Chat Transcript - November 17, 2008
Posted on November 18, 2008
ong3232 Hi everyone, Mike,Roger and Carlton, I name is Wenny based in London. sorry about last week . I couldn’t keep my eyes open as it’s was midnight in UK when the chat session begin.
ong3232 Mike and Roger , I had read your books and now I am reading Carlton’s ‘NO MONEY DOWN’ published in 1998, it is out of date?
ong3232 I would like to buy first property in USA from anyone of you who could provide me 100% seller financing.
ong3232 It will be my bedtime in 10 mins, HAPPY CHATTING, catch up with you next week.
ong3232 good night
hawkeye775 hi eddie
EddieNC Hey
Mike_Summey Hi everyone!
hawkeye775 Hi Mike
Mike_Summey Sorry I’m running late.
Mike_Summey I let the time slip up on me.
EddieNC hey Mike
broadway hello Mike
Mike_Summey I was working on another computer in another office.
Mike_Summey Anyone have any news to share.
EddieNC lots of properties out there
Mike_Summey Yep!
Len I am in Oregon and Sunday’s paper indicated that the repos are just staring to flow through in our area.
sparky37 Hi Mike
Mike_Summey I had a builder in my office today who offered me a house that has been listed for $1,200,000 for just $720,000. I respectfully declined as that is too expensive to be a rental.
Mike_Summey Hi Sparky
broadway There are a few companies around here that still offer 100% financing. Many are offering owner financing though
Len You might want to live in though.
Mike_Summey Len, we’re hearing a lot in the media about how bad things are, but I believe the worst is still to come…maybe as much as 1-2 years from now.
sparky37 Mike, I agree 110%
Len I was listneing to Cramer on CNBC and he claims the market will not bottom unitl June of next year.
sparky37 Wait till next year when gov’t contracts are not renewed and people lose jobs
sparky37 it will get much worse
Mike_Summey broadway, don’t be fooled by the 100% financing gimmick. If a seller has a large equity and is willing to finance almost anyone can get 100% financing. Borrow 20-40% from the bank and get the seller to carry the balance.
Jeff M Mike, I’m just starting out with your program, and am curious as to how the credit markets are for loans. If you have great credit, and low debt, will you get a good loan, or is everyone paying the price for this situation?
Mike_Summey Len, I wouldn’t believe Cramer on anything.
sparky37 Jeff great credit and good assets gets you a good rate
broadway I agree Mike. I can’t imagine throwing out advertising 100% financing
Mike_Summey Jeff, if you have good credit you should be fine. Banks are looking for GOOD loans. They make no money sitting on their cash.
Mike_Summey Hi Penny
Jeff M Thanks, sparky. That’s what I’m looking for. I’m just in the process of talking to potential property managers.
Penny Hi Mike.
Mike_Summey Jeff, if you’re just getting started, there are two traits you will need to be successful. PATIENCE AND PERSISTENCE!
Mike_Summey Hi kb!
kb Hey Mike!
sparky37 Patience Patience Patience
broadway Has anyone here refinanced anything lately? I’m wanting to refinance my property but I’m a little nervous to approach the bank with values soft.
Jeff M Thanks, Mike. I’m not in a hurry, and I realize this is a long term proposition.
Mike_Summey broadway, if your credit is good you should be able to refinance, but it will be hard to pull out cash unless you have a large equity.
Mike_Summey Hi anthony
Anthony Hello
Mike_Summey Hi oz
oz Hi mike and all
hawkeye775 Mike, do you ever pay down points to get a lower rate? How do you decide when you might do so?
broadway I have good credit and a great renter with good payment history. I’m just wanting to refinance to lower the payments and interest rate and gain more cashflow
Mike_Summey broadway, mark you calendar for December 8th. I believe I will have a representative from Experian, the credit reporting company, in that chat.
broadway Mike, ok will do. Thanks
Mike_Summey hawkeye, I never pay points because I don’t use fixed rate loans.
Mike_Summey broadway, you probably have a fixed rate loan at a much higher rate than you can get now, right?
Mike_Summey Everyone, points are nothing but prepaid interest.
kb Mike: I’ve got a meeting with a local banker tomorrow to hopefully start a good relationship to get some financing for properties. Outside of the basics he wants to see plus the numbers for existing properties and potential ones I’m looking to purchase, are there any must-haves or must-dos for my meeting with him to make sure I impress him?
broadway Mike, that’s what I’m thinking. I purchased this about 3 years ago so I’ve got a good track record at the bank. With lower payments and interest, I would come out in good shape
Mike_Summey kb, have you read the chapter “Building Your Support Team” in our real estate investing book? It has a section on building banking relations that the banker love. Several of my banks have purchased the books to give to investors for that chapter alone.
hawkeye775 Mike, you mentioned that you do portfolio loans before. What if you are new to investing and the banks aren’t ready to take that risk? What kind of loan would you recommend? (5/1, 3/1) You have also mentioned third party private investors. Where do you find these investors?
kb I have and will review…I just want to see if there’s one thing that others may not always do that can really help me stand out as a good investor for his bank.
Mike_Summey Hawkeye, banks don’t like to get locked into long term fixed rate loans, which is why they sell most of them. I use a “Fixed Payment” floating rate loan. The payment is usually set based on a rate 1/2 to 1 1/2% above the going rate at the time. The payment always stays the same, but the amount of the payment that goes to principal and interest fluxuates based on the prevailing rate. Banks don’t mind holding that type loan because they borrower is sharing the risk with them. These loans usually have a 5 year balloon payment which is refinanced at the time the loan matures if you have paid tiemly.
Mike_Summey kb, discuss the type loan I just described with your banker.
kb I will…Outside of working with a local banker, do you have any ideas on how to get around the 4 mortgage limit that Fannie/Freddie are imposing on us now?
broadway Mike, I may try that fixed payment/floating rate on my refi
Mike_Summey hawkeye, third party investors are usually people who have cash but don’t want to risk it in the stock market and are willing to invest in secured mortgages, especially when CD rates are as low as they are now. I have made many loans at rates higher than the banks are paying for deposits but lower than they are charging for loans.
Mike_Summey kb, the 4 mortgage limit only applies to loans that are sold on the secondary market, not portfolio loans the bank is going to keep.
Mike_Summey Hi Joey
Joeyfrom CT Hi Mike
Joeyfrom CT Mike orderd your offer generator today
Mike_Summey broadway, many people are afraid of the floating rate loans, but when coupled with a fixed payment, you know what your cash flow is going to be just as you do with a fixed rate loan,
Mike_Summey Joey, you will love it.
Mike_Summey Speaking of the Offer Generator, is anyone in the chat currently running it on Vista?
kb So now’s the time to get in good with local banks, right? Any thoughts on whether the 4 mortgage limit will be raised in the near future?
Joeyfrom CT I’m sure I will
broadway Mike, I agree. I’ve run some simulations on this idea and it seems to work well either way. The only time a person could have problems is when the rate jumps up dramatically.
Mike_Summey kb, I doubt that we will see the limit raised anytime in the foreseeable future. I think we are going to see a return to conventional, conservative lending.
broadway You get the benefit of paying principal quicker in the lower interest rate times and that’s a big seller to the bank in renewing the loan.
Mike_Summey broadway, I was using this type financing when the prime went to 21.5% During those times inflation was also running rampant and you could increase rents to offset the higher rates.
Mike_Summey broadway, the principal part of most of the fixed payment/floating rate loans I currently have is running 60-70% of the payment amount. As they say, I’m tonning the principal right now with prime at 4%.
broadway mike, I tried to push the rate pretty hard on my spreadsheet when I tested that but I never got that high. I’m very comfortable with that concept. You’ve got a great idea with the floating rate
broadway Mike. I’m sure you are. The banks are loving you with that type of paydowns.
Mike_Summey broadway if you base the payment on a rate a little higher than the prevailing rate, you start to get ahead of the amortization schedule immediately so if the rates go up the payment doesn’t ahve to be adjusted.
Mike_Summey I have used this type financing for nearly 30 years and over that time period I’m convinced I’ve paid less interest than I would have with fixed rate loans. Also, the fees and points on fixed rate loans end up costing you far more.
broadway Mike, I agree. I played with the interest rate changing every two years and that first one to two years of principal paydown it worked just like you said.
Mike_Summey Hi wps
wps good evening
Mike_Summey I think we will see a growing number of deals come on the market over the next year or two from people who have been hanging on thinking the market is going to turn. When they start running out of capital they will start dumping properties at prices well below what we are seeing now.
wps Is it your feeling that there will be a turn for the good or worse in’09?
Mike_Summey Right now, the more you can get the word out that you are a buyer the better. Also, if you don’t have our Offer Generator program, GET IT! It will be the best money you will ever spend as an investor.
Mike_Summey wps, I think we will see the market continue to weaken throughout 2009 and possible throughout 2010 as well. I think we’re still a long way from the bottom of this cycle.
Mike_Summey wps, what happened to you?
wps I went to check out the Offer Generator , looks like I’ll buy on tommorrow
Joeyfrom CT wps i bought it today
Mike_Summey Last week, I showed some Realtors how to use the Offer Generator to help sellers structure ways they could get their asking prices. Believe it or not, once you get familar with the program, you can use it both ways.
wps Just reading the quick overview online it seems to be a benefit
Joeyfrom CT Mike_Summey how did the realtors like it
Mike_Summey I have used the OG several times to show sellers why I couldn’t pay their asking prices if I had to get bank financing. Once they saw that I was not just trying to lowball them several of them worked out deals with me where they financed all or part of the purchases.
hawkeye775 its a good program, bought it a couple of months ago.
Mike_Summey Joey, I spoke to a group of top real estate sales people last year at one of their conventions and they bought over $23,000 worth of the books and OG programs. These were real esatate sales people, not investors. I did a live demo of the Og for them in a breakout session.
Joeyfrom CT Thats awesome Mike
hawkeye775 It makes it very easy to calculate offers that work.
Mike_Summey One thing about the OG is its simplicity to use. Every place where you have to enter data all you need to do to get help is place the cursor on the label for the info block and help will pop up telling you what to enter and why.
Mike_Summey I have bought 4 properties this year from banks and used the offer letters produced by the OG to make my offers.
Mike_Summey You can use the standard offer letter the program produces or edit it in any way you want before printing it.
kb Do local banks like or dislike HUD foreclosures? Anything peculiar about them when obtaining financing through a local bank?
broadway Mike, does offer generator work well using the floating interest fixed payment financing too?
Mike_Summey It lets you add conditions or any other language you want to the letter.
Mike_Summey broadway, yes it does. It computes the NOI which is the most you want a payment to be. Using that amount you can calculate hundreds of different ways to buy any given property.
broadway very good. I assumed you would have a way to make that work. thanks
Jeff M Mike, I just ordered the OG. Just having that will hopefully move me along toward researching and making offers.
Mike_Summey kb, I’m not sure what you are asking. Can you rephrase the question?
wps Mike of the 4 properties are they local to you and what types are you investing in these days?
Mike_Summey Jeff, if you follow the OG program, you will not get in trouble. Anytime you attempt to compute and offer that won’t cash flow the program will alert you.
Jeff M That’s great, thanks.
Mike_Summey wps, two are in Asheville, NC and 2 are in Anderson, SC. All are single family homes.
kb Sure, I have several HUD foreclosures I’m looking at now - even have a bid out on one. Do bankers look down on them or are they hesitant making loans on HUDs or does it even matter? I suspect the latter but want to make sure.
wps Are they for rental, rehab or flip?
hawkeye775 goodnight everyone
sparky37 Nite Mike
Mike_Summey kb, banks don’t care who you buy the properties from. Just because they are foreclosures that doesn’t make them bad properties. Banks; however, do not like to finance their own foreclosures. Those type loans get classified as “loans to facilitate” and are not good to have on the books. When buying foreclosures, try to get financing brom a different bank and you will do better.
Mike_Summey wps, they are rentals. I don’t do rehabs or flips. In over 37 years, I’ve never sold a property I’ve bought. Still own them all!
wps good input thanks
kb OK - thanks Mike.
Mike_Summey wps, I started like everyone else…one little rental house. I kept buying and letting the tenants pay off the loans. Today over 70% of my properties are owned free and clear. The margins get real good when the mortgages pay off. 
Jeff M Good night, everyone
Mike_Summey I’ve got to run also. This hour has flown by. See you all here next week.
Mike_Summey Goodnight all!
broadway Good night mike
broadway thanks for the chat!
wps I’ll say, in 37 years I imagine you have a few to keep track of
kb Good night - thanks for doing this each week Mike.
broadway good night all!!!!!!!!!!
wps good night
Joeyfrom CT Goodnight everyone
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