_Summey Rod, remember that you can facilitate a wholesale purchase at asking price by adjusting the terms.
Linda Danko, where are you?
danko Linda, Twin Cities…home of Diablo Cody
Roger Dawson Yes, it’s hard to cash flow with single family residences but anything will cash flow if you put more cash down on the purchase. We are investors aren’t we? We invest money to get more. Too many beginning investors are infatuated with buying for no money down.
Lon Twin Cities? I’ll be up that way in two weeks.
Mike_Summey I have my builder at a planning board meeting tonight trying to get approval of three 4 unit buildings I want to build on property where I removed 12 mobile homes.
danko Roger, my down payment is home equity that I still pay interest only pymts. So I do have to calculate that into my monthly payments.
gggggg Mike-why did you remove the mobile homes and not rent them out
danko I can put a lot of cash down, but I will still be making pymts on the cash
Mike_Summey Roger, I have been buying single family homes that would cash flow for over 35 years. Yes they are hard to find, but not impossible. You just have to be patient.
Mike_Summey danko, the Offer Generator factors in a return on your cash as well as the payments on the loan.
Linda According to one of your books Mike, mobile homes are like automobiles loosing value all the time? Right?
Mike_Summey Danko, that cask includes closing costs and repairs as well as down payment.
Mike_Summey Linda that is correct. The mobile homes I removed were only renting the lot. I didn’t own the homes.
Mike_Summey Hi Sandy
Sandy Hi Mike
Roger Dawson I wish I had put 50% down on a four plex in Beverly Hills 20 years ago. Leverage is good but it’s not essential.
Sandy Mike, I have a new computer. Do I have to re-buy the offer generator? I have the “beta” version installed on my very old desktop.
danko I want to ask again about SFH rentals. Those others in the chat who have SF rentals, whereabouts in the US are you and what kind of luck do you have renting them? Are there some geographical areas more conducive to SF rentals than others?
Linda Mike, I wish you luck with the building department, hopefully they will give you the permits you need…
Lon I am the Greenville, SC area, about an hour from Mike. I had people asking me about the property before I put the For Rent sign out. When I put the sign out, I had a phone call before I even got home.
danko I just told my wife what Mike said about SF being the easiest to rent…she said, “yeah, where he is…” So I have to ask.
Roger Dawson Danko, one point about SFH. They have the lowest turnover of any rentals (assuming they are unfurnished). The highest tenant turnover is with furnished one bedroom apartments.
Mike_Summey Here’s an example! If you buy a $100,000 house and put 20% down, that’s $20,000 and you need to get a return on. If you want an 8% return on your cash, you have to reduce the NOI by $1,600 and structure a purchase that can be serviced with the remaining NOI.
Mike_Summey Sandy, di you buy the download version or the version on CD?
Sandy download
Mike_Summey danko, I have SF in Western North Carolina and Upper South Carolina.
santo danko, I am in Buffalo ny– my SFH the tenants are better–multis give more cash, but some headaches with it
Lon danko, stay away from bad neighborhoods. try to find properties with romance, perhaps a view of the Mississippi River, or the TC skyline. Register your rentals with the local housing authority and you’ll probably have a waiting list of renters.
Mike_Summey Sandy, sorry, but that version cannot be relaoded. You’ll have to order the new version, but if you will put in the comment block on the order that you are upgrading from the download version, we’ll give you a $20 discount.
Mike_Summey Lon, good advice!
danko okay, well I just need to make some offers and try not to hyperventilate…lol.
Lon Mike, thanks.
danko But I will have a property to report by spring
Linda We have a Single family home in BRIGHTON, MA (part of Boston) close to BOSTON COLLEGE, & HARVARD, we never rent to students, learned long ago not to. Our single is very old, althought we modernized it in 1997 when we bought it, it’s not flashy like our 1/2 of our original 2 family that we CONDO’D in 2005 and will be putting back on the market for sale this spring. With singles you have to be careful about the FAMILIES you will attract, because if it’s quite old, you very likely have LEAD PAINT issues there, which are only an issue for children 5 and under at least in MA. We’ve been lucky and most of our tenants in that property stay for 2 or more years, that might not sound like alot, but we’ve had years of constant turnover. Our plan is to start buying up more singles now in the suburbs where we are living, like Mike say’s it takes alot of work, but whow won’t it be worth it when the mortagages are paid off.
scotyl10 i have got to go hope to talk woth yoy all next week
Mike_Summey danko, think of it this way, if you make an offer and the seller throws it in the river, you’re only out the sheet of paper it was printed on.
danko lol…and I’ll use recycled paper so it will still be good for the environment.
danko thanks for all the information. I really need these weekly chats. They keep me on course and give me a good “pep” talk.
Mike_Summey goodnight scoty
danko It’s that time. See you all next week. Take care, all.
danko Thanks again
Sandy okay Mike.
Roger Dawson Good night everone.
oz g/night all
Mike_Summey everyone, the coming 2 years are going to be the best time to buy long-term investments I’ve seen in my lifetime. I’m really looking forward to adding to my portfolio. All of you you should be counting your blessings that your srarting now instead of 3-5 years ago. There’s going to be a lot of money made in the coming years.
Mike_Summey Goodnight all.
Mike_Summey See you here next week.
Rod take care all.
santo I think I will take my 1941 oldsmobile for a spin–nite all.
Linda Good night…
LCD g’bye
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