Chat Transcript - April 28, 2008
Posted on April 29, 2008
Mike_Summey Hi valgrn
Mike_Summey We’re early
valgrn Hello Mike Summey
valgrn Yes -
Mike_Summey Where are you located?
Mike_Summey Hi Lon
Lon Hi Mike
valgrn TN
Mike_Summey valgrn, how’s the market where you are?
valgrn Would you mind me running a couple of questions by you before the whole crew arrives
Mike_Summey Hi Eddie
Mike_Summey Go ahead.
EDDIE-NC hello
valgrn Smokey mtns - market is still good
valgrn maybe too good
Mike_Summey valgrn, when you say good, do you mean good for buyers or sellers?
valgrn you tell me - I am new to this
EDDIE-NC anyone seen the tornado damages in Sulfolk Va.
Mike_Summey valgrn, when no one can sell, it’s good for buyers. When buyers are plentiful, it’s good for sellers.
Mike_Summey Eddie, no! Was that today?
Mike_Summey Hi Mark
EDDIE-NC couple hours ago. It’s a disaster
valgrn We have put in an offer on a foreclosure - first time ever - foreclosed at 184K The bank won’t respond until the 7th - is this normal? There have been no other offers
mark Good evening mike
Mike_Summey I beat everyone except valgrn here tonight
Mike_Summey Hi Scott
Scott44544 hello
valgrn The auction is set for the 9th
Mike_Summey valgrn, did you offer cash with a quick close?
Mike_Summey Hi poboy
Mike_Summey Hi broadway
valgrn The house will sell for 325 plus
Mike_Summey Hi Sparky
poboy Hi Mike
valgrn yes
sparky37 hi mike
broadway Hello Mike and everyone too!
Mike_Summey valgrn, if you have to sell real estate to make a profit, you are not an investor, you’re a speculator and now is not a good time for speculators.
Scott44544 Hey question about the exchange 1031 I think
valgrn I am not interested in selling it right now - I just wanted to know if it is normal for a bank to wait to respond - We want to rehab it and live in it
valgrn I may not be giving you enough information - sorry
Scott44544 Do I have to put all into another house or can I split it up? say two houses
Mike_Summey Scott, wait for Roger to get here. He knows more about exchanges than I do. I’ve never done one. Of course I’ve never sold a property either so that may be why I don’t know much about them
sparky37 hi roger
Scott44544 ok
Roger Dawson Hi everyone!
Mike_Summey valgrn, did you give the bank a timeline to respond?
broadway hello roger!
Mike_Summey I always put a deadline for a response in every offer.
valgrn Yes - twice
valgrn thanks
Mike_Summey The two foreclosures I bought in March both had a March 31 closing date and 24 hours to respond.
valgrn I think that we may have reinvented the wheel here - good lesson for the real estate foreclosures that we are looking at as potential rentals
Mike_Summey Hi Roger
Scott44544 Roger, what are my options on an exchange
valgrn The response was that they would respond to the best offer on the 7th
Roger Dawson From a negotiating standpoint giving the seller time to think about it doesn’t make much sense to me. Let the seller know that you have options and ask for a decision right away.
Mike_Summey Roger, can you help Scott with info on 1031 exchanges?
broadway Mike, on those houses you bought in foreclosure, will you have to do much to get them ready to rent or do you already have them rented??
Lon valgrn - some banks do it that way.
Lon not all
Roger Dawson Scott, I’m not able to read your earlier question. Can you repeat it?
valgrn thanks - I just wanted to know if that was somewhat normal
Mike_Summey valgrn, if I give a bank an offer and they don’t respond by the timeline I give them, I withdraw the offer and let them stew over it a while.
Scott44544 Can I split my profits up and if so is there a certain number to split it up?
Scott44544 on purchases?
valgrn If we don’t get it and it goes to auction, do you have any thoughts - posted starting bid is 175K
Mike_Summey broadway, they were brand new houses that only needed a little sprucing up in the yards. One is already rented, the other has two people looking at it.
Roger Dawson The first thing about exchanges is that you defer the tax, you don’t avoid it. There’s something to be said for paying the tax now because you’ll be in a higher tax bracket later.
Mike_Summey Hi David
mark I am a small builder in N.J. Any suggestions on selling two of my new houses just completed. I have them listed in MLS. Any other area for advertising u would recommend
sparky37 mark, where in nj?
davidoro hey there…did i miss anyone announce any deals they made this week?
broadway That’s great, I’m sure new houses with builders being in trouble right now is a great time to get that inventory.
Mike_Summey mark, some of our investors in this chat or who read the transcript later may be interested if you want to give your contact information.
mark One in South River, & one in Spotswood N,.J. Middlesex County
Lon Mark - craigslist and newspapers
Scott44544 How long do I need to own the home before selling to avoid capital gains?
Roger Dawson Scott, you must be buying like property e.g. rentals for rentals, industrial for industrial, land for land. And you must be buying more that you’re selling. Then you can exchange. I don’t know any reason why you couldn’t combine several purchases as long as they close at the same time as one transaction, but you’d better check with an escrow officer on that.
davidoro Mike, my problem is that there are deals galore, but i can’t say the same for cash. i’m getting a third property, but after this the dough for the down payments are not going to be around. thoughts, tips?
Scott44544 Thanks
Mike_Summey Mark, you probably don’t want to hear this, but I am having builders call me almost daily wanting to unload spec houses. The market has dried up in many areas and the only people buying are long term investors like me and we can’t pay anywhere near what prices were when the market was so hot.
EDDIE-NC Anyone know of any lenders loaning 30 years on rentals
mark Lon I also heard about craglist today also from someone else
broadway mark, I rented a condo on Craigs list this year. it would great for me.
valgrn Thank you for your advice Mike Summey. My 4 year old just fell asleep on my bed and I need to put him in his. Have a great evening.
Roger Dawson Hi Penny!
mark Mike I am not desperate but I would like to sell it at a fair price.
Penny Hi Roger!
Mike_Summey david, now is a great time to buy for cash and then get a term loan after you already own the property. I wouldn’t want to tie up too much cash in downpayments because if you get a new loan when you purchase, you will probably need 15-20% down and won’t be able to refinance for about a year. If you buy for cash, you can refinance the next month to get your cash out and if you buy right, you can get 100% financing.
Mike_Summey Hi Penny
Penny Hi Mikie.
Mike_Summey valgrn, glad you could join us. come back next week.
Mike_Summey Hi Doug
davidoro wow…i wish i had the cash. i will in 10 years when more of these properties start generating more income.
Doug_in_CT Hi Mike, Great article about the waitress ….in the Asheville Paper
Lon Eddie - plenty of banks will give you a 30-year loan as long as your credit is good. BOA does for me.
mark Broadway thanks also fro recommending graigslist
Mike_Summey Mark, can you get out for 60-70% of appraised value? That’s about all a long-term investor can pay and make the numbers work unless you are in a position to offer some very favorable financing.
broadway sure thing mark
Roger Dawson Scott you need to own the property for one year to take advantage of capital gains tax rate and the current rate is 15%%. That’s another thing that MIke wouldn’t know because he’s never sold anything.
davidoro mike, when you say buy right - do you mean way belowed appraised value so that you can get 100% financiing?
Mike_Summey Thanks Doug.
Mike_Summey david, when the market was red hot and there were no deals to be had, I was preparing myself for the times wer are in now.
Doug_in_CT That article was in the great tradition of a Zig Ziglar piece on doing something the right way.
EDDIE-NC Credit is not a problem we get 15 years easily, just can’t seem to get the 30
mark The home is appraised for $525,000 we have it listed for $450,00 & very little activity
Mike_Summey david, real estate goes through cycles like this. This is the fourth one I’ve been through so I’ve learned what to watch for over the years.
EDDIE-NC I will talk with BOA though
Scott44544 Alright, I have owned a house for 17 months and just listed it today. Are you saying that i could pay the taxes on it now and then be able to do whatever with the rest?
Scott44544 It is a rental by the way.
Lon Eddie - go to BOA Mortgage, I don’t know about what a branch location would give you
davidoro scott - why are you selling?
oz mark, look into a 9 day round robin sale, for a quick sale at the current prevailing market value
Scott44544 I watn to buy another house.
Scott44544 want*
EDDIE-NC Thanks Lon
davidoro another rental, scott?
Roger Dawson Scott you declare your capitl gain on your tax return next April.
Mike_Summey Mark, that is still aver 85% of appraised value and if it is a house at $450,000, it’s probably not a good investment property. The rent would have to be too high to make the numbers work. You are probably going to have to find someone wanting to live in it.
mark oz what is a 9 day round robin
Scott44544 I want to live in it.
Mike_Summey Hi alex & Sandy
alex hi
Sandy hi
mark It is a new home for a residential use. Not for rent
adam.hughes hello 
its been a while since ive been in here last
Scott44544 The property i want to buy is a step up from the rental.
Scott44544 Yes residential use.
Mike_Summey Hi adam
Doug_in_CT Mike, What is your take on the Gas Prices? It seems like we are in a free fall only falling upwards
Mike_Summey Hi magre
magre Hello
adam.hughes how are you mike? i have a question i was approached by a couple investors in real estate and they may be potential mentors for me, as im new to investing in real estate and they want me to do bird dogging for them ( property analysis) because im very good with assets and noi vs roi they want to see what i can do. Im just wondering what I should do if i take them up on it
Lon I think gas prices are going to hurt summer travel
Mike_Summey Doug, I think the Fed is going to cut rates again this week and if so that will probably push the dollar down and gas prices up. Eventually people will cut bak on usage and with declining demand prices will fall.
Mike_Summey adam, how do they want to pay you?
Roger Dawson I think that the evironmentalists are letting gas prices float upward to get more cars on the road. It’s not working in Los Angeles.
oz mark, the round robin is advetize it for a week, hold an open hoise for about 4 to 5 hours on a saturday and sunday, have a bidders sheet on site at the close of the sunday begin callign all bidders until they all drop out, then you can take he highest or best bid, or reject them all if not sufficient.
Doug_in_CT Seeing these uncharted numbers at the local gas station is a little scarry.
Mike_Summey Hi Jason
jasonannable Hi Mike!
Roger Dawson Mike do you think the Feds will drop to 2%?
Mike_Summey Doug, if you think gas prices are high, you should see what jet fuel is doing.
adam.hughes well, thats not what im so sure about .. i want experience , but they will charge me 1500 - 5000 just for being a mentor. I mean @ least with your program you walk my hand through it without being there in a sence … but im not sure because im still wet behind the ears … i have goals that i want to achieve
Mike_Summey Roger, my guess is that they will drop rates another .25%, possibly .5%
oz Mike, I just heard today diesel is now posted @ % $5.00 per gallon in the bay area… grrrrr
Mike_Summey adam, if they want you to pay them to do their work for them, I’d run from that as fast as possible.
Roger Dawson Mike just read your story about Pat the waitress. Be sure to send it to her. She’ll love it.
Mike_Summey oz, jet fuel is approaching $8.00 at some airports.
Lon Adam, their time is worth something, but you need to interview them like you were hiring an employee. Ask them questions, will you have their cell phone number, personal email address. If they charge you that kind of money and are not available when you need them, then they’re not worth your time.
Mike_Summey Roger, I already have. Thanks! I’m going to send it to the restaurant also.
Doug_in_CT Now all these price increases for gas and food (rice) should get some inflation going. Doesn’t inflation favor the borrower (landlord) over the lender (bank)?
oz Mike…Lord have mercy…
adam.hughes thats what i would do , but if i was a bird dog , then they would pay me , conversely if they held my had through the first couple deals then they would want me to pay them … i just dont know how to make strong business contacts … cause i mean 5000 can buy me a nice rental property up here in canada
jasonannable I hope this isn’t too off topic, Mike, but I’ve had a question that has been bugging me for a while. (I’m an aspiring RE investor, btw) If I found a great investment property and could find 1 or more private investors to finance it, what happens if (for some reason) I can’t find a tenant to occupy the property?
Mike_Summey Doug, that is correct. Inflation let’s us pay back loans with cheaper dollars.
Mike_Summey Hi danko
danko Hi Mike. Sorry I’m late. ‘putor problems
Roger Dawson Once we elect Barack “the elitist” he take care of you plane owners.
danko Getting political? I thought we were flagrant capitalists here.
Roger Dawson Yes, we are Danko. Don’t panic
broadway amen danko!!
danko lol
Doug_in_CT Roger, I am going to take refuge in my guns and bibles.
jasonannable hey Adam, where are you in Canada?
Mike_Summey Jason, part of what makes an investment property a “great Investment” is it’s ease of renting. Also, one reason for keeping some cash reserve is to carry you through periods of vacancy. Be sure to allow for all of these things when calculating your offer.
adam.hughes ontario
jasonannable me too.. Ottawa here
Lon Adam, splitting the first few deals with your mentor is a good way to pay them. You both have a vested interest that way. And yes, they should be paying you to bird dog for them.
adam.hughes nice .. how long have been investing jason? im in hamilton area … do you have msn ?
Sandy I’m still a renter. What happens when the landlord doesn’t pay the utilities and they are turned off? Does the renter just sit there in the dark?
adam.hughes thx lon … ill see if i can structure a few deals like that . like they help me get a couple places and then i split the payuments that way
jasonannable thanks Mike.. if for some reason, payments can’t be made to the investors.. what is the worst case?. I ask because I have used my own debt and have always calculated the payments as in.. “If I can’t collect the rent, I can always carry both my personal and my rental property by myself… as the worst case scenario”
Mike_Summey Adam, I have a couple of people who do some bird dogging for me and I pay them between $1,000 - $5,000 for each deal they bring me. I calculate this amount into the offers I make.
Mike_Summey Hi IBMally
IBMally HI all, been a while since I’ve sat in
Roger Dawson Jason, the answer would be in the arrangement you made with the investors. If they are merely putting up the money they could foreclose on you for non-payment. If however, you took part ownership as a finder’s fee you could write into your agreement that the investors have to cover the negative cash flow.
jasonannable that’s awesome, Mike (regarding your response to Adam)
alex Mike,
Roger Dawson Hi IBMalley. I be Dawson.
IBMally LOL
alex Mike, why don’t you use realestate agents and have the seller pay them.
adam.hughes mike thats great info , how do u base the rates … because he asked me to pick apart a couple ads and 8 were garbage … 2 were very decent , which is why he wants to try me out .. the cap rate on each of the 2 houses was greater then 10 % return
broadway adam, if your birdogging for them, just take a percentage of the net rent. With Mikes software, you probably couldn’t go wrong at all. Let them take the risk and a little more of the reward, you get sweatequity.
adam.hughes jason, would you care to converse on msn ?
Mike_Summey alex, I do! However, I have a couple of people who bird dog for investors who bring me properties they think I might be interested in buying. It is on these deals that I pay them a fee.
Mike_Summey Hi Linda
jasonannable Adam, my msn is jason@mb3online.com .. but it I’m only on it for work
adam.hughes usually anything that has a cap rate between 8 - 10 % ill consider .. more then that obviously gets closer inspections
Linda Good evening Mike
Mike_Summey broadway, good suggestion to Adam
adam.hughes is it possible to get ahold of you during the evening jason?
oz mark,I don’t know if I was clear on my explanation or not, if not and you want more information, leave a contact number or email (if permissible) and I will be pleased to provid more, thanks
alex thanks
Mike_Summey Adam & Jason, You’re welcome to use this chat room to converse anytime other than Monday evening. It is open for anyone to use.
jasonannable oh cool.. thanks Mike
adam.hughes that works
adam.hughes btw jason, i added you to my msn i look forward to talking with you
Mike_Summey Adam & Jason, just pick a time between you and get in the chat room.
Mike_Summey Does everyone in the chat have our Offer Generator program?
adam.hughes i do however have a ? for you … when you were 21 and you started the billboard company how long was it before you seen a profit? did you have monthly debt payments to make?
danko I have it, Mike
IBMally no
Doug_in_CT I have it too
adam.hughes ill have to get the software
alex I am ordering the offer generator, this pay day, 01May2008.
adam.hughes ooks like something ill have to give the once over
Mike_Summey adam, it was several years before I saw any profits. It was a grind for a while. I tried to get Roger to adopt me.
Mike_Summey Hi Philn
philn hi mike
Lon Adam, you can’t beat the price compared to others out there, and no other out there do what the OG does.
Doug_in_CT Roger made it a big mistake but not jumping on the adoption idea.
philn i have a question mike
broadway I’m with you doug
IBMally Mike, how is the offer generator unique. What does it do besides calculate an offer?
Lon Mike, have you asked Roger to adopt you lately? He might say yes now.
Roger Dawson Doug, now it’s his term to adopt me. I’m available.
Mike_Summey If you do not have the Offer Generator, you are missing the greatest tool on the market for long term investors. IT WILL HELP YOU MAKE OFFER THAT WILL KEEP YOU OUT OF TROUBLE.
sparky37 Mike its not too late to adopt me!
jasonannable has anybody tried the tactic of finding a tenant first.. having them find a property (by giving them specific criteria).. and getting them to front a deposit?.. I think the idea is called “options”
Linda Hi Mike, when you’ve worked with forclosures from the bank, have you ever been able to get the property at 0-4% fixed interest rate? I’m wondering if they are interested in getting the property off the books, or looking to make interest on the loan, of course assuming they keep the mortgage?
adam.hughes so then what in your opinion would you think is best for me … ill give you a scenario im 24 and i work, but i dont like the idea of working for some1 anymore then a year so i can pay off all my debts … what would be the best thing for me to do since i have 0 money and 0 credit to use ( like yourself mike )
philn I’ve read your book and also bought carleton sheets program for investing…how do i do it if i have a 450 credit score?
philn i live in new york now but i want invest in mississippi where i came from
Doug_in_CT It is possible Philn to partner with people who have good credit. It you can find a great deal and explain it properly maybe you could find a partner.
philn thats a problem cause i really dont socialize much doug
Mike_Summey IBMally, the OG computes NOI, then walks you through the process of balancing price and terms and combining bank, seller and third party financing to create hundreds of ways to buy any given property that will all cash flow. It even lets you print the offer letters ready for your signature and presentation to sellers. You can check it out in detail in our online store.
alex What can philn offer the partner?
danko Philn, seller financing is a good way to go if you don’t have credit or cash
jasonannable I wish I could see a real live video of someone pitching a deal to a potential investor..
philn i dont have any friends
Doug_in_CT Alex, A great deal that he hunts down
philn do the kind of deals really exist
Doug_in_CT Philn — How about finding a great deal and then putting notice in paper — partner wanted — opportunity for monthly cash flow as 50% partner.
Lon Jason, when it comes to tenants, you can get what they want, but they’re an impatient group and may not wait for you to find the property they want to live in. And you generally do not take an option or deposit on a property you don’t own yet.
Mike_Summey Linda, the banks will probably not finance much below market rates. If they do the loan is classified aa a “Loan to Facilitate” and that is frowned upon by the regulators.
Linda Thanks Mike….
philn sounds good doug
danko Philn, ask Mike about 0% interest seller financing
Mike_Summey adam, quiting your job is not a option in the beginning. It takes time to build up an income stream. I worked in the advertising business and let my real estate grow for 20 years before I tapped into it.
Doug_in_CT Philn, And then read Mikes’ article about buying from people who owe property free and clear — it is on the weekend millionaire website
philn yeah mike what about 0% intrest financing
adam.hughes lol its not that .. im just getting started in my “career” but it bores me so im contemplating a change
philn ok thanks
Mike_Summey philn, if you have no money and no credit, you options are limited. I’d spend some time saving and repairing my credit before trying to buy. The last thing you want to do is get in over your head and make matters worse.
philn is anyone here from the NY area that i can get in contact with?
Mike_Summey philn, your options are probably limited to finding sellers with large equities and getting them to finance the deals.
philn i understand mike
Mike_Summey adam, changing careers is fine, but don’t look to long term real estate investing as a career. It is an investment that should be treated like an IRA or a 401K.
Mike_Summey philn, I don’t believe in painting rosy pictures for people that only 1 in a million can achieve. Some real estate gurus do that for the purpose of selling books, tapes, boot camps and coaching programs.
Mike_Summey Everyone, if you go to the website and click on my picture it will take you to the archieve of my articles. At the top of the list is a link that says “see all” It will take you to hundreds of articles. There’s some good stuff in them that can help you in many ways other than just real estate investing.
Doug_in_CT I testify to what Mike says above. Very good material in those archives.
Mike_Summey Thanks again Doug!
philn thats good mike…i read so many books and its hard telling who’s real and who is out to rip people off\
Linda I have a CPA question, to get your Residential Exemption (I think it’s called) for your $500,000 (if married) 0 Capital Gains, you have to live in the PRIMARY Residence for 2 out of the last 5 years, but does it have to be THE LAST 2 YEARS? or any 2 years?
Mike_Summey philn, watch out for the ones who give you just enough information to whet your appetite and then want to sell you an expensive boot camp or coaching program to learn the rest. We don’t do that.
Lon Linda, that law recently changed due to the debt forgiveness act. It can be any of the last two years as long as it was not used as a rental any of the other 3 years.
Lon If was used as a rentaly, then you have to pay capital gains on a prorated basis.
Doug_in_CT I also testify that there are many people out to rip off the unInitiated
philn ok
Mike_Summey Linda, my understanding is that it can be any 2 of the last 5 years.
Lon Mike, that changed last year.
philn member you from the expo in NY a few years ago..i thought you were pretty straight forward
Mike_Summey Thanks Lon, I didn’t know that. YOu will find that I don’t know a lot about what happens when you sell a property. 
philn remember i mean
Mike_Summey Thanks philn.
Lon It’s supposed to only be through 2009 or something like that, just until the forelcosures go back to normal.
danko Thanks for a great chat. I’ll try to be on time next week.
jasonannable so Mike, are you buying like mad or what?
danko good night, all
Mike_Summey philn, I was very dissatisfied with that event. I knew something was not right when about mid day the line for people wanting their money back was longer than the line for people coming in. I will not do another of those events at any price.
jasonannable do you even care about residential units that are less than a 4-plex?
Mike_Summey goodnight danko
philn mike what do you know about buying homes with non-qualifying loans and are they easy to find?
alex good night all
Roger Dawson Goodnight everyone. See you next week.
broadway Good night mike, roger and all. Thanks for a great chat.
Mike_Summey jason, I’ve purchased 14 single family homes in the past month and expect to purchase many more in the coming months. I also like multi-family, commercial, office building, etc. As long as they make money.
sparky37 Goodnight Mika and all
philn gn
jasonannable oh my gosh.. Mike, you’re my inspiration
Mike_Summey philn, that’s the only kind of loan I can get. Once you own more than I believe it’s 10 properties all of your loans are non-qualifying.
adam.hughes how do u finance all that
adam.hughes let alone ensure its 100 % teneted like what is your vacancy rates?
philn so would that work for me to find those homes?
Mike_Summey adam, I’ve bought all for cash and am now in the process of placing term loans on them to get my cash back out. I’ve been able to get loans for more than what I paid on every one of them.
poboy Mike, do you offer 1 on 1 coaching programs or have you considered anything like that or videos, maybe?
Mike_Summey poboy, no we don’t offer coaching programs. Everything you need to know is in our books, CDs and computer program. We give it all to you without you having to sign up for expensive coaching programs or boot camps. Plus we’re here every Monday evening to answer your questions if you have a problem. That’s FREE too.
Doug_in_CT Someone might ask…..buy why?
Doug_in_CT but why?
Mike_Summey adam, I’ve been at it for 37 years so I have many properties. I always have some vacancies, but I keep enough cash reserves to cover them. I started many years ago building cash reserves and it took years, but today I could carry all of my properties vacant for 5-6 months with NO income.
philn well thanks all i’ll be back next monday
Linda Mike, I know it’s late, one more question, do you put each of your properties in separate LLC’s or TRUSTS to protect them from each other?
Mike_Summey Doug, the answer to that is simple, I make my living doing what I talk about, not selling books, CDs and coaching programs. Also, I think one of the biggest disservices successful people can do to their fellow man is to go to their graves and take with them the knowledge that brought them success and only leave behind the “Things” that they accumulated.
Doug_in_CT Good answer.
Linda Well said.
Mike_Summey Linda, no I use LLCs, but not one for each property. I have groups that are in each LLC based on what I’m doing with them. Mainly I use the LLCs for estate planning, not for the protection they offer. I am heavily insured.
Mike_Summey Well, it’s been fun, but I have to run too. See you here next week.
oz g/night all, have a great week…
Linda Thanks, Good nite, hope to be back next week
Mike_Summey Goodnight all.
adam.hughes night
Lon by mike
EDDIE-NC Mike where do you register your llc’s. In NC or another state
jasonannable defaintely.. thank you so much Mike
Doug_in_CT Thanks for the good info
davidl are we done?
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