Chat Transcript - April 7, 2008
Posted on April 8, 2008
Roger Dawson Good evening everyone!
Mike_Summey Hello everyone!
sparky37 Hi Mike & Roger
jacepharm@gmail.com Hello Mike and Roger
Mike_Summey Don’t everyone talk at once.
sparky37 Mike, how much room do you think you can negotiate with a bank owned property?
sparky37 They are asking 400k was thinking of offer of $30k
sparky37 300k
Mike_Summey sparky, that depends on how many foreclosures the bank has and how close it is to the end of a quarter when they have to report them.
jacepharm@gmail.com Mike do you still borrow money to buy from the banks? You must be buying all cash at this point
jeffers hello everyone!
jacepharm@gmail.com Hello Jeffers
Mike_Summey jace, I usually buy for cash and then term out a loan later to get my cash back. I bought 2 foreclosures for cash on March 28th & I have a closing set for April 17th to put bank loans on both of them.
Mike_Summey Hi jeffers
Mike_Summey sparky, offer them $300K. The worst they can do is say no.
Mike_Summey sparky, will your $300K offer be for cash?
jeffers I have the option of either getting a 100k line of credit or loan. Which would you choose? Should I buy the two houses cash, and then refinance those? or use the line for downpayments?
Roger Dawson Sparky, one of the keys to credibility that I teach is to use specific numbers. Try offering them $301,750 and come up with some reasons for offering that number.
sparky37 I like that Roger
Mike_Summey jeffers, I prefer a line of credit. You can use it to buy for cash and then get a term loan later to repay the line and do it again.
jeffers Ahh I see, so stick with the line of credit, but pay cash instead of using it as downpayments?
Roger Dawson Mike, did you pass your pilot training? Are they still letting you fly?
Mike_Summey jeffers, that’s a good tactic that can get you some great deals. Nothing motivates sellers, including banks, more than cash offers and quick closings.
jeffers I noticed that with lines of credits, they are usually no fixed options, and it’s interest only. In your experience, how do you handle these lines with adjustable rates?
jacepharm@gmail.com Mike on those two properties your buying do you make acellarated payments?
Mike_Summey Roger, I’m good to go for another year. It’s not actually a test, it’s called recurrent training. If you don’t pass something, you have to keep at it until you get it right. I finished the 3 day training in 2 days.
Roger Dawson Jeffers, be sure that you’re not getting a blanket loan. Meaning that they want several properties as security.
jeffers Roger Dawson, thanks for reminding me. I remember reading that in your books
Mike_Summey jeffers, with a revolving line of credit you pay interest only. You want to use the line to buy for cash, but then get a term loan as soon as possible to repay the line. The term loan could be a fixed rate loan.
jacepharm@gmail.com Mike, I have flown several times for business on Citation X…Its considered the fasted private jet in the world. Amazing speed heading back to the east coast from the west coast
Mike_Summey jace, what do you mean by accellerated payments?
Mike_Summey jace, that’s a bit more than I fly.
jacepharm@gmail.com Mike,I mean do you pay the loans faster or do you let them ride the full term of the loan…In other words to save the interest
Mike_Summey Wonder where everyone is tonight?
jeffers how long do you usually have to wait until you can get a term loan, and can you apply for term loans from another bank from where you originally got the line from?
jeffers Mike, regarding jets, have you seen MaverickJets, they seem like a low cost alternative to the more expensive jets out there.
jeffers Jace, I’ve read that some people take 30 year loans, but double or even triple the payments every year to cut it down to 1-15 years
jeffers 10-15*
jacepharm@gmail.com Mike, the citation X is a big jet….I would love to own one of those one day….Price tag over $10 million…Will have to own allot more houses or buy into those ownership programs….I will focus on buying houses so that one day I may enjoy that luxury
Mike_Summey jace, for over 25 years I have used fixed payment/floating rate loans with 15-20 year amortization and a 5-7 year balloon. I know that’s not what most of you use, but it has worked well for me. The initial fixed payment is usually based on a rate 1/2 to 1 point above the current prevalint rate when I take out the loans.
Mike_Summey jeffers, I’ve flown some of the smaller jets, but I prefer the King Air to them even though they are faster. I’ve found the light jets are just too small in the cabin.
sparky37 Mike, everyone is getting ready for the NCAA Basketball game
Roger Dawson Mike, wouldn’t a beginning investor who needed tax shelter be better off getting a loan rather than paying cash for tax shelter reasons?
Mike_Summey sparky, it doesn’t start until 9:00 Eastern, does it?
Roger Dawson How much preparation do you need to watch a basketball game on TV?
sparky37 guess there tv’s take time to warm up 
Mike_Summey Roger, how would getting a loan be better than paying cash?
Roger Dawson Oh, we have electric TVs in California!
Mike_Summey Hi Penny
Penny Hi Mike & everyone.
sparky37 electric is too expensive in the northeast
Roger Dawson Mike if you borrowed money against your first or second home up to the price you paid for it, wouldn’t the interest be tax deductable against any other income?
Roger Dawson Hi Penny!
Penny ;-)Roger
Mike_Summey jace, I flew the new Cessna Citation 1P+ and it performed well, but two large men can’t sit in the cabin without moving the seats to the center or their heads will hit the top of the cabin.
Mike_Summey Roger, you are correct that the interest would be deductible, but it takes $1 paid in interest in order to get a $1 tax deduction. How is that better than keeping your $1, paying the tax and still having what’s left. I’ve never understood the argument that paying interest is a good tax deduction. Cash or financed, you still get to deduct the depreciation and all other expenses.
Mike_Summey Hi Lon
Lon What did I miss. I didn’t kill my computer, but I felt like it.
Lon two of them
Lon We need that debate between you and Al, Mike.
Mike_Summey Lon, Roger is taking over Al Lee and trying to explain to me why it’s better to have a property fully financed rather than owned free and clear. 
jeffers is there a minimum amount of time when you buy houses for cash, to turn around a refinance to pay back the line?
Mike_Summey jeffers, some people say there is a waiting period, but I just closed on two March 28 and will finance them on April 17. I think the waiting period is to “refinance.”
Mike_Summey Hi Doug, I didn’t see you come in.
Doug_in_CT What kind of rate are you getting Mike?
Mike_Summey Doug I get prime rate.
Doug_in_CT That sounds like a steak.
Lon Mike, I submitted my first offers using the OG yesterday. Took me a while to figure out how to manipulate the numbers the was I was wanting to, once I did it worked nice.
jeffers wow, that’s quick! Did you pay cash out of pocket or with a line? I’ve heard you have to wait 6-month or something like that before you can refinance, they must be dealing with properties that weren’t paid off I am assuming?
jeffers that’s why I was a bit confused and shocked that you did it so quickly
Roger Dawson Mike, what do you think about the government getting involved to help people in foreclosure?
Lon 6 months is for an FHA loan. It’s 90 days to refinance for non-FHA.
Mike_Summey Lon, the more you use the program, the better you will get. I used it to purchase the two bank foreclsoures. the letters I submitted to the bank came right from the OG. Both were accepted.
Mike_Summey jeffers, I closed with cash. There was no financing on the properties at closing. The term loan I will put on them on April 17 will be the initial financing, not a refinance.
jeffers Ahh I see, if you pay cash in full using a line, can you get the same benefit?
Mike_Summey Lon, it’s 1 day for initial financing on a property acquired for cash.
Mike_Summey jeffers, that’s correct as long as you don’t have to pledge the property being purchased in order to draw on the line.
Lon Mike, I didn’t know if that applied for FHA loans or not, and their big thing is (and this doesn’t apply to you since you do not resell) if you were to sell a property within 6-months for a certain percent above the purchase price you need good documentation as to why the selling price is so much higher than the purchase price.
jeffers im sorry, when you mean pledge, as in the property you may buy as collateral sort of in order to pull the line? But if you can pull the money freely without collateral, you’re in the clear?
Mike_Summey jeffers, that is correct.
jacepharm@gmail.com Mike, yes you are correct the cabin on the citation 1P can be tight for two big men. I will look up the king air on the web and see what it looks like. Didnt you have pics on the site at one time?
jeffers thanks for clearing that up
Mike_Summey Lon, I’m not familiar with FHA loan guidelines. Never used one.
Lon Just what I remember being in the news last summer.
Mike_Summey jace, there is a ton of information on King Airs on the web.
Mike_Summey Roger, did you die?
jacepharm@gmail.com Mike, I will look it up on the web.
sparky37 Roger is warming up his tv!
Mike_Summey jace, the King Air is the most popular business aircraft ever built.
Lon Mike, did you fly down to take your test?
Roger Dawson No, Mike, I’m still here. I paid my property taxes today, so I can’t say it was a great day.
Mike_Summey Roger, you didn’t have to pay property taxes by Dec 31?
Lon You gotta pay the piper, Roger, I just don’t want to know his rate in CA.
sparky37 Roger how many properties do you have?
Roger Dawson In California the second payment on property taxes is due April 10th.
Doug_in_CT I know the feeling you are referring to Roger….its enough to make you consider impounds.
Mike_Summey Lon, yes I flew down for the flight training. I squeezed 5 hours of simulator time into the second day and then flew home after that. Another 2 hours through rough weather.
sparky37 Mike do you pay the taxes through your mortgage or seperate?
Lon Did you bring a co-pilot to fly you back in case you didn’t pass?
Roger Dawson I flew back from New Orleans on Friday. It was a real adventure, ducking and weaving around huge thunderstorm clouds.
sparky37 Your arms must be tired
Lon thump thump TING!
Mike_Summey sparky, I do not allow the banks to escrow for taxes and insurance. I prefer to keep my money and earn interest on it rather than giving it to the bank to use. I feel the same way about over paying taxes just so you can get a refund.
sparky37 Sme lenders require you to escrow taxes and insurance
sparky37 some
Mike_Summey Lon, no I didn’t. You don’t fail, you just keep at it until you get it right.
Lon Mike, you could have turned that into an extended vacation. Oh, darn, I crashed, guess I have to stay another day and try again tomorrow.
sparky37 Roger, how many properties do you have?
Mike_Summey sparky, if you are getting a “qualifying loan” you will have to escrow for taxes and insurance. Otherwise the originating bank or broker will not be able to sell the loan on the secondary market.
sparky37 Mike, I would imagine most of us are getting “qualifying” loans
Mike_Summey Lon, I take pride in being able to handle whatever they throw at me and being able to deal with it. You name it: engine loss, electrical failure, gear failure, avionics failure, engine instrument failures, etc. You get it all and have to deal with it.
Mike_Summey sparky, that may be true.
sparky37 Roger wake up!!!!
Lon Mike, no doubt you’d want them to throw that stuff at you. You never know when that training will be needed.
Mike_Summey I think it would be worthwhile for everyone to meet with a banker and discuss other options than just 30 year fixed rate qualifying loans.
Roger Dawson Sorry Sparky! I’m still here. Thinking about paying my income taxes on 4/15
sparky37 Mike, you need a community bank for that, not a big bank
Lon Roger, do you get in the long lines at the post office around midnight?
jeffers Mike, Roger, gotta go, thank you for your help!
jeffers Good night everyone!
Mike_Summey goodnight jeffers
sparky37 Roger better to pay it from earnings then to have not earned at all or something like that!
Roger Dawson No, my CPA files electronically. I don’t mind the level of taxation in this country. It’s what they do with out money that drives me crazy.
Mike_Summey sparky, yes community or regional banks offer many good products for new investors, but everyone seems to want to think 20% down & 30 year fixed.
sparky37 Mike, I know they tried the 40 and 50 yr amort loans but I am not a fan of those, what other loand do you reccomend?
sparky37 I think I have Al’s keyboard
Mike_Summey Roger, I have my tax return lying on my desk. Will get it out by week’s end. I put it on the postage scale and it weighs 7 pounds 4.5 ounces. 
sparky37 Mike they don’t take Cash!
Lon E-file, Mike, E-file.
Mike_Summey sparky, as I mentioned earlier, I use fixed payment floating rate loans.
rbrittain mike, what kind of credit is needed to get into a line of credit to purchase homes? We are very poor and reading along, when the phone just interupted methe insurance claim that the insurance company won’t pay has gone to collections now. I am trying to stay positive and fight our way out of this. Any ideas?
Roger Dawson The difference is payment between a 15 year loan and a 30 year loan is not huge and you save $10s of thousands in interest.
sparky37 Mike are they amortized over 15 or 30 yrs or something else?
Mike_Summey Lon, I still have to provide 8 banks with copies of the return. It takes almost a whole case of paper to run the copies.
Lon wow
Mike_Summey rbrittain, if you have poor credit, you will have trouble getting most any kind of financing from a bank. You might be able to find some seller financing if you have a good reputation. Before you will be able to get a line of credit, you will have to improve your credit and be able so show a good track record for a couple of years. I wish I could tell you otherwise, but I try to be honest with everyone.
Mike_Summey sparky, my loans are usually amortized over 15 years, but occasionally I will get 20 year amortization. Banks do not like to make investor loans with longer than 15 year amortizations unless they are going to sell the loan.
Mike_Summey Whoever said it earlier, I think you were right. Everyone is getting ready for the basketball game.
Doug_in_CT Mike are these 8 different banks you reference local banks or national banks?
Lon Oh yeah, that’s tonight. I need Memphis to win to win my bracket pool.
sparky37 Mike , do you use OG with 15yr amort?
rbrittain thank you Mike, we will continue the hard work and keep reading. Thank you for writing your books, at least we can continue to work at fighting our way out of this rat race.
Roger Dawson I’m going to go skiing for the rest of the week, but I’ll be back in the chat next Monday.
Doug_in_CT Where are you skiing Roger? Big Bear?
Mike_Summey Doug, they are a mix of local, regional and national banks. Each serves a purpose. I’m a big believer in not putting all your eggs in one basket. Develop several banking relations.
Mike_Summey Hi siha
Mike_Summey rbrittain, just remember what caused your current problems and vow not to repeat them.
Penny enjoy, Roger. See you next week.
Mike_Summey siha, you’re a bit late. We’re just getting ready to wrap up for tonight. If you have a quick question, we’ll be happy to answer it before we sign off.
Roger Dawson Doug, I’m taking my son John and his daughter Astrid to Mammoth. It’s on the east side of the Sierra south of Reno.
Mike_Summey Roger, don’t crash and kill yourself.
Mike_Summey Roger, stay on the bunny slope.
Mike_Summey Well, goodnight all. I going to watch the basketball game.
Lon night all
Mike_Summey See you here next week.
sparky37 Night Mike
jacepharm@gmail.com good night mike and roger
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