Chat Transcript - September 15, 2008
Posted on September 16, 2008
Mike_Summey Hi everyone.
cferrier66 Howdy from Texas!
Roger Dawson Howdy everyone~
Mike_Summey cferrier, or what’s left of Texas.
Mike_Summey cferrier, are you near where Ike hit?
eryk76 Hello, there Massachusetts here..
cferrier66 Not much down by Galveston!
Mike_Summey Well, it looks like we have the country covered. TX, MA, NY, NC, CA
cferrier66 No I am up around the D/FW area!
Mike_Summey Hi Danko
Roger Dawson Hi Dannko
danko Hello Mike. Hi Everyone
danko Hi Roger
cferrier66 Hi Danko!
Mike_Summey What does everyone think about the Leman Brothers bankruptcy and Merrill Lynch being taken over by Bank of America?
Mark BofA seems to be absorbing everything.
danko The meltdown is crazy
cferrier66 When is this meltdown going to end?
danko I heard Merril Lynch was taken over by Bof A for no cash…all stock
Mike_Summey Personally, I think we’ve got a year to go before things finally shake out.
Mike_Summey danko, that’s what I understand too.
danko I heard the Feds are probably going to lower interest rates again
Roger Dawson Danko that’s what I read too. $50 billion in stock
Mike_Summey We are seeing the result of GREED!
cferrier66 I agree maybe longer! My question is how low can it go?
Mike_Summey cferrier, I think there is still quite a bit of downward movement left.
Mike_Summey Hi Sandy & Eddie
EDDIE-NC hello all
Sandy hello
cferrier66 I read an article on short selling today and they were explaining that is really risky unless you know what you are doing!
Mike_Summey I will be surprised if Wachovia survives until year end.
Mike_Summey Hi Sparky
sparky37 Hi Mike
Sandy According to Greenspan, short selling is good….something about keeping the market in check
Roger Dawson I think that WaMu Washington Mutual will be the next to go. They just grew too fast and didn’t have controls in place.
cferrier66 My credit cards are with some of the banks that are getting hit the hardest do you think I will be able to get a break LOL?
Mike_Summey cferrier, short sales are fine as long as you get title insurance. You want to be sure you have the title searched thoroughly to be sure there aren’t other leins in addition to the mortagage.
Mike_Summey Hi Sharon
Mark Anyone, have you used any Pre-Foreclosure lists. Our local REIA promotes one, and I get emails from a few others…your thoughts on effectiveness/costs? Which do you recommend? I’d like to get ahead of the guys at the courthouse!
Mike_Summey Hi Karl
sharon Hello
karl Good day
Mike_Summey Mark, I wouldn’t pay for any list. Nearly all of the information you pay for is available online and is usually more current.
cferrier66 Mike does your program address Short Selling?
Mark Mike, thanks…just wondered.
Mike_Summey cferrier, good luck!
Mike_Summey Hi jneun
sparky37 Mark, it is not just the guys at the courthouse but usually the lenders attorney
Mike_Summey cferrier, are you talking about the Offer Generator?
Mark sparky37…how so? Do you mean they swipe them before we get a chance to bid?
Roger Dawson Just in case, here’s a primer on short selling. Let’s say IBM stock in selling on the open market for $100 a share. I offer to sell you shares at $90 and deliver them to you in say 60 days. I don’t own the stock yet. If I can buy for $85 in 60 days, I win. If it cost me $95 to deliver that stock to you, I’ve lost.
cferrier66 OK that what I thought?
sparky37 Mark, they have a set amount they have to get and that is where they bid it up to
sparky37 mark, usually too high to make money on
Mark Oh, yes. The first time I experienced that I thought…what the heck?
Mark sparky37…you’re right, usually too high price and no equity.
Mike_Summey Hi IBMally
cferrier66 BTW is a preforclousure sale the same as a short sell?
IBMally hello everyon
IBMally everyone
EDDIE-NC Mike do you have any doublewides in your portfolio. I’ve purchased 2 really nice ones and they have very good cash flow. Plus both are brick underpinned.
Mike_Summey Mark, the banks will bid up to the amount they are owed even if that is more than the property is worth. If they later sell for less than what they bid it in for, they can go back to the original borrower for a deficiency judgement for their loss. If they chose to write off the loss, the borrower gets hit with a 1099 for the money and then has to pay taxes on it as if it were earned income. That’s why the banks bidd the amount they are owed.
Mike_Summey cferrier, preforeclosure sales are not the same as short sales unless you present the bank with an offer agreed to by the seller that is for less than what they are owed.
Mike_Summey Hi Trav
Mark Mike or sparky37…When the lender “buys the property back,” on the courthouse steps, it becomes an REO. Have you had any luck getting a reasonable offer accepted by the bank…we’ve had a tough time. They all want full (retail) price or they won’t talk to us.
Trav hey mike
cferrier66 Mike are you saying that banks will bid on their own short sell properties?
Mike_Summey Eddie, I have a small mobile home park that I put brand new homes in. Three of them are double wides.
IBMally Eddie, Are your doublewides on your property or do you pay for lot rental?
Mike_Summey Mark, give them a little more time. They will alway try to get as much as possible, but the more inventory they get the more flexible they become.
Mike_Summey Hi Penny’
Penny Hi Mike
Roger Dawson Short sales in real estate are not as complicated as they appear. The buyer makes a written offer to the seller. If it won’t net enough to pay off the loans, the seller takes the offer to the lender and says, “Do you want to accept this offer, which means you won’t get the full amount owed?” Bankers know what their loan collateral is worth and know that they are better off to take their loss and get out.
EDDIE-NC They are on their on lots. We purchased lot and home. I just didn’t know for sure if they would hold value or not.
Roger Dawson Hi Penny
IBMally Mike, do you buy many from the sherriff’s sale, or do you prefer to wait until after the bank has cleared the title?
Mike_Summey cferrier, a short sale occurs when a bank is presented an offer that is short of what they are owed prior to foreclosure. If they agree to accept the offer rather than go through the foreclosure process that is a short sale.
Penny Hello Roger 
Mike_Summey Hi Linda
Linda Hello everyone
Mike_Summey Hi John
johnc1211 Hello
Roger Dawson A short sale doesn’t eliminate the second and third loans on the property the way that a foreclosure sale does.
Mike_Summey IBMally, I prefer to wait until the bank owns the property after the foreclsoure. Buying on the courthouse steps is very risky. One of the banks I deal with got a house back in flreclosure and learned that it is partially located on the state road right of way. They have to clear up that problem before they can sell it.
Mike_Summey Hi Bob
cferrier66 Roger I guess that is why title insurance is so important!
Linda Mike, do you have any thoughts about where the rates will be going over the next 1 1/2 weeks?
Roger Dawson Yes, cferrier, never buy any real estate without title insurance.
cferrier66 Will the title insurance company do the title search or do I have to do it?
Mike_Summey Linda, I don’t see rates doing much in the near term. We’ve already seen a substantial drop after the feds takeover of Fannie & Freddie. I think things will be stable for a few months. That’s just my opinion.
danko sorry, lost my connection
Roger Dawson Cferrier, they do it. All they are doing is accessing the ownership files on their computer bank.
sparky37 Mike, I think rates will drop 1/4 to 1/2 point
danko Mike I heard rumors that interest rates might go lower in the next week or so
Trav mike, i am a renter and i am ready to purchase my first place. I was curious if it was a good investment to look at condos
Linda I’m floating my interest rate until the begining of next week, so I’m curious about peoples thoughts
Mike_Summey cferrier, that depends on which state you are in. In some states, like California, the title companies will do the title search. In NC where I live the searches are done by real estate attorneys.
cferrier66 OK thanks!
sparky37 Linda, depends on your credit score and the program you select
Mark Roger, can you get title insurance after purchasing on the courthouse steps? Doesn’t this protect you?
cferrier66 What is the minimum FICO score will most banks work with?
Linda I was told by the loan officer that it can change each day. I’m over 750 for a score
Mike_Summey sparky & danko, I believe you are talking about 30 year fixed rate loans. I don’t keep up with what they are doing because I can’t qualify for them. I pay more attention the the commercial loan rates.
danko Sorry if this has already been asked, but Mike and Roger do you see bank loans getting tighter with this financial meltdown? Will it be harder to get loans? And do you think seller financing will be more commonplace?
sparky37 Linda, 750 is a great score depending on your downpayment your rate could be 5 5/8 as of today on a 30yr fixed
Mike_Summey Trav, if you are planning to live in the condo you may be fine. If you are buying for an investment, I’d stay away from them.
eryk76 If you don’t mind Mike why is it that you can’t qualify for 30 year fixed loans?
Linda Thanks Sparky, I told the loan officer that I was holding my breath until I got in the mid 5’s, at last check is was 6 1/4 and that was last Friday
sparky37 Trav, Mike is 110% correct condos are very tough for investement
danko I have a friend who invested in a condo for a rental unit and it has become an alligator
IBMally sparky, you’re probably talking owner occupied, investment property is higher
sparky37 Linda, what state are you in?
Linda MA
Mike_Summey danko, loans will be harder to get. You’ll have to put more down and have a higher credit score than what we’ve seen over the past decade.
sparky37 Linda, are you using broker or bank?
Trav what if i an wanting to only live in it for a few years then sell it?
danko so do you think, Mike, that seller financing will become easier to get?
sparky37 IBMALLY o/o or 2nd home
Linda broker/bank, I’m getting a SIVA loan with 20% down
Trav will it get better profit than a house
sparky37 Linda, stated income is always a little higher so 6% will be your best rate as of today
johnc1211 Anyone have any thoughts about a real estate business plan? I have a couple of houses with various equity. I have a little $ sitting aside. Not surhere to put the money. Paydown or buy more? Don’t want to become too extended. Need a plan!
Roger Dawson Mark, you could buy title insurance afterward but it’s very risky. That property can be encumbered with a new loan in a split second. Loans have priority based on when they were placed on the property,not the size of the loan.
Mike_Summey Trav, if you have to sell a property to make a profit, you are a speculator, not an investor. Act accordingly! I wouldn’t buy a condo today unless I could get it for 50% of the asking price or less.
Trav ok thanks
Linda Thanks, I have to lock in by tuesday of next week as we will be closing on Friday. It’s a forclosure, but a fantastic deal believe it or not. We will be OO also.
sparky37 Linda, good luck and congrats
karl Mike you kill me
Trav Mike, so I should try and make most of my profit on the purchase
Roger Dawson John, it’s a good idea to keep a cash (or liquid) backup in case of emergencies. Don’t spread yourself to thin financially.s
Mike_Summey john, right now, I’d be very careful. Cash is king during times like now. Whatever you do, keep a good cash reserve so you don’t get in trouble.
Mike_Summey karl, I’m sorry. I never thought of myself as a killer.
Mark Roger, so are you saying that we shouldn’t buy foreclosures at all? That we should wait until they are REO’s?
cferrier66 Mike or Roger which would be a better investment in this ecomonic situation single family or multi-family?
johnc1211 I’m being pretty conservative. I’m in a strong position right now. I still want to get in on the “deals” available right now. I’d love to see a business plan. Is there such a thing? Maybe I’ll wait for that “steal” to come along.
hawkeye775 Hi Everyone
Mike_Summey cferrier, both can be good investments. Multi-family can produce better cash returns, but they also have many things to consider tha SF do not. I recommend buying a few SF before moving to multi-family. Get some experience.
Mike_Summey Hi Hawkeye
cferrier66 Thanks Mike.
Roger Dawson Mark, you’ve got to look at every situation diffently. But so many properties are over-encumbered now, it’s hard to find one that you be a smart buy at the auction, where the first bid will be for the amount owed.
danko Mike, right now SF in the Twin Cities can be gotten for pennies on the dollar. I can buy one, but 60,000 in rehab and still be under 70% of ARV
danko sorry, PUT 60,000 in rehab
Mike_Summey john, there is so much product on the market right now that you shouldn’t even think of buying anything that is not a good deal. I think prices are still going to fall a good bit before theis cycle bottoms out.
hawkeye775 how do you feel about the asheville market Mike?
hawkeye775 I have just started looking in the area.
karl How are banks looking at sf propertys vs commercial at this time
Mike_Summey danko, that’s what I’m talking about. There are so many SFHs on the market that the inventory will continue to supress prices.
IBMally John, I found that there are many ways to make money in RE. I am a member or a local REI club and many folks have different business plans. I am a part time investor focusing on sfh only. Many others are into multi units for better cash flow. I reccomend you read a lot and you will be able to come up with the plan that best suits you needs.
danko SF are great here right now. You can buy them, rehab them, rent them for under market rents and still have a good cash flow
IBMally I have a preety good paying full time job, that’s why I was attracted to WM
sparky37 IBMally, do u work for IBM?
Mike_Summey hawkeye, Asheville is jut now beginning to experience what places like Florida & California have been experiencing for over a year. This area always goes into the down side of a cycle 6-12 months behind the rest of the country and comes out 6-12 months behind the rest of the country. This is the 4th one of these cycles I’ve been through and that pattern has held true in all of them.
cferrier66 I am not much in the area of fixing-up as am physically unable at my age and I have had major surgery on myright shoulder. Should I find a really good cappenter or try and line up several different people that I can use if I need work done on properties that I buy?
hawkeye775 thanks Mike
IBMally No, Mally properties is my side business,
sparky37 oh
Mike_Summey John, I’ve followed the same business plan for 37 years. If I can buy so that I know I will make money, I buy. If I’m not sure, I don’t buy. That has served me very well.
Trav Mike, do you think it is a good time to buy a SFH in asheville right now?
Mike_Summey Trav, yes I do and I think it will get a lot better before we see a bottom.
IBMally I live near Pittsburgh, we never got the bubble and we don’t have an abundance of inventory in my target neighborhoods. I think I may find a deal this fall/winter. If someone is putting a house on the market then, they are probably a more motivated seller.
Mark Roger, you’re right about very few good foreclosures, but my wife is diligent about looking monthly. We just picked up one for 87,900. Recent comps are 130,000+. It needs some work, but using the Cash Flow Generator, we expect to do okay.
hawkeye775 From reading, it seems that you and Roger differ a little in the areas that you look for property. Roger looks at different places around the country, and you seem to look around the local area. If you are looking at a broader area, how is the best way to go about it, and how do you make the contacts that you need (property managers, etc..)? I guess this question is more for Roger. Thanks.
Linda ANYONE, is it true that if you hold more than 4 mortgaged properties you are considered a COMMERCIAL BORROWER? And therefore, have to get COMMERCIAL LOANS (30% DOWN if financing through a bank)????
Trav how do you think it will be in 10 months or so because i have a lease
IBMally I understand that you can only have 4 Fannie eligible mortgages in your name.
Mike_Summey Everyone, there are always deals in real estate. During boom times they are few and far between, but they are still there. During times like now they are plentiful. Just be sure to base your offers on the income a property can produce, not on asking prices or appraisals. Our Offer Generator is the best tool on the market to use to calculate deals like that.
Roger Dawson Hawkeye: Like Mike I’m a firm beleiver in buying within 50 miles of your home. You need to drive by the property once in a while and see what’s going on, even when you employ a property manager.
Mike_Summey Linda, the number was 10, but I think that has now been cut back to 4-5. Once you pass that number, your loans no longer qualify to be sold on the secondary market and have to be kept by the bank as portfolio loans. There is not 30% down requirement on portfolio loans. It can be whatever the bank wants 50% or 0%.
Mike_Summey Hi Jonas
cferrier66 BTW just as an aside who is going to win tonight the Cowboys or Eagles?
IBMally clicked on you offer generator description and it took me out of chat…
danko Mike, Roger, anyone…with the financial meltdown, do you think rents are also going to go down? And should I base my offer on today’s rents or on where I think the rents might go?
Trav cowboys
Mike_Summey IBMally, do you have the program?
sparky37 danko, rents will rise
Linda Great, thanks for clearing that up for me Mike… got to fly, thanks again,
Roger Dawson As more owners become renters, rents are likely to go up.
IBMally not yet, probably should just get it.
IBMally Mike, on offer generator, do you plug in the positive cashflow that you want?
eryk76 Danko, ask a property manager and they should be able to give you an accurate quote on rent.
IBMally I assume you have to plug in taxes, repair allowance, estimated rent, insurance etc?
Mike_Summey INMally, get it! You’re wasting a lot of time trying to calculate deals without it. It does everything for you. Computes the NOI, uses it to let you generate cash or financed offers that will all cash flow and even lets you print the offer letters ready for your signature and presentation to sellers. It prompts you to do everything and has popup help everywhere you have to enter info. You’ll love it.
Roger Dawson Ibmalley: The big five are maintenance, insuarance, taxes, utilities and management.
hawkeye775 Mike or Roger, How do you decide how much to raise rents each year?
Mike_Summey Some of you who have the Offer Generator tell IMBMally what he’s missing.
danko I have the Offer Generator. Mally, get it. It is easy to use and walks you through the steps.
Mike_Summey IBMally the OG will prompt you to enter things you often miss when trying to work out an offer without it.
IBMally ok, ok, I’ll try it
Trav Mike,would you suggest me to buy something sooner or latter, becuase i rent a one bed/one bath for 750
hawkeye775 Does the offer generator give you the ‘bracketed’ offer?
IBMally Loved your books, I’m sure OG is a natural
eryk76 Mike and Rodger, Have you ever had your cash flow become lowered or wiped out due to an extreme rise in property tax? Or do you adjust rent to compensate for the increase?
Mike_Summey Trav, buy as soon as you can, but only buy if it’s a deal. So many people let their emotions get in the way and they pay too much. If you are renting, you are buying the property for an investor (that’s good for me, but not for you). When you buy, think of the mortgage payment as paying rent to yourself.
Mike_Summey hawkeye, what do you mean “bracketed offer”?
Roger Dawson In California, property taxes are fixed. They are one percent of the purchase plus a two percent increase on that every year. So property taxes are low. Income taxes are high.
Trav right but whats holding me back is a down payment, I have great credit, my score is 770
karl I have learned more from Mike Summey ,Thanks Mike, and don’t have the offer generator TONIGHT…. we won’t have the same conversation tommorow
johnc1211 I agree with eryk, In IL property taxes can be an issue.
hawkeye775 I wasn’t sure of the right term, but if you want to get to $75k and they are asking $100k, does it give you the $50k offer?
Mike_Summey eryk, I adjust rents to keep up with inflation and other expenses such as taxes & insurance. On properties where I pay for water and sewer, I have a surcharge in addition to the rent and my lease states that I can adjust the surcharge at any time.
Roger Dawson That’s right Hawkeye, assume that you will end up half way between to two opening offers.
eryk76 That’s good to know Mike. Thanks. Sounds like thoes are essential provisions to have in your lease agreement..
danko well, it’s about that time. Thanks for a great chat. Hope to see you again next week.
danko ‘night
IBMally night all, off to OG tour!
Roger Dawson Good night everyone. Happy investing!
Mike_Summey hawkeye, if a bank finance offer would only be $50K, the OG will let you calculate how you could pay the full asking price of $100K. It lets you compute all cash offers, bank financed offers, seller financed offers, third party financed offers or any imaginable combination of two or more of these.
eryk76 Thanks Rodger, Mike and all. Good night.
hawkeye775 Thanks for the information Mike
cferrier66 Good night all!
Mike_Summey Those of you who don’t own the Offer Generator, you are missing out on the best tool a long-term investor can own. I use it every week. Just made two offers to a bank this past week with it…unfortunately both were rejected…for now.
johnc1211 How much is the OG again?
hawkeye775 What is your success rates with offers Mike?
sparky37 Night all
Mike_Summey Well, I’ve got to run. Roger will be here next Monday. I will be traveling. I’ll see everyone in 2 weeks. Goodnight.
hawkeye775 Good night everyone.
Trav goodnight
Mike_Summey hawkeye, I probably average 1 purchase per 10 offers.
hawkeye775 Thanks again
karl thanks and goodnight
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