Chat Transcript - June 9, 2008
Posted on June 10, 2008
Ken Santo how far do you live from your properties
santo hi, ken 400 miles
Ken were do yo live
Mike_Summey Hi guys!
santo ken, new york city
Ken Hey
santo hi mike,
Ken Mike what do you think of buying properties in the south compared to the north. In PA I’m dealing with extremeley high property taxes and now energy cost are going crazy
Mike_Summey Anything new to report this past week?
santo mike, 99 degrees here
Mike_Summey Ken, every market has it’s drawbacks. The key is to factor in the ones in your market when you are buying properties.
Mike_Summey Hi RGrimsley
santo mike, closing on ,my 7th house on july 15th
Ken I have 3 in PA, I have kicked the idea around of buying in the south. it will cost $5700 just to heat my house this year. Triple than years past
Mike_Summey Santo, it was hotter here in the mountains yesterday than it was in Miami.
santo hi Roger
Roger Dawson Hi everyone!
Ken I am afraid that will impact the rents or cost of everything at that
Mike_Summey Hi Roger. How about sending us some of your cool weather.
santo ken are you talking heating oil
Roger Dawson It was 82 here today. Is that cool enough for you?
Ken Santo Yes
Ken about 6 years ago that was better than anything
Mike_Summey Ken, expenses do impact the rents. That’s why you figure them in when you are making an offer.
Roger Dawson Hi Sparky
Mike_Summey Hi sparky
sparky37 Hi Mike Roger and all
Mike_Summey Roger, 93 here yesterday and today.
Mike_Summey Hi willy
Ken Mike I am just after rents will go down. heating cost are tripling.
santo ken, my houses have gas, and the tenants pay for that
willy hello everyone
Mike_Summey Hi Al
Al Lee Hi, Mike, santo, everyone
santo Hi, Al,
Ken Electric is next. I expect a KW hour to be 50% more in 5 years
Mike_Summey Ken, are you paying the utilities?
Ken No
sparky37 Does anyone here invest in Wilkes Barre PA?
Mike_Summey Then why worry. The tenants are going to have to pay for utilities wherever they go.
Ken Nope I am in PA but not that far north
Roger Dawson As we say in our book who pays the utilities makes a huge difference of the value of multi unit buildings.
sparky37 Was there for the race this weekend it seems to have potential
Al Lee Hi, Roger. Didn’t see you higing back there.
santo Roger I only pay for water
Roger Dawson Hi Al. How are things in Texas.
Mike_Summey Hi Penny
Al Lee Things are hot. IT rained this afternoon and cooled things off a bit, though.
Ken Utiliities are going to start hurting people. Most people will pay their cell phone bill be for rents
Penny Hi Mike.
Roger Dawson Santo, waters usually not a problem but where I live I pay over $100 a month for water.
Al Lee The rental market is great here. I am building 10 houses for rental and we have applicants lined up already and it will be 2 weeks before we have the houses ready.
sparky37 car said 105 today in nj
Roger Dawson Hi Penny, didn’t see you come in.
Al Lee Roger, you pay a lot for water because the Smelts need it and the court gave them first rights.
Penny HiRoger. Just in about a min.
Mike_Summey As the real estate market continues to worsen, the rental market will strengthen. When people can’t buy they rent.
Mike_Summey Hi mayorad
santo Al where i am i’ts about $150 for 3 months of water
Al Lee santo, that is cheap!!!
mayorad Hello, Mike et. al
Ken Mike I have serous doubts rents will strengthen if utilities continue to climb
Al Lee Ken, with gasoline prices rising the rents in locations near the city will get pressed upward.
Ken Al what about utilities such as the KW hour
Mike_Summey Ken, rents will strengthen. Rising utility rates may contribute to collection problems, but rents will continue to rise. It’s the number of renters that put pressure on the market, not utilities.
Roger Dawson Al, what’s a smelt?
Al Lee I have considered forming a group of investors to buy up infield lots while they are still cheap because they should multiply in value in the next couple of years.
santo Al, one tenant has a garden in the back and his bill was was $300 for 3 months, so i raised his rent $50 a month to make up for it
Mike_Summey Today is one of my son’s birthday. He is having a party out by the pool right now. Lots of young people.
Mike_Summey Hi alex
Al Lee Roger, a smelt is a little fish (tasty, if breaded and deep fried whole) that was “endangered” because California was taking too much water away form them. The courts decided in favor of the fish which cuts off some of California’s water from neighboring states for half the year or so.
Ken Al what type of money are you talking about
sparky37 How old Mike
Mike_Summey Hi Lon
alex hi
Mike_Summey sparky, 26
Lon Hi Mke, lost track of time
RGrimsley [RGrimsley] I’m just getting back into the residential rental business and am wondering how much more I’m going to have to pay for conventional financing on single family than if it were owner occupied. I find owner occupied rates everywhere ut now investor rates.
Roger Dawson Al, we should poisen the smelt and then let the spotted owls eat them.
Al Lee Ken, what difference does it make if utilities go up? If electric bills run $500/month instead of $200/month it just makes yoru rent of $1000 seem smaller, doesn’t it?
Al Lee No, we shoudl EAT the smelts. They are tasty!
sparky37 Congrats Mike
santo Al, i don’t like them they smelt bad
Mike_Summey RGrimsley, depending on your credit rating, investor rates usually range from .25 to 1.5% higher than owner occupied rates.
Al Lee Utilities going up as well as everything else going up means INFLATION. Inflation means property values and rent rates will be higher, also.
Ken AL you lost me
Al Lee Ken, everything is relative. IF other prices go up, rents will go up also.
santo Al, gas is headed to $8 to $10 a gallon by dec. 2009.
Roger Dawson Al, I think that’s it’s only inflationary if wages start to rise too and there’s little sign of that.
Mike_Summey Everyone, rental properties are one of the few investments that allow your return to keep up with or ever exceed the inflation rate.
Mike_Summey even
Al Lee santo, not if we get some sensible politicians who will permit drilling the trillions of barrels of oil we have under our own soil.
Ken I thought the cost of homes climbed so high because of the low interest rates meaning there is was more money to give out. now that the belt is tightening and not as much money can go out prices drop
Ken once a rents money dries up because of paying high utilities rents will drop
Al Lee Roger, wages WILL rise. They will have to.
Ken again I am still new to this
Ken I was wrong one other time I can’t recall when 
Al Lee Ken, they is true temporarily; but long-term rising inflation will increase real estate values.
santo Al, we have enough here for 50 years worth–but the democrats won’t let them drill
Roger Dawson Ken, that is more than offset by the increasing number of renters because they can’t get financing.
RGrimsley Thanks, Mike. Sounds as though I need to get in front of a couple of lenders.
Mike_Summey Inflation is the government’s way of monetizing the national debt. Higher inflation allows the debt to be repaid with cheaper dollars. That’s why it is so important to invest in something that keeps up with inflation and real estate does that.
Ken Roger soon they won’t be able to afford rents
Al Lee BTW: in Texas, expecially in our area (DFW) prices have not dropped more than a percent or so. In some areas they have dropped 40%.
Mike_Summey Hi Linda
Al Lee especially
Linda Hello everyone
Roger Dawson Hi Linda
Lon Mike/Roger, if a wholesaler brings you a deal and you run it through the OG and all the numbers work, do you generally pay their asking price or do you negotiate with them also?
Ken Texas property taxes are extremely high a long with the Electric
Ken but no state income
Al Lee ie, very true! That meas that the debt we take on for real estate is getting devalued also. We get a double benfit from inflation: rising value and diminishing debt.
santo Al, gas in saudia arabia is 38 cents a gallon–in Iran it is 45 cents a gallon–whats wrong with this picture !
Mike_Summey Lon, I always negotiate. Even if I don’t get much of a price reduction, it makes them feel better.
RGrimsley Mike, I agree w/ your assessment about this being a phenomenal time to do what you and Roger preach in book #1. Talk about perfect storm, blood in the streets, etc!
Roger Dawson Lon, that would depend on the options the seller has.
Mike_Summey RGrimsley, this is the best time I’ve seen in my lifetime to invest in rental properties.
Al Lee Ken, Texas property taxes are not high–the rate is high. There are two factors to taxation: rate ad valuation. A house that brings $1500 a mont ret in Texas might be valued at $150 and have a tax rate of 3% (or 2.5%, or so). IN California, a house that brings $1500 rent might be valued at $600 with a tax rate of 1%. That means that the Texas house has a tax of $4500 wile the California house has a tax of $6000 to generate the same rent.
Mike_Summey I have been able to raise rents more in the past 6 months than I did in the previous 3 years.
Al Lee That was $150k and $600k
Al Lee You have to look at the actual numbers, not just the rate. It is dollars that you pay, not percents.
santo mike, looking at any new properties.
Ken Al compare those numbers to NC, SC, AR, AL
RGrimsley 10-4 on that! I had a number of properties in Ash. 18 years ago and sold when I left town, all cash flowing. Dumb! I was too cheap to pay a property manager. I wish I had had a beer with you back then but I read your book (twice) and now I’m drinking the kool-aid. Just resisted an opportunity for a quick $15K gain on one I recently bought. I’m a long term holder now, baby!
Al Lee The houses we are just now completing construction on are sold for $121k and are valued for $1700/month rent from Section 8. That is if the owner pays utilities. It will be about $1300 if the tenant pays utilities.
Ken AL not sure if you got my question. I was looking at exploreing for properties in the south instead of PA
Mike_Summey santo, yes, I am looking at a block of new spec homes that are about to go into foreclosure, plus one of my banks called about another house they now have in inventory. I plan to look at it this week.
Mike_Summey Hi sharon
Al Lee Ken, go to www.buyRentHouse.net (one of my websites) and look at all the data there. Then also click the link for “Current Project” to see the actual houses being built.
Sharon Hello
Roger Dawson Hi Shane
Mike_Summey RGrimsley, good for you. I’ve been buying for 37 years and have never sold one of my investment properties.
Mike_Summey Hi Shane
santo mike that is good, I would not want you to get rusty, just sitting around
Al Lee Ken, if you don’t want new construction, I have people wanting to sell existing houses, many leased already.
shane_Ky Hi Roger, Mike- everyone
Ken TX just never really appealed to me for REI
RGrimsley Mike, I first got depressed reading your book # 1, as I had sold so many units, but your message to make today the first day of the rest of your life, and so forth, was not lost on me. Now, I’m re-loading.
Mike_Summey RGrimsley, have you read Weekend Millionaire Mindset?
Mike_Summey Hi Jim
Al Lee Ken, I believe that Texas is the number one state for REI. Prices are low, rents are high, the laws are favorable to landlords, no state income tax, fastest growing metro area in the US, etc, etc.
jimNC hi all
Mike_Summey Al works for the Texas State Chamber of Commerce
Al Lee Mike, No, but they ought to be paying me :p
jimNC well mike, i’ve been making those embarassing low offers, no takers yet
Ken Al I will check it out.
Ken more
santo Al, a friend of mine had $124,000 in a annuity account–he passed away a few years ago–now she wants to take it out and invest in houses where i invest, in buffalo ny.—that’s the mans wife i am speaking of
Mike_Summey Every market is a great market if you make your purchases based on the conditions of the market. The only difference between one market and another is that some have easier to find deals than others. All markets have deals.
Al Lee santo, you are doing great where you are investing and you have a good thing going. I would say you should stick with what is working for you.
jimNC Mike, I gave your book to my property manager. she really likes your philosophy
willy mike, how do you finance your purchase?
Mike_Summey jim, just keep at it. I once made 50 consecutive offers that were rejected before one was accepted. Then 6 of the next 10 were accepted. That’s what happens when market conditions shift.
RGrimsley Mike, I bought “Mindset” the day I finished Book #1. What a great follow on!!! LAst night read about your harrowing experience coming home from Greer. As soon as I finish it (tonight), I’m going to bribe my 2 daughters into reading it. Tremendous book!!!
jimNC yep, just worried my agent will burn out, she’s been great so far
Mike_Summey willy, I use many different financing methods. Bank, seller, third party, etc.
santo Al, yes Al I will–I told this lady she could get 5 duplexes for $50,000 down payment
Roger Dawson Hi Zert
Mike_Summey RGrimsley, thanks for the endorsement. You may have noticed in the foreword that Carleton Sheets said it should be required reading for every high school student in America and most of the adults too.
Mike_Summey Hi zert
willy thank you mike.
Al Lee Ken, one note: if you click the contact link on the buyRentHouse.net website you will not be going to me, but to my son. We work together on those projects. Just tell him you know me from the chat room and he will know who you are.
zert Good Evening, Mike, Roger and everyone
jimNC who wrote “millionaire mindset”…? need to pick it up
Mike_Summey jim, right now agents are just happy to have offers to present. Having low ones sure beats having none.
Ken Al OK
mayorad Mike, could you explain what you mean by 3rd party as a financing method?
RGrimsley JIMNC, MIke and Roger !!! look on their website. Must reading.
Mike_Summey jim, Roger and I wrote it. It is the second book in the Weekend Millionaire series.
santo Mike, all great books—please write some more
jimNC i think i’m thinking of a different book, “millionaire next door” maybe…
zert I’ll second Santo - I re-read them every 6 months or so
Al Lee jim, a guy named Stanley wrote that book Also a good book.
zert Jim - read Mike and Rogers books and you will be part of the other book
Mike_Summey mayorad, right now banks are paying 2% or less for deposits. There are many people with money who are willing to invest in mortgages at 3-6% rather than keep getting practically nothing from the banks. I seek out these people and offer them the opportunity to get a higher return on their money with the security of a first mortgage on income properties.
santo zert, good thought–don’t let the mind go stale
zert that’s right Santo, I always come across something useful
Ken Mike no doubt. I”m getting 2% and 2.5% on my banks money markets
jimNC i’m finishing up the negotiating book now, i’ve read the first book and have the audio
Mike_Summey jim, have you read the Mindset book?
jimNC no, i need to get it
Mike_Summey Ken, want to invest in a mortgage?
Mike_Summey at 5%
santo Al, after each house i buy, reminds me of an old saying–a rolling stone gathers momentum
RGrimsley Jim, get the Weekend Millionaire Mindset. It will be the best read you’ve had in a while. (and this comes from another tarheel)
Al Lee santo, yes, and it is not true that a Rolling Stone can’t get no Satisfaction, either.
Mike_Summey santo, remember how scared you were when you were making the first offers? Now you’re beginning to sound like an old pro.
jimNC i own a homesite on a golf course that i want to sell, i’m thinking of seller financing using a “wrap” mortgage…my agent (different agent than i use for investments) says it’s a problem?
Ken Mike its tempting but I have been looking for properties. But like you said 5% is very tempting
willy mike, how do you finance a purchase when you are making offers on bank owned properties?
Mike_Summey jim, you can sell that way, but you need to get permission from your lender to do so. Otherwise you could be in default on the loan.
santo Mike, I still am a rookie in my eyes–maybe when i have 50 units, now i only have 14
Al Lee santo, how does the income from rental units compare to the bank interest you would have gotten?
jimNC i would still pay my mortgage, like i have been, difference is buyer would be paying me (contract for deed)?? right??
Lon Mike, how do you seek out the people earning a meager 2 - 2.5% to offer them a higher rate of return, secured by real estate?
Mike_Summey willy, I have a credit line I use to make cash offers to banks. Then once I buy the properties and own them free and clear, I go to another bank and take out a new loan. So far I have been able to finance 100% or more of the purchase price of every one I’ve bought this way.
santo Al, yes you are right on that
mayorad Thanks for the explanation above, Mike. Sounds very interesting. Think you can share with us what you mean by investing in mortgages? Just a statement or two?
Ken Mike that is what I do.
jimNC yes im interested too…getting 3% on my MM
Mike_Summey jim, that is true, but your lender still would need to approve this arrangement or you would be in violation of the due-on-sale clause that is in all mortgages today.
jimNC oh yeah, right
Mike_Summey Lon, I know many wealth people through all of the contacts I’ve made over the years.
Ken Lon you seek out guys like me that don’t have time or no clue on how to invest
willy mike, so the net rent can pay for the new loan if you were to refinance, that’s how you come up with the offer price?
Lon Ken, we need to talk.
Al Lee Mike, the lender woudl not allow you to transfer title. That means the buyer would not be able to take the tax benefits, making it less palatable to him.
Mike_Summey Hi briank
alex How can I get a Line of Credit?
briank_73 Hello
Al Lee hello, BrianK
santo Al, I should have have 2 more duplexes by the end of this year, which will give me 18 units–that’s good for 2 years work, right
Ken Lon there was a website out there were you could ask for money usually its high like 17%
Al Lee santo, that is fantastic.
Mike_Summey mayorad, when you loan someone money on real estate and take back a mortgage, you are investing in the mortgage.
Ken forget the name of it
RGrimsley Alex, you can get one on your primary residence HELOC.
alex I do not own a home.
Lon Ken, I can get hard money all day long cheaper than that. I’m looking for long term money at 6% or so.
sparky37 Ken it’s prosper
Roger Dawson Santo, cogratulations. That’s great.
Mike_Summey willy, that is correct. I use the Offer Generator to calculate the amount of loan that can be paid at current rates with the NOI and that’s what I offer the banks in cash. Then when I finance the deal later, I have the cash flow to cover everything.
Ken Yeah that site had high rates maybe that is why I forgot the name of it
santo thanks Roger
jimNC santo…do you live near buffalo? we live outside raleigh, nc, but my wife if from pittsburgh area
jimNC very similar economy, i believe
santo jimnc, no i live 400 miles away from buffalo
RGrimsley Ken, that’s probably a good place to lauch from (buying a house to live in, perhaps to fix up and then rent out and move on to another one).
Lon But seriously Ken, if you want, I am buying a 4-plex and could use some better terms.
Mike_Summey alex, it is difficult to get a line of credit when you are first getting started. Once you get a property paid off and own it free and clear, you can use it as collateral for the line of credit.
jimNC my wife keeps saying we need to invest there, but i’ve been reluctant to invest long distance
RGrimsley sorry, meant for Alex.
jimNC your success make me think twice
Al Lee santo, you live on Lawn Guyland, right? (That is Long Island spoken by a resident)
alex thanks
santo Al, no, I live in Queens ny
Roger Dawson That’s cute, Al.
jimNC people buy houses in my wife’s hometown for what most spend on cars
Al Lee santo, Oh, yeah. I lived in Astoria.
willy Mike, for example. If the NOI is 700/mo and that’s the rate of 8.4%, you would offer $100,000?
Lon Al, I spoke with Santo, he doesn’t have that strong of an accent.
santo Al, not far from me
Al Lee Roger, I am something of a linguist, you know.
santo Al, I have a brooklyn accent
Mike_Summey willy, I’m not sure I follow your calculations. I would offer whatever amount $700 per month would make the payment on at the time of the offer.
Ken Jim i’m about an hour and a half from Pittsburgh I know what you mean
jimNC ken, where i live, starter homes are nearly 200k
jimNC it’s tough
Mike_Summey willy, if I could get 5% interest I could offer more than if I had to pay 8%. Do you have the Offer Generator computer program?
Ken Tell me about it. I use to live in MD
Roger Dawson Santo, say “taudy taud” street
Ken Jim I know Fatyeville has piles of forclosures
Al Lee What is important is not the price, it is the ratio of price to rent.
santo Roger, that’s manhattan ny
jimNC yeah, i hate it there. you’re not from there are you?
willy let say the market rent is 900/mo, net is 700/mo, you can borrow at 8.4%, that’s 8400/yr, you offer $100,000
Lon Willy, 700 @ 8.4% will not cover a 100k loan at 50 years. If you put 10% down, you can squeeze in at 30 years.
Ken no I just remember seeing those
willy want to get the concept right.
Ken Jim I hate Pittsburgh. It’s a rust bucket and broke
Roger Dawson The ratio of rent to purchase price varies enormously from one town to another. For no reason that I’ve been able to figure out.
jimNC i don’t like it either. seems like everyone is suicidal
Ken I think it’s the wheather. I did see the sun today however
jimNC it is the weather, and the economy
Mike_Summey willy, you need the Offer Generator. It will let you juggle rates, amounts, length of loan, etc to come up with hundreds of ways to buy any given property and they will all cash flow with the NOI.
Roger Dawson It’s Buffalo where suicide in redundant, according to Chorus Line.
Ken North of Pittsburgh in Cranberry I hear is booming still
Al Lee Roger, yes, that is exactly right. That is why I believe THAT is the thing to look at. If you can buy a house for $50k but the reant is just $400/month, you haven’t found a bargain.
willy ok mike.
Ken Jim I was just telling some of the guys here my heat bill tripled this year.
jimNC Cranberry is doing well…it’s not like the rest of the area for some reason
jimNC where do you live ken?
RGrimsley Has anyone had any experience investing in rentals in Lexington KY and know how rental prices stack up to purchase prices?
Ken I was just wondering how rents would be effected with the increase of utilities
Ken Ebensburg PA.
Ken Out near Johnstown
Al Lee Ken, high heating bills witll prevent lots of people from saving the down payment to buy–making them renters for a few more years. That is good for us.
jimNC offa da turnpike? lol
santo Al the house i just bought was $40,000 with a $900 rent– down payment was $8000
Mike_Summey The only places where rents get totally out of whack with prices are near large cities where population density puts enormous pressure on prices and in markets where speculators have bid up prices unrealistically.
Ken Jim Whats a turnpike?? we still have dirt roads
Al Lee santo, excellent ratio!
jimNC wow santo…900 rent here would prolly be a 170k house
Al Lee A turnpike is a dirt road that you pay to go on.
santo Al, that was a duplex
jimNC i need to give this pittsburgh thing some more thought
jimNC i’d have to see my mother in law more often
Lon RG, no experience investing in Lexington, but I have a niece that lives in the area. I know the REIA group there recently folded due to lack of participation.
mayorad Mike, thanks for the explanation again. Which of your Weekend Millionaire books would you mind I obbtain to fully understand your financing and negotiating strategies?
Mike_Summey Well folks, today is my son’s birthday and he is having a pool party. I’m going to say goodnight and go join him for a little while. I’ll see you here next week. Goodnight
Al Lee jim, do you know the difference between in-laws and outlaws?
jimNC no al, what?
willy thanks again mike.
Lon Wish him a happy one, Mike.
alex thank you, mike, good night
Al Lee Outlaws are wanted! :d
willy good nite.
santo Al, yes,outlaws are liked
jimNC
sparky37 nite all
Penny goodnight from Penny as well. See you all next week.
alex night all
Mike_Summey mayorad all of the books except the Mindset book deal with the topic.
Ken Yeah I got to jet also. night all
jimNC thanks all
Al Lee goodnight all. I need to go tend to family affairs
Al Lee Happy Investing!
Roger Dawson Good night everyone!
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