Chat Transcript - August 18, 2008
Posted on August 19, 2008
OUR FRIEND CARLETON SHEETS JOINED US UNEXPECTEDLY FOR A WHILE IN THIS CHAT. SEE HIS COMMENTS IN THE FOLLOWING TEXT!
irish rebel hello
padale70 hello
irish rebel where are ya from?
padale70 pa you
irish rebel currently in nj
irish rebel originally from ireland
padale70 how long in usa
padale70 whats up roger
Roger Dawson Hi Irish and padale!
irish rebel i came here 23 yrs ago just to visit friends and guess what ended up staying here
irish rebel i roger
Roger Dawson Are you from the south or the north?
padale70 how are you roger
irish rebel i mean hi roger
irish rebel in new jersey
padale70 north
Roger Dawson I was born in Croydon, just south of London. Coming to this country was the smartest thing I ever did.
shane hello all
sparky37 Hi Roger
irish rebel same here I left back in 85 was in london for 3 yrs before that
irish rebel hi mike
padale70 hi mike
Roger Dawson Shane I was just talking to Mike about the movie Shane. He’s going to Jackson Hole (where the movie was filmed) to hunt qual.
Mike_Summey Hi Everyone.
mayorad Good evening, Mike and all.
shane Ha everyone aways ask me about that movie
Mike_Summey Roger, not to hunt quail, to trout fish and hike. We hunt quail in South Georgia.
shane ha
Roger Dawson OOps! I guess I’m not up to speed on killing God’s little creatures!
Mike_Summey I hope we don’t have a problem with the website during the chat. It’s been crashing today for some reason that we haven’t figured out yet.
Mike_Summey Hi sparky & david
shane i have 4 student houses and the repairs are killing me. Do any of your guys have student housing?
DavidO holla
Roger Dawson Hi Sparky
sparky37 Mike is OG a download or do you mail CD
Mike_Summey sparky, it is on a CD that is mailed.
sparky37 Mike, chat has kicked me out twice
DavidO Hey Mike, you should make OG downloadable.
mayorad Mike, can we go ahead with the questions?
Mike_Summey sparky, we had it as a download during a trial period, but the only way it is now available is on CD.
sparky37 Mike, I will order 2morrow
irish rebel i want to say I just finished listening to your cd set and kudos excellent none of the bs normal just straight common sense.
Roger Dawson Mayorad: fire away!
shane how many properties have you guys bought this year? there must be some great buys right now
Roger Dawson Thanks Irish Rebel!
Mike_Summey David, we had it taht way for a while, but had problems. The CD contains versions for Windows, Unix or Mac all on the same CD.
Mike_Summey Thanks Irish
irish rebel i use linux[ a variation of unix] very stable
Mike_Summey shane, I’ve bought 14 so far and will be looking at 3 more tomorrow.
Mike_Summey Hi Jem
mayorad Thanks there, Roger. I’ll get right to my question: what do you (Roger) and Mike believe are good (if not, the best) resources for learning about OPM? Any good websites or books that you can suggest?
Mike_Summey irish, the OG should work fine on that platform too.
Roger Dawson Hi Carleton! Welcome!
Mike_Summey Hi Carleton, what a surprise!!
carleton_sheets Hello everyone
sparky37 Hello Carleton
mayorad Hello there, Carleton. My pleasure.
Mike_Summey Everyone, the great Carleton Sheets has just joined us. He must be looking for a golf lesson.
carleton_sheets Oh stop it!
padale70 hi carleton
shane wow.how long did it take you to get to the point where you felt like you where in control. I mean buying the first few properties for me have been tuff. I just cant wait till i get to the point where i am in control….
Mike_Summey Carleton, why don’t you give everyone your website in case they would like to check it out later.
Roger Dawson Carleton are you in the path of that storm again?
Mike_Summey Hi RGrimsley
irish rebel here is my story and plans, if you can throw ideas my way i would appreciate it. I am in the middle of a divorce right now and will in alll likelyhood have custody I will be selling the house in the next few months and expect to come out with about $100-130,000
RGrimsley Hi Mike and others.
mayorad I guess I’ll have to ask Carleton as well since he is a pioneer in this field of Real Estate Investing. Carleton, can you advise … best resources (website, magazine, books) for learning more about OPM?
Mike_Summey Hi Robert
Robert hi
Roger Dawson Mayorad: do you mean other people’s money?
Mike_Summey irish, what do you plan to do with the money.
carleton_sheets Ijust wanted to join in for a few minutes Mike and everyone. You are doing great things Roger and Mike, for thousands of people across the country.
irish rebel as my half I want to invest in the green county area of new york state
mayorad Yes, Roger, that’s what I mean.
Roger Dawson Thanks, Carleton
irish rebel i want to buy wholesale and rent out
Mike_Summey Thanks Carleton
Mike_Summey irish, do you have our real estate program?
DavidO I have a question: Right now, I don’t have the cash to buy another property (bought two earlier this year), what do you in-between time? I’m still sstudying and staying abreast of the market obviously. Bugs me to look as I know they have deals out there, but just can’t buy at this time.
irish rebel Just the weekend millionair course and Carletons
Mike_Summey irish, now is the best time to get started I’ve seen in my lifetime…especially if you have some cash.
mayorad Looking into purchasing apartment buildings and will need help from equity investors (for the downpayment and what not). I feel I’m very green on this topic and I need to strengthen my knowledge. I’m looking for something to sink my teeth into, like a book, a website, or a magazine.
carleton_sheets Mayorad, I think a study of my program can be a great help to you in identifying sources for OPM…and best of all it’s free. Go to www.carletonsheets.com
irish rebel I agree and as soon as everthing goes thru I want to start
mayorad I will do that, Carleton. I will look at the website after this chat. Thank you much for your answer. Roger, Mike, your thoughts?
irish rebel should i use as little cash as possable initially or should I put a bigger down payment down on the first one?
DavidO Carelton, what’s your take on borrwing from low interest rates credit cards to purchase property? Or for that matter other lines of credit
Mike_Summey irish, you should definitely have the Offer Generator. It will help you generate offers that will keep you out of trouble.
carleton_sheets Davido, don’t forget about lease-options as a no money down opportunity then you sould sublease the unilt.
shane do you guys have any good reading on buying student rental houses?
irish rebel Mike does it run on linux?
shane carleton, does hour program show us how to use lease-options?
Mike_Summey David, there are many ways to buy that don’t require a lot of cash. A small first mortgage with a bank (20-40%) combined with a larger loan from the seller is a great way.
DavidO Thanks Carelton. are you still buying?
Mike_Summey shane, who manages your student housing
Mike_Summey Hi Al, long time no see.
shane i have a full time property manager.. all the houses are in albany new york
Al Lee Hi, Mike. Hi, Everyone
RGrimsley Mayorad, Within the last 2 months I have read 2 of Mike and Roger’s books and 1 of Carleton’s. I feel I have learned an enormous amount and I believe you will as well if you get into even 1 of their books. Already bought 1 unit and have 2 more under agreement.
Roger Dawson Shane: some tips of student housing. Be sure that you get the parents on the lease and a good understand of how they’re going to pay for damage to the property. Also rent high enough that you can recoup your outflow over a nine month year, not 12 months. Expect some damage and charge to cove for it.
Mike_Summey irish, yes it does.
Mike_Summey Hi Penny
carleton_sheets Davido, if you do use credit cards be cautious. No problem IF things work out as you project them but so often they don’t. Rather than use your credit card for say, a $10,000 down payment, what about offering three payments of $3333 each…keeps your exposure down.
shane the houses are worth 190k each and i make about 1600 a month all together after all repairs and expensis
Roger Dawson Hi Penny!
Penny Hello Mike and everyone.
Al Lee Hi, Carleton!
irish rebel ok it runs on linux so I will get it.
Penny Hi Roger and Carleton
Mike_Summey irish, did you see my response that the OG does run on linux
DavidO Mike , the problem today, at least in my market is that the sellers are banks. OVer 75% were bank sales in the Sacramento Area so getting them to finance like a traditonal seller /owner is tough. They want 20% down.
carleton_sheets Yes, Davido, I’m still buying.
mayorad Sounds good, RGrimsley. Do you mind passing along the names of these books please?
irish rebel yes I am getting it tonight
carleton_sheets Hello AL
shane thanks roger..also i collect 50 dollers for late fees from each student and in some houses i have 8 students per house. so this makes up for some of the repairs
carleton_sheets Hello Penny
shane its a rough start but i have learned alot over the last two years!
Mike_Summey David, do you have access to cash for a short period of time. I buy all of my bank foreclosures for cash and then within a month or so go to another bank and get a permanent mortgage to get my cash back out.
DavidO I have access to cash - a business LOC. it’s good, but I need to double that LOC if I’m going to buy cash.
Al Lee Carleton, do you now consider yourself retired? No more infomercials?
shane Mike do you have different property managers for all your properties and how do you keep track of everything? maybe this should be the next book!
DavidO But yes, Mike, that is on my mind. I’d love to have an LOC of around $200k to buy houses outright and then refinance. I will get there.
mayorad RGrimsley, which book titles do you recommend from Mike and Roger’s book - when focusing specifically on OPM?
padale70 new guy here are rentals better or is it better to just flip properties and try to make money that way?
DavidO And Mike, the future goal is to have that cash laying around some place so I don’t have to draw from a LOC.
carleton_sheets Al, I guess semi retired but still 40 hours a week in my office. I have a major interest in three non real estate businesses.
irish rebel Mike when you buy,fix and rent out house #1 how do you get the cash for the next one?
Mike_Summey shane, I have 5 property managers that each handle separate blocks of properties. Each month each manager provides me with a full accounting of income and expenses on each property.
Mike_Summey padale, I don’t know anything about flipping. I’ve never sold a property in 37 years.
Mike_Summey Hi Ken
Ken Hey Mike and crew
carleton_sheets Padale70, My own experience and preference is to buy and hold. that’s where the long term money is.
mayorad BTW, Carleton, I’m checking out your website right now - for a minute there I thought I was being redirected to another site but then I saw your image there. Professional Education Institute has a nice ring to it. Nice site. I’ll join the forum soon.
RGrimsley mayorad, books are Weekend Millionaire’s Secrets to Investing in R.R. and Weekend Millionaire’s Mindset (both available on this website) and Carleton Sheet’s The World’s Greatest Wealth Builder.
padale70 grat thanks for the help
shane Thanks mike…. are these your property management companies or do these property managers have there own companies?
Mike_Summey David, there’s nothing wrong with using a line of credit. I do it all the time. I use it to pay cash and then get financing after the property is in my name. It’s a lot easier that way and you can often finance more than 100% if you purchase low enough.
DavidO Padale70 - read what Mike and Roger say about wealth - it’s an income stream.
RGrimsley Mayorad - Sorry R.E. (Real Estate)
Ken mayorad whats that link?
mayorad Ken, the site is www.carletonsheets.com. It’ll redirect, but you’ll get to Carleton’s site. Looks good, clean - not too busy.
irish rebel guy’s after you buy and fix up and rent out your first house what is the best way to get the cash for a second home?
Mike_Summey mayor, we also have the Weekend Millionaire FAQ (Frequently Asked Questions) it’s a companion to the real estate book and the 4th book, just out this year is Weekend Millionaire Secrets to Real Estate Negotiating.
padale70 thanks david im a loong way from making my first investment just leaarning and reasearching but this is a great fourm i really appreciate everyones help
Roger Dawson My computer crashed, so if you asked me a question in the last five minutes, please repeat it.
Al Lee Hi, Roger. I was setting up my wine glass and getting comfortable and neglected to say hello.
DavidO Thanks, Mike. So now I need to just get the LOC high enough. Mike, do you factor in the interest rate carry costs on the LOC when calculating the NOI? Also, I have credit cards that allow me to borrow at very low interest rates forever as long as I pay. I’ve been using those and making payments of course.
Roger Dawson Hi Al, good to have you here again!
Al Lee Roger: Oh, in that case, I said hello several times and you didn.t answer.
mayorad Thanks, RGrimsley, for your recommendations. I actually have the Mindset book, and I think my mindset is good as well for getting into this business. Just need to get over the fear of a $100,000+ down payment on a 100+ unit building. That’s why I ‘ll need to utilize OPM.
DavidO Hi Al.
Mike_Summey shane, all of my property managers have their own companies. I hire their company. they are not employees.
Al Lee Hi David
Ken I have to say the first book secrets to Real estate investing and the offer generator is a must
shane thanks mike
Ken Both are eye openers
mayorad Thanks, Mike, for your reply there. Sounds good. I’ve got many books right now. Looks like I’ll need to get a couple more. If nothing, my nephews will definitely inherit a library on REI from me.
Roger Dawson Mayorad: those first few big checks are pretty scary but after a while it becomes like Monopoly money. The extra zeros don’t scare you.
Mike_Summey mayorad, how much experience do you have? That sounds like a mighty big project for a first.
shane Mike, do they also rent the properies for you when they are vacant.. and how much do they charge for this?
DavidO Mike - FYI…I just ordered the Offer Generator. It better be good. 
carleton_sheets Mike, speaking of other business interests, I have just received a call from one of my non-real estate partners and have to take it. Good luck to all and ….DON’T MISS THE GREATEST BUYING OPPORTUNITY I HAVE SEEN IN MY 38 YEARS OF INVESTING!
shane yes i want to play monopoly and it will take time for me to get to this point…
Mike_Summey Carleton, thanks for joing us for a while.
Mike_Summey Hi Sandy
DavidO Mayorad: The problem is this: once you buy one, you want to keep buying more. it’s pretty addicting, especially if you do it right.
Sandy hi
mayorad Good bye, Carleton; thank you.
Roger Dawson Thanks Carleton
Mike_Summey Sandy, you just missed Carleton Sheets. He signed off just as you signed on.
Sandy that was a bummer
Mike_Summey Al, how are things going with your projects?
Mike_Summey Sandy, you snooze, you lose. You were late.
Roger Dawson Al, how’s the market in Dallas. Are there a lot of bargains?
Mike_Summey Hi Jess
mayorad Admittedly, not much experience, Mike. But I’ve aligned myself with a few other investors. Experience, resources and connections vary amongst us. But I’m trying to take the bull by the horns and become knowledgeable in the different facets. But yes, 100+ units may be a wee bit too much. 50+ may be the right place to start. I’ll see.
Jess Hello Mike and everyone
shane hello jess
Al Lee Mike, everything is going great except that closign escrow on sales that involve a loan is much harder than it used to be. We have seen lenders send a loan back to underwriting three times just to be sure that the buyer who paid 20% down and has a FICO of 720 is really worthy of this $100k loan. It is a different world from last year. We are getting them closed, though.
Mike_Summey mayorad, I recommend starting with one single family house in the beginning and then adding a few more before getting into larger multi-family projects. There are many pitfalls in large projects that you won’t see until you get some experience.
Al Lee I have decided not to build any more houses for a while until the lending market settles down.
Mike_Summey Hi Jonathan
Jonathan Hello everyone
mayorad Sound advice, Mike. Thank you.
irish rebel roger do you get back to london often?
Mike_Summey Al, you know that equity that you don’t like to have…it sure comes in handy in times like these.
RGrimsley Are you guys that are using property managers paying a fee for leasing AND a fee for management or does the management fee usually take care of the leasing side of things?
Al Lee Mike, yes it does!
Roger Dawson Irish, I don’t think of London as home any more but I’m there about every second year. Problem is that it’s so expensive with the pound at $2!
Ken depends. My PM says she is placing them for free as a favor.
shane i pay for leasing for and a mangament fee. 10 % managment fee and half a monh rent for leasing fee
Mike_Summey RGrimsley, I do not pay a leasing fee, only a percentage of collected rents. The management companies handle advertising and showing out of their fee.
Mike_Summey Hi Scott
DavidO Hey Mike - speaking of mortgage loans and lines of credit, and that fact that Al says that it’s tougher with underwriters - have banks or sellers ever questioned your “cash purchase” because it’s a line of credit?
ScottR hello new here
Jonathan I found a vacant house on a lake in a nice neiborhood. I have a number for the present owner but i can’t get a response anyone have a way to get them to deal
irish rebel im going over in september for a wedding
Al Lee In the past year I have locked in a number of loans at rates below 7% on investor properties I own, so I should reap some great rewards over the coming years. There are folks who think rates will be going back to what they were 15 years ago. That means 8.5% 9% or more.
mayorad BTW, Mike speaking of your Offer Generator - is this applicable for all types of properties - single families, apartment units and the different scenarios (Lease Options, subject to’s, etc.?) Will it provide different angles for purchasing a property?
Mike_Summey David, no they haven’t. They don’t know and don’t care where I get the money. All they are interested in is getting their money at closing.
RGrimsley Ken, Shane and Mike - Thanks!
Mike_Summey Hi Corey
Corey Hello from Toronto Mike
Mike_Summey mayorad, yes it is. The principles used by the OG are applicable to all real estate investments.
mayorad Okay, will look into. Thank you.
Roger Dawson Jonahthan: there are so many sellers desperate to sell right now that it doesn’t make much sense to go after a seller who doesn’t want to sell.
Mike_Summey Corey, welcome back. We’ve missed you. How is Hottie?
Ken rgrimsley, I travel the US for work. I just get a check once a month. My PM even mails it to my bank for me I just log on to the net look up my account and see the deposit.
shane mike..I need to look into more property managers in my area but i think the one i use is the best but they charge alot.. should i try and bargain with them?
Jonathan yeah I have been thinking about the motivated seller thing too.
Jonathan nks roger
Roger Dawson Cory, US property must look like a real bargain now, with your dollar at par.
ScottR hope to be purchasing first rental in couple weeks. made offer today
Ken Shane I had to fire my first PM. Somone recommended them to me. what a mistake. I then interviewed 3 other ones and went with commonsense and my gut
Mike_Summey shane & everyone else, keep this in mind…property managers need you more than you need them. They can find another tenant tomorrow, but owners are more difficult to come by. Without owners they have no business.
Corey Mike She is great. She just got back to Mississippi to get the kids in school. I got off early tonight so ran home to try to make the chat. Usually have to read transcripts
mayorad Roger, I’m assuming you use Property Management companies as well for some of your properties. What do you particularly look for when you are interviewing them? And what types of things do you do to keep them honest?
DavidO Mike, so I know right now that you have a big enough line of credit to purchase all the oil in Arabia, but when you started buying homes using LOC, did you use several LOCs from different banks?
Corey Roger I am just working here right now. But yes the housing in Toronto is outta site in the City anyway
mayorad BTW, meant to slip in the question … how long are you service contracts with these Property Management companies? No more than …. ??
Jonathan I have had some medical related credit issues what kind of deal should I give a co-signer
Mike_Summey David, I still use several banks. I deal with 8 different ones today. It take time to build banking relations. There is a great chapter on building banking relations in the real estate book.
Roger Dawson Mayorad, with large multi units like you’re talking about, you’ll have to have a resident apartment manager. In CA the rule is for 16 or more units. What you have to watch for is the manager renting a unit but telling you that it’s still vacant. So do regular inspections.
shane what is the best to deal to make with property managers..like how much should they take in monthly percentage and if they take a fee for leasing the unit what is reasonable?
Mike_Summey mayorad, in the beginning I had to deal with the management company’s contracts. Most had a 3-6 month cancellation policy unless the company violated the contract. Today I have enough properties that the management companies sign my contract which gives me the right to terminate with 30 days notice.
mayorad Yes, agreed. Learned the point about checking units from Mr. McElroy’s book. Great guest, BTW, Mike and Roger. Glad you brought him on last time.
Roger Dawson Shane, my problem with a leasing fee is that the PM makes more money when turnover is high. I agree with Mike that it should be strictly based on the amount of rental income they generate.
mayorad Seems very nice, Mike. Guess it’ll take some time before I can negotiate such contracts with PMs. Well, we’ll see.
DavidO someone in this forum once gae me a list of quesitons to ask when hiring /evaluating a property management firm. if anyone here wants those questions, please email me at david@income100.com
DavidO once gave
shane yes and becouse i have student rentals the leasing fee is killing me. the propertys turn over every year….
Mike_Summey shane, most management companies will charge 10% unless you have several properties, in which case you can negotiate that down. I never pay a leasing fee. I believe you said your management company charged 1/2 of the first month’s rent plus 10% of the collected rents. Do the math, that’s over 14% and that’s way too high.
mayorad Dave, I’ll be sending you a request for this before the night is done. Thanks for mentioning this.
Al Lee Roger, here in Texas, a large portin of the rentals involve co-brokers from an MLS listing. That means you have to have money to pay the broker’s fees (commissons). That means a leasing fee is pretty standard.
Jonathan Thanks everyone
shane yes i know i think its way to much also. the problem is that i cannot find a another good company. i looked everywhere….i feal stuck
Mike_Summey shane, how many units do you have?
shane i have 4 two family properties so 8 units….
Mike_Summey That was nice of Carleton Sheets to pop in on us. He does that from time to time.
mayorad Mike, Roger - I imagine you two still use OPM from time to time. Do you do so as a syndicate working with accredited investors or is there another method you employ?
Ken davido that might have been me, ken@kenhicksjr.com if anyone wants my PM questions
Roger Dawson Al, are you saying that rentals go through agents? And do the agents expect to be paid up front on the entire length of the lease?
shane this month the property manager got me for 5 grand
Al Lee Management companies that charge a leasing fee are the norm in Texas; but the management fee rate is usually lower than 10%.
shane for renting out the units
DavidO Ken - it could have been you. It was a few years back.
Mike_Summey shane, that is enough to interest another company. why don’t you check and see if someone else will handle them without a leasing fee. 10% on 8 units is a good chunk of change for a property management firm.
Mike_Summey Hi Daisy
Ken Shane that one PM I had would send their personal guys to my properties to just clean out weeds because they didn’t make their bills for that month.
shane yea i get over 10k in rental income each month
RGrimsley I know Mike and Ken advocate hiring a property manager but Carleton recommends managing your properties yourself initially to understand what is involved. After doing that, paying a PM seems like a bargain - but the leasing fee? Forgetaboutit!
Al Lee Roger, yes, most rentals go through agents who get a commisson upon move-in, or lease signing.
DaisyNH7 Hi Mike and everyone.
DavidO mike, roger: with PM companies, the leasing fee is the norm rather than the exception, right? all i’ve talked to charge a leasing fee.
shane so at 10 percent thats a grand for the company… i am going to look into other companies but i am kinda scared to switch everything…..
Mike_Summey Al, that’s a good point. A leasing fee coupled with a 6-8% monthly fee is livable, but that’s still better for the management company than it is for the owner. What happens if the tenants fails to fulfill the lease?
Al Lee shane, one mistake novice investors make is to focus on how much soemoen else is making instead of how much they themselves are making. If you are making money as it is, don;t jump to make a change you might regret.
shane exactly…
Mike_Summey shane, are property management companies required to be licensed in your state?
shane hmm im not sure i dont think they are though!
Al Lee Mike, every PM I have used (about a dozen) would give you a credit if the tenant failed to live out the lease. That means they woudl get another tenant at a reduced or waived fee.
RGrimsley Mike - has it been your experience that some states license PMs?
Mike_Summey shane, check it out. In NC & SC where I invest they are licensed by the state and have to meet certain requirements or lose their license.
shane oh i see what you mean! i dont think they have to be licensed in new york
Ken Rgrimsley I use to mange my properties for 8 months. Traveling for work is just wasn’t working out. I got the PM I respect their decisions more. It’s well worth it. IMO
Roger Dawson I need to leave a few minutes early tonight because we have company over. See you next week.
Al Lee In TX a PM does not have to be licensed; but in a practical sense, needs to be licensed in order to operate efficiently. That is because you must be licensed to sign the lease on behalf of the owner or to enter listing s into MLS. All of them, as a result, have a licensed real estate broker.
shane for know i am going to have to stick it out until i build reserves…then i can make a better decision on what to do
Mike_Summey everyone, whatever you management cost is, if you factor that into the deal when you are structuring offers you will be fine. The Offer Generator prompts you to do that.
shane got yea.. that is the best idea!
shane yea i have alot to learn…
Al Lee Focus on how much YOU make, not on how much soemone else makes. Let thge people who are making you wealthy make a little money themselves.
shane al.. you are right.. i just wanted to bring it up in the chat to get everyones advice
Al Lee I am not saying “Don’t switch” — But, don’t switch for the wrong reasons.
irish rebel good night folks see u next time!!!
Corey Mike this past year was the first year I did not have to pay taxes to uncle sam beacuse of our real estate. My accountant is keeping up with my income to help me do the same thing this year
RGrimsley Al, you are absolutely correct that if the guy working for you feels fairly compensated he is generally going to do a much better job.
Mike_Summey Corey, that’s just one of the advantages of owning real estate.
Al Lee Corey, Since I retired from my computer software business in 1999 and started deriving most of my income from rents, I have paid zero taxes almost every year and nearly-zero the other years.
shane al..how many properties do you own and when did you start?
DavidO Mike, Al: Tax quesiton - so if I make $10k a month on rental income, I’m being taxed for investment income (say long term). That means I’m taxed at capital gains - no social security, no selfemployment tax. is that correct? if so, tha’ts like a 20% cut in taxes.
Corey Mike and Roger that was VERY exciting for me because in the past I have been paying some big numbers to Uncle Sam.
Mike_Summey As you know I stress the importance of building banking relations. I had an interesting thing happen last week that emphasizes this importance. One of my banks sent me a commitment letter for a $600,000 revolving line of credit for one of my LLCs. The commitment letter states the purpose of the loan is to enhance buying opportunities, but the most important part is the the line is unsecured.
Al Lee shane. I have three dozen in the DFW area, plus two commercial properties, plus some oil & gas properties. I started in 1974. I have a book about it at www.myRentProperty.com — if you buy it, get the discounted price by first subscribing (free) to the website
DavidO Corey - I pay BIG #’s to Uncome Sam.
shane thanks im going to buy it…
shane does it go into the whole history of what you have done?
Al Lee DavidO, No! you do not understand the tax system. Go to my website and read soem of my articles. I will get soem links for you in a moment.
Penny goodnight everyone
shane wow mike thats some buying power!
Mike_Summey David, if you make 10K per month you will pay no Social Security or self employment taxes, but any unsheltered income will be taxed as ordinary income. The interesting thing is that most of the income will be sheltered from taxes for many years.
Corey David my account said I am not sure you would want to take on that much debt in Real Estate. I told him i would rather invest the money there than hand it over to the irs where i know i wont get any kind of roi
RGrimsley Mike, when you say unsecured, you have to give a personal guarantee, though, even though it is an LLC. Right?
DavidO Ordinary income is fine - it’s Social and Self Employment that kills me right now. especially self employment.
Mike_Summey David, I left the business world 12 years ago and have not paid one cent into Social Security since. I just started drawing it this year.
Mike_Summey RGrimsley, that is correct.
DavidO Good chat tonight guys. Catch you on the other side.
Corey Hey Mike how do you like your new goldwing over your other one
DavidO And gals
shane thanks everybody for your help today….
Al Lee http://www.myrentproperty.com/2003-12-31.htm is one article that explains the tax aspects of rental property
Mike_Summey Al Lee and I have had an ongoing dialog about whether to pay down debt or not. I like to pay it off, he doesn’t. He just rejoined us so he can comment if he wants.
shane al, i dont know if you got my last questions. does the book go over your history of all the properties you bought?
Al Lee Good Debt is a good thing. Bad debt is a bad thing. More of a good thing is better.
RGrimsley Mike, thanks for the chat tonight! That was cool having you, Roger and CArleton all on at the same time! Wow!
Al Lee shane, pretty much so.
DavidO i’m in Mike’s camp. no debt is good debt.
shane thanks al
Al Lee Not one -by-one, of course.
shane yes i mean like an overview of your aventure into real estate
Mike_Summey All, no debt is better than good debt!!! 
I’ll argue that point with you all day!
shane i think levrage though is a good thing.
Al Lee If you are paing 7% interest to own a house that makes you 35% returns, that is good debt.
DavidO but i also see where Al comes from.
Jess Hi anybody could help on negotiation skills? I’ve been trying to buy properties with a price that could bring me a net positive cash flow, but so far without much success. Is there anything I could have done better?
Mike_Summey All, glad to have you back tonight. Don’t stay away so long next time.
DavidO good night all.
Al Lee Mike, we still need to have that debate. I think it would be great to do.
Mike_Summey Jess, do you have the Offer Generator?
shane Al i agree with you
shane you can levrage the money
sparky37 night all
Jess yes Mike but I see that negotiation is more of a problem here
Mike_Summey Jess in our book Weekend Millionaire Secrets to Negotiating Real estate, we talk about the OG and why it is the best negotiating tool an investor can own.
mayorad Mike, I know the OG package comes with the software, but does it include a manual with case studies and examples?
shane If you keep mortgages you can keep the cash liquid in a side fund which increases safety liquidity and rate of return and you can make an arbitrage
Al Lee debt is leverage! That is the investor’s greatest tool–if used correctly.
shane There is a book on this by Doug Andrews
Al Lee shane, ther eis a book on this by AL Lee !!!
Mike_Summey Jess, use the OG to compute your offer and only buy those properties that will cash flow. You will alway have more rejections that acceptances, but the ones you buy will make you money for the rest of your life. You won’t lose anything on the ones you don’t buy.
shane lol
Al Lee OK, gotta run now
shane thanks for everyhting al
Al Lee goodnight, Mike.
Mike_Summey Goodnight all. I have company so I’m going to have to leave you. You are welcome to stay and talk amoung yourselves as long as you like.
Al Lee goodnight, everyone.
shane Goodnight mike hanks for the help
Mike_Summey Goodnight.
Jess Mike, the owners seem not able to come to agreement with me on the offer I’ve given them. The problem is that I keep on getting rejections from property owners that have positive cash flow from the OG.
mayorad Thanks, Mike - good night.
mayorad Jess, I’m a newbie in this field, area, but I will offer what I learned from one investor recently - this is a numbers game.
mayorad You have to do the numbers, put them on paper, make them credible and present strong reasons for arriving at your offer price.
mayorad You may strike out 50 times, but the 51st time may be the one that yields the results that you are looking for. Just don’t get desperate to buy simply to buy. This is where discipline kicks in.
Jess mayorad, yes I do agree with you. The problem is that when the numbers work the owners are not willing to let go of the property base on that price
mayorad Yup, there are many that won’t. I’m a RE agent and you want to see owners that don’t want to …
Jess i find the owners just want to make a profit as high as they could after all they don’t sell thier homes everyday. U know what I mean?
mayorad part with their properties for anything below the asking price!! Now think about owners of properties that bring in income. These guys are looking to hit pay dirt so anything less than what they’re asking and they’ll balk.
mayorad Yes, I agree with your point. Just keep plugging away. Eventually, you’ll find the right property for you. Just pass on the owner that says no and move on to the next …
Jess yes patience is the virtue here
mayorad I think you mentioned this already, but it’s a game of perserverance and focus. Ken McElroy, whose books I really like, says the same thing. If an owner doesn’t like your offer, just pass. He’s done this, and he’s had owners come back to him after realizing that his offer was the best and only one he was going to get.
Jess I guess I need to make a lot of offers and make the numbers work.
Jess thanks mayorad
mayorad That’s what it is, Jess.
mayorad Don’t buy just to buy. We all want to get things fast, but it’s better to be slow and get the best results then be fast and get a quick problem.
Jess mayorad, The thought of giving up finding properties that work did creep into my mind. Thanks again for the encouraging words.
Jess I guess I have to control my impatience …
mayorad No problem. Just run the numbers. Due diligence. Cash Flow formula, cash-on-cash, etc. Plenty of resources out there. I’m even thinking of getting Mike’s OG. Oh well, I must be going now. Best of luck to you, Jess. Perhaps, next week. Cheers!
Jess mayorad, see u again next week. Have a good night
mayorad You too!
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