Chat Transcript - November 24, 2008
Posted on November 25, 2008
hawkeye775 hi Ken
Ken Hi Hawk
Ken were are you from
hawkeye775 Asheville, NC
hawkeye775 you?
Ken I live in PA,
Ken I am in Clemson SC now for work
Ken You ever meet Mike before?
hawkeye775 No. He has spoken at the investment club before but I just joined a few months ago. I know a banker that knows him, and a property manager.
hawkeye775 Are you currently an investor? Or just interested?
Ken I have 3 duplexes
Ken I haven’t bought anything or even looked for anything in the past 2.5 years
Ken I have been doing to much traveling for work.
hawkeye775 I have one house, and just went under contract for a second one today.
Ken Thats good
hawkeye775 I travel a fair amount as well.
hawkeye775 What do you do? I’m in engineering.
Ken I’m usually on the road for 3 months at a time.
hawkeye775 Hi Lon
Ken I work Electrical and Instrumentation
Lon Hey Hawkeye
Lon Hi Mke
hawkeye775 Hi Mike
Mike_Summey Hi everyone!
Mike_Summey What’s the latest?
Ken it’s getting a little warmer outside
hawkeye775 Went under contract for another house today.
Mike_Summey I’m working on an article on “Deflation” and how it will impact us all.
hawkeye775 Used your offer generator
Mike_Summey Great Hawkeye.
hawkeye775 to generate the offer letter. I’ll still need to formalize it.
Ken Mike do you know of a way to contact builders to see if they have any properties that they need to sell yesterday?
Lon Mike, do you see deflation in the future?
Mike_Summey The OG give ytou the option to edit the offer letter any way you want before you print it.
hawkeye775 I had a little issue with editing.
hawkeye775 I had to save it as text then edit it in Word.
Mike_Summey Lon, I believe it is a very good possibility. We’ve been living a standard of living propped up with debt for too long. There has to be a correction as some point.
Lon Ken, are you talking about closeouts? How many homes are you looking at? I know Ryan homes here is doing that with their show homes, with a guaranteed lease back option.
Ken Lon just something that they need to sell.
Ken Lon were you from?
Lon Greenville, SC, just down the hill from Mike.
Mike_Summey Hawkeye, that’s one way of doing it, but if you will bring up the letter ready to print, you can edit it in that screen too. Saving it as text allows you to edit it in word or other similar program.
Ken I’m near Clemson for another month
Lon Then where you headed?
Ken Back home to PA for the Cold Cold winter
Lon I’m sorry
Ken It’s ok,
hawkeye775 I tried editing it before saving, and it lost the changes. I’ll try again and let you know.
hawkeye775 I have to figure out what to do next though.
Ken The OG seemed hard to figure out at first but then it was a breeze to set up.
Lon Ken, one way would be if you see a subdivision that has slowed down, go into the sales office and ask the realtor on duty.
Mike_Summey Ken, I’ve been trying to work a deal with a builder on some homes near Clemson. He hasn’t been able to get his lenders to go along with my proposal YET!
Ken Yeah that Realtor is like a stone wall
Mike_Summey Hi Len
hawkeye775 I’ve been talking with a bank, but I’ve always used a realtor before.
Mike_Summey Hi Kevin
Ken I went to the dealership looking for a new truck thinking I was going to find deals, They had no deals. For a doom and gloom industry they are holding firm
Mike_Summey Ken, there is popup help under every label throughout the program plus a popup explanation of every screen by placing the cursor on the line at the top of the screen.
Mike_Summey Hi ong
Mike_Summey Kevin, having problems?
hawkeye775 So how do I go about formalizing the offer. She says her lawyer can handle everything. but I imagine that I will need to talk to a lawyer, or title company. Do you have any recommendations?
Kevin I was but I’m in now…thanks.
Mike_Summey Ken, give them a few more months.
Mike_Summey Hawkeye, do you have a signed letter of intent?
Len Hi Mike
hawkeye775 Yes
Mike_Summey Hi oshugart
hawkeye775 The letter from you Offer generator.
Ken Mike, did you ever get that building built in ashville? I remember seeing an antimated design.
Kevin Hey Mike. I have an investment property that’s deeded in the name of my LLC but the mortgage is in my name. I was told by a banker recently that “Ooh, be careful because the bank could call the loan any time…”. My questions are: 1) how likely is this to occur as long as I’m making my payments on time every month? 2) isn’t this how most investment properties are transferred and held? 3) what would be the strategy if when they were to call it?
Mike_Summey hawkeye, once you have the signed letter of intent, take it to your attorney or realtor ans ask them to transfer it to a formal contract.
Lon Ken, another investor was telling me Saturday he picked up a 2006 Dodge Ram truck from a bank with 26k miles on it for $15k and still left money on the table. The previous owner owed over $30k on it and just surrendered the keys and said she couldn’t pay for it any longer.
hawkeye775 Thanks Mike
Mike_Summey Ken, it is still on the drawing board. I don’t expect anything to move forward until the economy settles down and we can see where we are going.
Ken Good deal mike,
ong3232 hi mike
Ken Whats going on with Al Lee? I read some past scripts
Ken Lon how do you locate bank owned trucks?
Mike_Summey Kevin, in most cases, the property is held in the name of the LLC, the loan is made in the name of the LLC, but you will have to guarantee the loan. I’m assuming your LLC is a single member LLC.
Kevin Correct…My long-term goal is to have 20+ properties. If I own them all this way am I going to have to worry about loans being called at any given time and me having to come up with some serious cash?
Mike_Summey Lon, I think we will be seeing more of those type deals on other big ticket items.
Lon Ken, he was at the bank getting a loan on a property and she just asked if he knew anyone who needed a truck. This was the case of being in the right place at the right time.
ong3232 May i ask what is LLC, please?
Len Ken, Most of the time a vehicle repo will wind up at a dealer auction.
Kevin Limited Liability Company
Ken yeah, Thats what I thought
ong3232 thanks
Mike_Summey Ken, I haven’t talked with Al in several weeks. I understand he is having some problems. He no longer wants to debate the issue of being as heavily leveraged as possible. I think he is learning the value of equity.
Lon HA
Lon Not to laugh at Al’s problems, but that struck me funny.
Mike_Summey Kevin, as long as you keep your banks informed and pay your mortgages, you won’t have any problems.
Mike_Summey Hi tony
tonyb_oh Hello Everyone. Happy Holiday to All!
Mike_Summey ong, an LLC is a Limited Liability Company
ong3232 thanks
Mike_Summey tony, where are you from?
tonyb_oh Mike, Can I violate the “not near me” rule when buying a property? Dayton is pretty depressed right now….
Ken Mike do you have a time frame that this economy might turn around
Kevin Mike - My current loan is with a hands-off mortgage company (went through a broker) - are you saying it’d be good for me to tell them that I have it titled to an LLC?
Mike_Summey tony, the most important thing in owning rental properties is having property management you can trust. I own a block of properties that are about 100 miles from my home base, but I’ve had good management and no problems.
Ken Kevin IMO I think the last thing a bank wants is a house. Keep making the payments and I don’t think you will have a problem
tonyb_oh Thank You
tonyb_oh Hi Penny
Penny Hi tonyb and everyone.
Ken Tony I travel the US for work. My PM has helped me big time but sometimes they hurt. I always thought you need guts of steel for having rentals.
Mike_Summey Ken, for the past year and a half I’ve been saying I didn’t think we would see a bottom until late 2009 or early 2010. I think I might have been optimistic. I’m afraid we are in for several years of falling or flat prices in real estate.
Mike_Summey Hi Penny
Penny Hi Mike 
Ken Mike I seen the average home sold was $183k last month. It wouldn’t suprise me if that average dropped to $140k
hawkeye775 Will rental rates hold up? That’s my big concern.
tonyb_oh Mike, What is your opinion of Dave Ramsey’s rule of not buying unless you can pay cash? Is that too conservative or ???
hawkeye775 I suspect they will, but it could get a little painful if they didn’t.
Lon I’m thinking no more than 50% LTV
Mike_Summey Kevin, although you have transferred the property to an LLC, if you are still on the mortgage and there have been no changes there, as far as the bank is concerned there has been no change. There mortgage is in front of the transfer so there should be no problem. I’d let them know what I did and why. I personally did this wih over 100 properties at one time a few years ago. I had no problems with any of the banks.
Mike_Summey Hi Anthony
Anthony hello mike
Mike_Summey hawkeye, when people can’t buy they have to live somewhere. The only concern I would have about rents would be the result of a sever recession or depression that would keep people from being able to pay their rents.
Mike_Summey tony, I’m not familiar with that rule, but paying cash never got anyone in trouble with their lenders.
tonyb_oh I guess it’s just “his” rule
Lon Mike, if you listen to my wife, it’ll be a depression.
Lon She reads too much.
Mike_Summey For the next few years, I think equity is going to be at a premium.
Mike_Summey Lon, want to trade?
Ken I have to leave. I got work in 9 hours 
stupid work…. I’ll try to get more involved with these chats, I think the next few years are going to be great for buying Properties.
Mike_Summey Lon, wives are just like that. They worry too much.
Lon Mike, make a offer.
Kevin Mike/Tony - I was considering paying cash for a property I have contracted but if I did I’d lose leverage and not be able to use my cash and HELOC for down payments and then buy several properties rather than being stuck with one.
Mike_Summey Ken, glad you joined us. Will we see you next week?
Ken I will try, I’m usually in bed at 8, I have to get up at 2am I’m doing a turnaround at a plant.
tonyb_oh Kevin, So what did you do?
Kevin I’m currently getting a loan on this property…will use my HELOC and some cash for down payment and closing…that’ll leave me room to do the same thing again next year.
Mike_Summey Kevin, if you can buy for cash and hold the property for a month or so, then you can get a loan based on appraisal, not cost to get your cash back out of the deal. I’ve done that with 3 purchases this year where I bought for cash and the next month got a loan for more than I paid for the properties.
Mike_Summey Hi ashley.
ashley73737 Hello Mike
tonyb_oh Mike, That’s really good information. I never looked at it like that!
Mike_Summey Kevin, if you get the permanent loan when you buy the property you will only be able to get about 80% of the purchase price. If you buy for cash and finance later you can get about 80% of the appraised value. If you buy at 60-70% of appraised value, which you should be able to do during these times, you can get financing for 100% of your cost or more. Just be sure the property will support the new loan.
Mike_Summey Where are you from Ashley?
Kevin Thanks Mike…Are you saying that I could get a loan on it for appraised value, get my cash back and then have some extra cash to buy another? Would this be the smartest thing to do to minimize my expenses (closing costs, etc.)?
ashley73737 New York
Mike_Summey Kevin, that’s exactly what I’m saying. It’s a way to buy at 60-70% of appraised value, get financing for 100% or more of your cost and use that cash to buy another property and do the same thing. Read the chapter in our real estate book about the advantages of getting a property free and clear.
Mike_Summey Hi galle
tonyb_oh Mike, Do you ever give opinions of areas? My target is Tampa, Fl (not vacation property) rentals in the city. I want to live there long term.
ong3232 [i]Hi, Mike, My daughter just bought a property from auction last month, if she will want to get a loan, what is the criteria to apply for a loan in USA?
Mike_Summey Kevin, if you buy the way I described, you will have 2 closings, but the added cost is immaterial in the overall scheme of things.
Mike_Summey ong, is the property in the USA?
ong3232 dallas
Kevin Mike - still trying to wrap my head around this. So I just need to make sure that the numbers will work for the property with the NEW mortgage payment (80% of appraised value after repairs)?
ong3232 Yes, in South Dallas
Mike_Summey Kevin, that’s correct. Of course if you are able to buy the property for considerably less than appraised value, you may not need an 80% loan to get all of your cash back out.
tonyb_oh Very eye opening information for me.
gallegosllc@yahoo.com hi mike!!!
Kevin Mike. Right…I got a property for $57K in a neighborhood with recent comps of $105-$110K. Are banks going to be open to financing like this? Would it just be a normal mortgage?
Mike_Summey ong, in the USA she should be able to get a loan for 80% of the appraised value or 80% of cost, whichever is less unless she pays cash in the beginning and then finances later in which case she can probably get 80% of appraised value without regard to the cost. That’s assuming her credit is good.
Mike_Summey Hi again Galle, where are you from?
gallegosllc@yahoo.com new mexico
gallegosllc@yahoo.com I just bought your progam and really excited about it
Len Mike, I assume the bank is aware of how much you paid in cash, do they through that up as a roadblock at the time of financing to lower the loam amount?
ong3232 I am not sure about her credit, she just married a American guy . how easy is for her to get a loan?
gallegosllc@yahoo.com I was asking about the cash flow postition after finding the NOI
tonyb_oh galle, just curious audio, book or both?
Mike_Summey Kevin, if you paid $57K cash and you already own the property, if it appraises for $105K you can probably get a loan for $70-$84K depending on the bank and your credit.
gallegosllc@yahoo.com both!!! and the offer generator.
Mike_Summey Galle, I’ve shortened your name so I can type it quicker. I’m glad you are excited about the program and glad you decided to join us tonight. do you have any questions for me?
hawkeye775 Mike, if you use conventional financing, can you get a refinanced loan based on the appraised value after a period of time, say 1 year?
Mike_Summey ong, credit is difficult to get in the USA right now unless the borrower has good credit.
gallegosllc@yahoo.com just the quesion about the cash flow once you find out the noi
Mike_Summey Hawkeye, yes you can refinance a conventional loan after a year in most cases, but the cost of doing so usually offsets any gain you might make.
tonyb_oh galle, that question was not clear to me
Lon ong, if you’re daughter is new to the US, she will have no credit at all, and that is sometimes worse than bad credit. They should be able to use her husband’s credit.
Mike_Summey Hi Tom
ong3232 same as over here , lenders are very strict , since the credit crunch…
Mike_Summey Galle, what exactly is your cash flow question.
gallegosllc@yahoo.com the NOI is the PI when in the loan isn’t it???
ong3232 thanks , lon
tonyb_oh Kevin, Don’t be a chicken like me. Now is a great time to invest. Go for it! 
Kevin Thanks Mike…this is great info. To clarify (so I don’t sound stupid to my banker) would this be considered a re-fi or a plain old mortgage?
hawkeye775 I’m just thinking about getting cash out.
gallegosllc@yahoo.com of course after all the other expences
Mike_Summey Galle, the NOI is the money that is left over after covering all expenses except the mortgage and a return on any cash you have to invest. It the amount you have with which to make the mortgage payment.
Kevin I hear you Tony! It’s nice to be able to buy at foreclosure prices and immediately be $40,000 richer (at least on paper).
gallegosllc@yahoo.com Right, so after all expenses are paid then the NOI will pay the P & I in the mortgage. Is that right?
Mike_Summey Kevin, this would be a plain old mortgage. It wouldn’t be a refinance because there is no financing to refinance. In most cases, the bank doesn’t need to know how long you have owned the property. All that’s important is that you own it free and clear.
hawkeye775 I based the offer I was talking about earlier on using conventional financing, but now you are making me wonder if it might be better to try to get the cash together to pay for it, and then refinancing it. It’s very interesting.
gallegosllc@yahoo.com Mike, my question is which item is the cash flow item?
Mike_Summey Galle, you’ve got it. If the NOI won’t cover the payment, then you have a negative cash flow deal.
Mike_Summey Galle, the Offer Generator will help you with this calculation and will alert you if you try to create a negative cash flow deal.
gallegosllc@yahoo.com Mike, then anything above NOI is our cash flow???
Mike_Summey Galle, the cash flow is the money left over after covering all expenses AND the mortgage payment.
gallegosllc@yahoo.com Mike, what are your thougts on breaking even?
tonyb_oh Thanks for everything Mike. If you were going to invest in a different market, would you form friendships with lendors in that market or would you just use the people you already know. (Not you, but a novice) ??
Mike_Summey Galle, if I can buy a property that will break even I will do so. The reason for this is because I’m a long-term investor and I know that the longer I own the property the better the cash flow will get. As rents go up and mortgages pay down the cash flow increases.
Kevin Excellent Mike. If I pay cash and get the property title in my name now, there shouldn’t be any issues with getting a mortgage in the name of my LLC *and* me titling the property in the name of the LLC would there? I’ve already talked to my banker about the LLC loan and she’ll do it. Just curious if there are any other issues…I should be able to “sell” it to my LLC, or similar, right?
gallegosllc@yahoo.com Mike, how often do you increase your rents?
Mike_Summey tony, if I were going to invest in another market, the first relationship I would build id with a good property manager. As for lenders, it is usually easier to get loans from lenders in the market where the property is located rather than a lender you know that may be hundreds of miles away.
tonyb_oh Thank You
Mike_Summey Galle, I try to increase rents at every lease renewal date. It may only be $10-$20, but every little bit helps. Try to at least keep up with inflation, but for the next few years we may not see much inflation.
Mike_Summey Kevin, if your LLC is a single member LLC, it is treated for tax purposes and your lenders will look at you and it as one and the same.
gallegosllc@yahoo.com great. Thank you Mike!!! As for your rental contracts, do you lease for 1 yr or longer?
Kevin Mike - one more for you…what are your thoughts on putting each property in a dedicated single-member LLC?
gallegosllc@yahoo.com Mike, I guess you will cash flow even if the renter covers all your costs, do to the note being paid off/down!
Mike_Summey Galle, I never lease for more than one year. I want the option to raise rents or get rid of the tenant if need be. On another note, if a tenant wants to stay in the property on a month-to-month basis after their initial lease is up I give them the option to do so at double the rent increase they would have if they signed a new lease.
Lon Kevin - look up “cell” or “series” LLCs. NV, DE & WY are 3 states that have them. Saves you the trouble of having to open a new LLC for each property.
hawkeye775 Mike, are you planning on speaking in Asheville anytime soon? Maybe at CREIA?
Mike_Summey Kevin, I don’t think there is a need for a separate LLC for each property. The cost of maintaing the recoreds and annual fees is usually too great when dealing with small properties. If you are talking about a large multi-family property that’s a different story.
gallegosllc@yahoo.com Mike, sounds good!!
Mike_Summey Hawkeye, I don’t have any plans at the present time.
tonyb_oh Mike, I know you have several LLCs.They are not wise for a first property, right?
hawkeye775 Thanks. Hopefully, one of these days I’ll get the opportunity to hear you speak.
Mike_Summey oshuqart, you are being awful quiet tonight. Do you have a question before we wrap up tonight’s chat?
Kevin Mike, OK - I think the basis behind this was just for increased asset protection. If you have more than 1 property per LLC and that LLC is exposed then you risk losing more than 1 property…Thoughts?
gallegosllc@yahoo.com Mike, I buy a lot of home on short sales, and now in a position to keep them. I am buying at great discounts and then doing cash out refi’s. Do you think that is wise to do?
Mike_Summey tony, I do have several LLCs, but I have multiple properties in each one.
tonyb_oh Is it wise for a first property? Or just a waste of time?
Penny gooneodnight every
oshugart no it is my first time and I just learning
gallegosllc@yahoo.com a wise way to finance the homes we buy.
Kevin Tony - In my humble opinion, I think it’s wise for any property you don’t want to chance losing in a lawsuit.
tonyb_oh Kevin, Like if a tenant would sue you?
Mike_Summey Kevin, I think good insurance provides better protection that multiple LLCs. Keep in mind, you have to do something and be found at fault before a lawsuit can be successful. I require my property managers to carry Errors and Admissions insurance with me named as an additional insured. That provides a buffer between me and the tenants in the event the property managers do something to create liability.
Kevin OK - thanks a TON Mike! You’ve been very helpful tonight.
Mike_Summey Galle, whenever you can buy a property and rent it to cover the cost of buying and all other expenses, do so. I’ve been buying for almost 40 years and I’ve never sold a property.
tonyb_oh Kevin, Tonight?????? All the time!
Kevin I meant *especially* with all of my questions.
Lon Mike - how many doors is that?
gallegosllc@yahoo.com That sounds good!! Thank you very much Mike for all your help. Im excited to be part of the team, and really look forward to these chats!!!
Mike_Summey oshugart, glad you joined us and hope you will become a regular participant, but next time use a short easy to type name for the chat. SOHUGART is hard to type. 
Mike_Summey Lon, LOTS!
tonyb_oh Thanks Mike. I hope Roger fairs well in Dubai.
Mike_Summey Wow, this hour has flown by.
Lon I’d like to get a ballpark figure one of these Mondays. Just for conversation sake.
hawkeye775 Thanks Mike, everyone!
Mike_Summey tony, he is in Kuwait, not Dubai.
ong3232 what is your time, Mike?
Mike_Summey ong, it is 9:05 Eastern Standard Time
tonyb_oh sorry about that.
hawkeye775 Good night, and Happy Thanksgiving!
gallegosllc@yahoo.com Mike is the chat the only time we can email with questions?
tonyb_oh Same to All!!
Lon mmmmmm Tuuuurrrrkeeeeyyyyy
Mike_Summey Goodnight all! I’ll see you here next week and Roger should be back also.
tonyb_oh galle, I often wonder the same thing.
ong3232 bye
oshugart How do I change that?
Mike_Summey Galle, yes, that is the time Roger & I set aside to answer questions each week. It’s not that we don’t want to help, but we don’t ahve time to answers tons of emails.
Lon oshugart, when you login, just type in a different name
gallegosllc@yahoo.com Good night all!!!
Mike_Summey Goodnight.
tonyb_oh Goodnight
gallegosllc@yahoo.com Mike, that is very understandable!! Thanks again for your help!!
oshugart Good night and happy thanksgiving
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