Chat Transcript - September 23, 2008
Posted on September 29, 2008
Roger Dawson Hi Lon and Santo!
Lon Hi Roger, any word from Mike if he’s going to have an internet connection?
Roger Dawson I don’t know yet. He’s up in Wyoming on a fishing trip with his buddies.
Roger Dawson Hi GG
Roger Dawson WB Santo
santo hi, roger
gggggg Hello
Roger Dawson Amazing developments in the financial markets this week. Most people that I talk to are still in shock.
Roger Dawson Hi Sandy
Sandy Hi Roger and all
santo roger, have had a lot of trouble, logging on- could not get in last week
Roger Dawson We missed you!
Roger Dawson Santo, what browser do you use to log in?
santo roger, thank you, someone does
Roger Dawson Hi Mac
Mac Hi, Roger
Lon We’re in the perfect storm. Rates are low, it’s a buyers market, CD rates are low, the stock market is shaky - people are looking for other areas to invest. We as real estate investors can give them secure investments if they are willing to be our private investors.
santo roger i don’t know anything about browser’s
Mac Roger, what do you think of the possibility of buying some of the paper that the gov’t is backing/taking over?
Roger Dawson Santo, the reason I asked is that I gave up on Safari. It kept crashing. Now I use Firefox and don’t have any problems.
Lon Santo - I had the problem a couple of months ago. I just had to reboot, but that took 20 minutes!
santo lon i gave up after 10 minutes–but i think it alright now
Roger Dawson Mac, I’ve never been able to make money in the stock market, so I can’t answer that. But if the investment houses didn’t want the paper and the government is reluctant to buy it, I don’t see how it could be a good deal for us.
GlennQ hello everyone…
Mac Roger, I was thinking that it should be available at a deep discount.
Roger Dawson Mike Summey is up in Wyoming fishing with a bunch of his Good Old Boy friends. I think he flew them up there in his plane. He going to try and join us if he can find an internet connection.
Al Lee Good Ole Boy? Isn’t that who caused this financial mess?
Roger Dawson Welcome Al. How are things in Dallas.
Al Lee Hi, Roger, Santo
Al Lee eryone
Al Lee everyone
Al Lee Roger, things in Dallas are mixed. The rental market is great. The relations with the City of Dallas on our building projects stinks.
Roger Dawson When BofA bought Merrill Lynch, they paid 20 cents on the dollar, and even that was risky.
GlennQ Roger, how will this 700 billion dollar bail-out, with oil $25 mrre per gallon affect real estate?
Roger Dawson Who has made some offers this week?
hawkeye775 Good evening everyone
Al Lee All of this financial distress can be traced back to the 1990s and the government obsession with “redlining”
Mac Roger, do you see any particular market segment for buying houses that would be the most likely to result in seller financing in the current and coming environment?
Roger Dawson Glenn, it seems like it will help. By clearing bad debt off the banks books, it frees them up to start lending again.
santo Roger, when I worked for the n.y.c. transit authority they had a 401k plan, where the worker could invest up to 6% of his paycheck and the boss would match it–but they did not tell you what they invested in–i did go into this plan– a few years later co-workers were telling me how much they lost, because they invested in risky stocks. hello Al
Roger Dawson Al, you mean forcing banks to lend in high risk areas?
Al Lee Roger, YES! If we do not repeal the regulations that forced Fannie Mae to make half their loans to people who could not pay their bills and imposed penalties on lenders if they did nto make risky loans to “disadvantaged” people, we will see this go deeper and deeper.
Al Lee It was not just “areas”, it was demographics, also.
Roger Dawson Mac, for seller financing you need a seller with big equity in their property. That doesn’t describe homeowners who bought in the last five years. However, about 40% of the homes in this country are owned free and clear, so there’s still a big potential for sellers who want to turn their equity into an income stream.
Al Lee The government regulations created an artificial real estate boom which had to collapse sooner or later.
Mac Al, you sound as if you’re talking about subprime loans. Subprime, by definition, is a loan that doesn’t meet Fannie Mae guidelines. This confuses me.
Roger Dawson Nowadays sub-prime is a euphonism for junk loans
GlennQ Is it going to be harder for buyers to get money through Fannie and Freddie now?
Al Lee Mac, no, Fannie Mae was forced to make half their loans to people who were unqualified to borrow. They adjusted their standards so that those people woudl be rated on the online loan approval systems as almost being A-paper. The big banks had to go along with it or they faced stiff penalties.
Roger Dawson Glenn, probably it will make it easier to get a loan. But the size of this bailout is mind-boggling. No telling how financial markets are going to react.
Al Lee Mac, the term that means not meeting Fannie Mea gudelines is “non-conforming”
santo Al, just sold my 1941 oldsmobile to a collecter for $20,000
GlennQ Did all of these insurance companies purchase bad loans, and this is what the bailout is all out? Not necessarily the insurance side of things, but on the purchase of mortages?
Mac Thanks, Al
Al Lee santo, that is too bad. wanted a ride in it.
GlennQ I have a Suzuki Grand Vitara for sale… 
santo Roger, the goverment will just print more money
GlennQ I heard today that this is going to cost each tax payer in the US $2300
Al Lee The insurance companies bought the Mortgage Backed Securities that were created by Investment Bankers by bundling a lot of bad loans from a diverse group of banks and geographic areas so they could cal lit “diversified” and give it a rating that made it look like “investment grade paper”
GlennQ thanks for all the answers everyone.
Al Lee GlennQ, good thing we real estate investors know how to avoid taxes, right?
GlennQ if I was one yet… other than my home mortgage fear has gotten the best of me.
Roger Dawson I think that the state of market dictates that you make super low offers. I don’t think the value of real estate has bottomed out yet.
GlennQ I read Rogers books a couple of years ago. Have always felt real estate investing was the right thing to do, the right thing for me, but after riding around scoping things out I just havent found “deals” yet
Al Lee Your own home is the least valueble property you can own. It usually costs you as much as it makes you. Rental property gives you huge tax benefits and also makes money.
santo Al, thinking of buying a 4 plex rehab for $10,000–rehab cost, $15,000–in Buffalo tha 4 plex will sell for $80,000
Roger Dawson Santo, I can’t see too much wrong with that.
Al Lee santo, you have the Midas touch. For that amoutn of money I wouldn’t think twice about it.
Lon Santo, are you asking for his permission?
Mac Roger, how about the old investment warning about not trying to catch a falling knife
GlennQ Santo, that would be a gift from heaven compared to what I’ve found
Roger Dawson Mac, Bernard Baruch used to say, “Buy when there’s blood on the streets.” That sounds like today on Wall Street to me.
Mac Roger, that’s true of Wall St., but what about the falling RE market?
Lon Santo, your hardest problem with that 4-plex will be finding a lender to loan you so little.
santo Al, my p.m. is doing this now– he just did a duplex–cost $8000–rehab $10,000—sold it for $45,000
Roger Dawson Mac, I’d say we’ve got another six months to go before it bottoms out. What do you think Al?
santo lon, no lender–all cash
GlennQ falling real estate market? I couldn’t imagine things falling much more. am I incorrect in saying that?
GlennQ that answers my question…
Al Lee I think I will have a brand new house for sale. Price $121k, seller financing with 20% down, rent $1275 on Section 8. 4 bedroom, 2 bath, 1 car garage. The buyer is falling through because he has screwed up his financing, so I will be able to sell it to a new owner and can finance it. Getting a loan in this market is tough.
Lon Oh, it’ll go down at least 6 more months, possibly until 2010 in some markets.
hawkeye775 Yes, and although you can will never pick the true bottom when your buying, it doesn’t really matter if you are getting the return that you were looking for on your money, and somebody else is paying off the mortgage. I try to look at it the way Warren Buffet looks at businesses. There are more deals in some markets than others, but when a great business is selling at a deal buy it, and not any other time.
santo Lon, that way if the house don’t sell right away, you collect the rents a have no mortgage
Al Lee Roger, I do not think Ican predict what will happen in the workd of finance. I do think that we are certain to experience inflation and that is good for real estate investors.
Roger Dawson Hawkeye, that’s good advice.
Mac Hawkeye, I like that. That makes perfect sense. And it squares with using tools like the Offer Generator.
GlennQ thanks guys. that is all good advice.
Al Lee Things have not fallen much if at all in Dallas-Fort Worth
GlennQ northeast pa and jersey haven’t seen a whole lot either. at least what I see, read and hear.
Al Lee The Dallas-Fort Worth market was not overpriced, that is why it has not fallen. Most other markets were overpriced and this is merely an adjustment back to reality
Mac THings have not fallen much in Raleigh, NC, either. We tend to be insulated because of the Universities and the state government.
hawkeye775 Asheville hasn’t fallen much if any yet either.
Lon Santo, is your exit strategy to sell this one when you have it rehabbed and rented?
Roger Dawson In LA it varies enormously by area. The beach areas and other desirable neighborhoods are booming like always. Out in Riverside county when you had hordes of first time buyers buying up tracts of houses, it’s been a blood bath.
Al Lee santo, how is yrou wife doing?
santo Lon like i said, I will hold it until it sells—and if it does not sell, I will have no mortgage
santo Al, she is okay, thanks
Mac Wilmington, NC went up like a skyrocket in the last 2-3 yrs (25%/yr), but it has experienced a significant slowdown and some prices have fallen there. The market is uncertain and people are not buying there out of fear.
Mac NC coastal properties have also experienced a downturn, again because of the rapid rise.
hawkeye775 Mac, have you looked at Charlotte? There are a ton of foreclosures in Charlotte right now.
DaisyNH7 hawkeye, what is the best way to view the foreclosures in Charlotte. I live here in Asheville.
Al Lee I think the queston to ask is: what is the ratio of price to rent? If you can buy a decent property at 100 time sthe monthly rent or better, your should make money without resorting to artificial boosters, like ARMs (which you probably can nto get today anyhow).
Mac Hawkeye, I have had poor results from investing out of my home area. I don’t know the area well and have to rely heavily on others to manage and vet the properties. I like Mike’s and Roger’s advice to stay within 50 miles of home.
Roger Dawson HI Linda
Linda Hi Roger
santo Lon, the strategy here is to sell that 4 plex, make a $55,000 profit, buy a couple more with the profits, keep one , sell one, a continue to buy more, and let it snowball from there
Al Lee Roger, you seem to greet the ladies faster then you greeted me when I logged in.
Lon Santo - solid strategy
hawkeye775 My only investment property is somewhat out of the area about 90 miles away, but has worked out great so far, but I do have ties to the area (my inlaws) so I’m frequently there and have a good property manager. There p
hawkeye775 The property kind of fell in my lap right after I started looking. It was an estate sell that my inlaws went to.
hawkeye775 However, I would prefer to stay closer to home in the future.
Mac Hawkeye, that’s different if you can visit regularly and have folks in the community who can keep an eye on things.
Roger Dawson However good your property manager is, it helps to be able to drive by the property a few times a year and see what’s going on.
Al Lee hawkeye, if you have a good PM in that area, I think I would prefer to buy in that area.
Mac I have seen an offer of a brand new beach house on Topsail Island for half price!
santo roger, my pm has been my eyes for two years and everything is fine-400 miles away
Roger Dawson I remember a rental house I owned in Northern CA when I lived in Washingtonstate. A storm blew the roof off and the insurance company said they’d take care of it. Years later when a saw the house again it had red shingles on one side of the roof and green on the other.
Linda Roger, I missed the discussion you folks had with an ASSET Manager, and I was wondering if you might have another one join in some Monday night again? Did anyone get much out of the discussion, and could you tell me what the date was so I could look back? Thanks
santo roger great for christmas
Al Lee Roger, if the house was paying you rent for the years you didn’t know the color of the shingles,who cares?
Al Lee Maybe tenants like that !!!
Roger Dawson Linda: I think it was July 28 when I was in Taipei. Mike set up so I’ll ask him if he can get him back.
Al Lee :p
Roger Dawson Al Lee, it’s an English thing, you wouldn’t understand
santo Roger, like the old saying goes, If God wanted crocodiles to stand up and walk, he would have given them alligator shoes!
Al Lee Righto!
hawkeye775 Roger, have you ever been through any economies where it was tough to keep your rentals rented?
Roger Dawson Hawkeye, thinking back, no I haven’t. I tended to keep rents low and develop long term tenants but don’t tell Mike that I said that.
hawkeye775
santo Al,.did those hurricanes bother any of your projects in texas
Al Lee The years 2003-2004 were terrible for rentals because those ridiculous easy loans fo rpeople who ahve bad credit were still around and would-be tenants just bought a house instead. Then they got them foreclosed, of course.
Mac Now, we have the situation that the would-be renters are losing their jobs!
Al Lee santo, the hurricanes hit Houston and Galveston, Dallas was spared. We got a little rain, that is all. Texas is larger than most European countries, so there is a wide variance in weather and terrain across the state.
Roger Dawson Hawkeye, also realize that I’m in Southern California. Movie stars, swimming pools. People want to move here so the population is always growing. Things might be different in Michigan.
hawkeye775 I’m in Asheville, NC.
gggggg Mac- you’re right renters losing jobs and landlords have many vacancys in FL
hawkeye775 Though I’ve got relatives in your neck of the woods, a brother, and uncle in Newport Beach, and a cousin in Bel Aire.
Linda In 2005- 2006 I had 3 units empty for about 9 months…. it was extremely difficult for us that year… I learned a very valuable lesson, keep the rents BELOW MARKET, which will give you more choices on tenants, and ones that will stick around
Al Lee Mac, all the rental houses I have built were designe to leas on Section 8, so jobs is not an issue.
santo roger, i’am in n.y.c. where only Donald Trump can buy
Roger Dawson I’ve always thought that Asheville was a great rental town because the ratio of rents earned to purchase price favored the investor. The opposite is true in LA. We have to put down a huge down payment to break even on rents.
Al Lee santo, you are creeping up on the Donald, I think
hawkeye775 What kind of ratios are typical for LA?
Al Lee Roger, yes I use the rule of thumb, 100 months rent of less
santo Al, I have a way go with that guy
Al Lee or less
GlennQ thanks for all the great advice everyone. I have to go. go
GlennQ good night.
Al Lee Roger, have you ever bought into any mineral royalties?
Mac Al, Section 8 here used to be a pretty good thing. But falling rent subsidies and understaffing with attendant long inspection times and approvals is making it not very attractive right now. I had a house that rented under section 8 for 1150/mo. When the tenant moved out, I had to re-rent for 863 and that was the best I could do.
Al Lee Mac, that sounds terrible!
Roger Dawson Al, only oil. I get about $300 a month from the oil under my home here.
Al Lee Roger, three of my rent houses came with mineral rights and I have leased the rights to energy companies. I also bought an interest in a large pool or minerl rights (153 wells) and get a great return on it.
Mac Al, I’m hanging in there. At 863 the house breaks even. I think things have to improve or the section 8 tenants won’t have anyone willing to rent to them.
Roger Dawson Wow Al, that entitles you to tuck both your pant legs into your cowboy boots, doesn’t it?
Al Lee Mac, you are correct. The market will force it to improve. That is waht happened here.
Al Lee Roger, it etititles me to say Y’all
Al Lee By the way, Y’all is singular. The plural is All Y’all
santo Roger, you did not comment on my crocodile joke–or did it just blow you away!
Roger Dawson Santo, it was great!
hawkeye775 Roger, are there any other resources besides Mike’s and yours that you would recommend for new investors? All of the Weekend Millionaire series have been great btw.
Mac Al, glad to see you correctly spell “y’all.”
Al Lee Over in the East they say You All
santo gotta go, nite all
Mac Well, bless their hearts!
Roger Dawson Hawkeye, Al Lee has a great book that he’ll tell you about now. And we’re big supporters of Carlton Sheets. His program is very conservative and makes good sense.
Al Lee hawk, if yo like you might look at my sites: www.buyRentHouse.net and www.myRentProperty.com for starters
hawkeye775 My nephew was going to lend me some of Sheets materials.
hawkeye775 l
hawkeye775 I’ll check them out. Thanks Al
Roger Dawson Thanks for all your participation everyone. I’ll tell Mike Summey that he missed a good chat. See you next week!
Mac Nite all. I’ve got to bail out.
hawkeye775 Thanks everyone and good night.
Al Lee Goodnight, all. I need to go , too.
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