Chat Transcript – May 4, 2009
Posted on May 5, 2009
Mike_Summey It looks like we’re early.
Tommy top of the day guys
Mike_Summey Tommy, where are you located?
Tommy mike i missed your show
Penny Hi Mike and Roger
Tommy too late
Mike_Summey Tommy, I wish I could say it was archieved and you could listen later, but the radio host said it was only available live.
Tommy Man 2 bad
Penny Sorry I missed it Mike.
Mike_Summey Hi david
davido hi mike
Mike_Summey Slow start tonight!!
Mike_Summey Any questions?
davido have the number of people joining dropped?
Mike_Summey David, I don’t know. It seems that a lot of people wait a few minutes before they get in so they don’t have to say much. 
Tommy the banks? are they doing any lending?
Mike_Summey Hi Carol
davido Mike – I saw you’re quote in the New York Times a couple of weeks back (the Carlteon hit piece)…too bad they didn’t offer you up more as a success story of his program.
Mike_Summey Tommy, some are & some aren’t. I just turned down an offer from one today because I thought it was overpriced and I got another bank to give me a better deal than I asked for.
Mike_Summey Hi Mad Mike
Roger Dawson Tommy there is plenty of money for owner occupieds that fit the FNMA guidelines, but investors are having a tougher time finding financing.
davido Financing is tough unless you have a good history of rentals and six months of reserves
Mike_Summey david, that little quote was all they gave me out of an hour and a half interview.
madmike hi everyone
Roger Dawson Hi MadMike
Penny Do you guys think it is wise to buy a house to take advantage of the stimulus pkg is wise even if you have to borrow part of the down payment? (Of course paying it back the min. you get the stimuls payment?
Mike_Summey david, that’s why I’ve been preaching that for years.
davido mike, ha! they had their story in mind and obviously you didn’t fit into it. 
Mike_Summey Penny, I just learned that you can only use a gift from a parent for part of the down payment. You can’t borrow part of it.
Mike_Summey David, I think they wanted to do a hatchet job on Carleton, but couldn’t find anyone to give them what they needed.
Roger Dawson The Feds told me that my stimulus check would be $250!
davido Except for John T. Reed the hatchet man
Mike_Summey Hi Joshua
Mike_Summey Hi sandy
sandy Hi
davido i’ve read all of your stuff – sheets, reed, you. i just think each has a different level of understanding. parts of sheets is very elementary, but some people need that. reed’s is a bit more advanced.
Mike_Summey david, have you noticed that Reed seems to have something bad to say about anyone giving real estate advice other than him?
davido ah yeah
Penny How then can you deposit a gift from a non parent and work it so it is usable as down payment? Does it have to be on deposit for a time perios>
Penny period?
Mike_Summey Hi DaisHi wps
Roger Dawson Davido. Our program is different because we advocate buy and hold, not flipping properties.
Carol Does anyone know anything about setting up your own 401k and using it to finance buying real estate? I know you have to set up your own company first, like a LLC.
DaisyNH7 Hi Mike, Roger and everyone.
Mike_Summey Penny, the gift from the non parent needs to be made to the parent and then from the parent to the recipient.
davido penny – when taking a gift from parents, it’s probably best to have the money sit in your account for a couple of months and not even tell them that it is a gift. if it sits in your account for a couple of months, the bank statements will show that it’s yours.
madmike Mike, I have been reading your books and listening to your cds, you mention investing in mh parks is ok but not in the homes because they go down in value, but if you can get a good deal is it still worth it even if you don’t have as long a life span on the homes.
Mike_Summey david, the gift can be from a parent, just not a third party.
wps Good eveing, just wanted to compliment you on the radio talk tonight, it was very informative
Mike_Summey madmike, the deal would have to be very good. I would like to see the homes paid off in 5 years.
Mike_Summey wps, thanks! Glad someone listened.
wps -)
madmike Mike, I could see that, because the rent increases are not very much and you don’t have the number of years to rent them out, thanks
Mike_Summey Hi rgrimsley
davido not sure if my last message got through: are price trends still going down in your area?
Penny Mike, is that part 50% and of course can’t exceed the 15,000 that a parent can gift a child annually?
wps Carol, my experinece has been on the 401k is that you can take the $ out and have up to 5 yrs to pay it back with a reasonable interest rate
davido in NorCal – prices are close to bottom, i think. lots of homes moving quickly now at much reduced rates. might go a bit further down, but not much from here.
Mike_Summey david, yes they are. I don’t expect the Asheville area to see a bottom for at least another year.
rgrimsley Hi Mike and Roger. Thanks for hosting tonight!
wps Carol, again my understanding is up to 50K
madmike I tried to listen, got off work too late, is there a way to go back and listen later, I tried to find it on the school’s website but couldn’t figure it out
davido I think we have another year in Cali too
davido New Homes in the area are selling too – at about 40% off the peak rate though.
davido crazy if you think aobut it
Mike_Summey Penny, the gift will count toward the annual exclusion, but I believe it is currently $12,000 not $15,000. Of course two parents could give $24,000.
Carol Re: 401k, I’m not talking about taking out a loan, but rather having the 401k owner loan out the money as an investment. Just in this case, the owner of the 401k would be me.
Roger Dawson Davido, in Southern California, prices are going up in the bottom quarter of the price ranges. Prices are still soft in high price property.
Penny thanks Mike
Roger Dawson Penny, I think that you also get an $8000 tax break if you’re buying your home.
davido Roger, I agree – Menlo Park, Marin, and tony parts of SF still have to come down. The Mayor of SF just listed his 1 bedroom condo for $4 million.
davido C’mon on!
Penny and Davido
Mike_Summey madmike, sorry, but the host said it was available live only.
Carol Doesn’t the tax break only apply to first time home buyers, not investors?
Penny Yes
Mike_Summey Hi ARay
Mike_Summey Ray
Roger Dawson Carol, yes, that’s right.
Mike_Summey Sorry, I’m trying to type & eat a pizza at the same time.
Carol Sounds messy!
davido Penny – if you’re married, your parents can give the same amount they gave you to your spouse. And that’s a tax free gift too.
Penny Had pizza last night Mike.
Penny Carol, & I think the 1st time home buyer has to stay in the house for 3 years. I guess it then could become an investment.
rgrimsley Have many of you seen the softening of rental rates? With all the unemployment, it seems as though demand has softened rental rates a bit but I don’t have a lot of units.
Mike_Summey My son brought me a pizza because he knew I hadn’t eaten dinner.
Carol Re: 401k, I heard about this on from a talk I heard on creative business financing, but it was a downloaded MP3 file, so really know how to track down the speaker.
DaisyNH7 Mike, I really miss your column in the ACT. Fridays just aren’t the same anymore. Are you coming back soon?
Mike_Summey rgrimsley, to the contrary, I find that rentals are stronger than they were when the market was so hot. There are more renters now due to the market conditions.
rgrimsley Interesting, thanks! It is amazing what you read and what is really going on.
Carol I’ve also got a question about buying foreclosures. I’ve never done it. Do you make an offer on these just like buying a regular home, or are they sealed bid auctions, or can they be both?
Mike_Summey Daisy, I guess you’ve noticed that the newspaper eliminated the entire business section and me along with it. I doubt seriously if things will get better for them. Newspapers seem to be a dying breed.
Penny thats interesting Davido
Penny I didn’t know that
Carol Is the ACT your local newspaper?
Mike_Summey Carol, most foreclosures are listed with Realtors and marketed as any other property. If you are in a position to buy for cash and close quickly you can get some fantastic deals on foreclosures.
DaisyNH7 I have noticed, and let it be known that you are extremely missed. Big mistake on their part…
Carol Thanks, Mike.
Mike_Summey Carol, yes. That is Asheville Citizen Times, a Gannett Newspaper.
madmike Mike or Roger, I was wondering if you can give me some tips about talking to different banks, I have used the same bank for almost 10 years with my business dealings. But now that I am investing in real estate I know I need to spread out a little, but I don’t want to offend the banker I have been working with.
rgrimsley Mike or Roger, have you been able to establish a rule of thumb for how long lenders are willing to hold REO forclosures before they drop their price in those situations where they are not priced aggresively to begin with? I realize the situation probably varies with each lender, but I also thought there may be some patterns.
Carol I have a question about the best way to set up a LLC. Is it best to use a local lawyer, or to use an Internet-based service like INCORPORATE.COM or MYCORPORATION.INTUIT.COM?
Mike_Summey madmike, I currently deal with 8 banks and just today agreed to open relations with 2 more. Banks are businesses just like any other business. They have their ups and downs and if you deal with just one bank you have to ride their wave and it may not be going in the direction you want to go. Establish relations with multiple banks. Don’t worry about offending anyone. The more options you have the more flexible the bankers become.
Mike_Summey rgrimsley, I find that the prices drop every 2-4 weeks that pass with no offers.
Mike_Summey Carol, why are you wanting to set up an LLC? That is the first question you need to answer.
Carol Mike, good question. We want to try to limit potential liability.
Mike_Summey Hi skorway! Sorry I was typing and didn’t see you come in.
skorway hello Mike
Mike_Summey Carol, is that the only reason? Why not use insurance for liability protection?
Roger Dawson Carol: There are several ways to buy foreclosures: 1. buy from the owner before the foreclosure is final. 2. buy on the court house steps. 3. from the lender after foreclosure (called REOs). 4. Get the lender to accept less that what is owed on the property, called short sales. In tody’s market number 3 is by far the best way to go. Google your zip code and “bank owned property for sale” and you’ll see a bunch of them.
rgrimsley Carol or Mike, do you need an LLC or would a revocable trust not surfice, with a liability ins. policy?
madmike I actually set up an llc, all the real estate books said to do it,(that was before the weekend millionaire books) but I still have to guarantee everything, so I have not noticed any benefit.
Mike_Summey Hi Hawkeye
hawkeye775 Hi Everyone
hawkeye775 ike
hawkeye775 Hi Mike
Mike_Summey madmike, you make the point I was alluding to.
madmike I have even thought about dissolving my llc
Mike_Summey Hi a.nawehs
a.nawehs hi
hawkeye775 Mike, saw Doug McKinney today. I’m going to be switching my homeowners to him for the rental properties. Thanks.
Carol Mike, the other reason would be to be able to set up the LLC with a 401k and then be able to use the 401k $ to invest in real estate. My husband has a good chunk that he can roll over from the 401k he has with his former employer.
Mike_Summey rgrimsley, I use LLCs, but I use them for estate planning purposes, not liability protection. Maintaining properties correctly and good insurance is better protection than just using an LLC and you don’t have to pay the annual fee.
a.nawehs first time participant – here to learn
Mike_Summey Hawkeye, glad he could help you. He has handled my insurance for years and does a wonderful job.
Mike_Summey Carol, that’s more the kind of reason I was looking for.
Joshua Mike, have a student rental in small college town and mgmt co today sent me their 30 day cancellation notice. Said they are focusing on larger properties/complexes, etc.
Mike_Summey a.nawehs, glad to have you. Feel free to jump in anytime with a question.
a.nawehs thank you
Mike_Summey Joshua, are they the only mgt company in the area?
Joshua upset about it because when I interviewed to find this one, very few met qualifications, will have trouble finding anyone suitable
Mike_Summey Joshua, I find that interesting as most management companies are anxious to add owners. They can find another tenant tomorrow, but owners are much harder to come by.
Mike_Summey Hi Lew
Mike_Summey Has anyone bought anything during the last month?
Mike_Summey Hi Jess
Joshua yeah, agree, was shocked myself. Since it’s a student rental (4 individuals) they have to collect from all 4 (each separate contract) they’ve had hard time collecting from all 4 (usually best they do is 3/4).
Jess hello Mike
Mike_Summey Joshua, in most situations like that, one student is the primary lessee and the other pay that student. The one that is primary on the lease then pays all the rent at once. I can see how it could be a problem if they are trying to collect from 4 people.
Penny Joshua, were you locked in at a low management rate? If so, could they be trying to hopefully get you to come in at higher rate? Probably not likly since you said you have only one property, but you never know.
Carol Are there any other downsides to a LLC other than extra paperwork and an ongoing yearly expense?
Mike_Summey Hi Billy
billy hey
madmike Haven’t bought any yet, during the last month, I have read two of your books and listened to the audio cd’s three times. I am eager, but am learning my area and trying to set up a team, don’t want to be too eager, or jump in too quick.
Carol Roger, thanks for your input on my foreclosure questions.
Mike_Summey Carol, if it is a single member LLC, everything in it is treated as if it was owned in your name personally as far as the IRS is concerned. There is a good bit of paperwork to keep up with if you operate the LLC as it must be to provide any liability protection. You have to keep minute books and a separate bank account and be sure not to co-mingle funds.
Mike_Summey madmike, good strategy. I never tell anyone that they can get-rich-quick in real estate. If it was that easy everyone would be doing it.
madmike I own several properties that I have purchased myself using methods from many sources but mostly just common sense, they are cash flowing very well, but I amy trying to make sure I don it right, I love the system you guys have spelled out in your books.
Mike_Summey Hi Jason
Jason Hello
Carol Mike, thanks. But wouldn’t you want to do those things anyway?
Mike_Summey madmike, building wealth takes time or very high risk. I prefer the slow, but steady approach over the high risk method.
Mike_Summey Carol, yes, but too many people want to arrive without taking the journey. The cut corners and make stupid mistakes that a step back and a second look would prevent.
madmike I have been very lucky that I fell into good deals, didn’t really know what I was doing, like I said, your system is great, I puts it all in perspective
Mike_Summey madmike, common sense is the root of the Weekend Millionaire way of investing.
Roger Dawson There are too many gurus out there promoting “no money down” real estate investing. We agree that it’s possible to structure deals like that, but getting them to cash flow while reducing the mortgage balances is very hard.
skorway Roger Dawson , do you know anyone in particular of such gurus?
Carol My husband and I tried to get into the weekend millionaire program back in 2005, but could never get an offer accepted where the NOI would work. Now the prices are fantastic by comparison. But I’m having to go back and re-read everything. I’m shocked at how much I’ve forgotten.
madmike Funny thing, growing up I was always told I didn’t have common sense, but had plenty of book sense. I think I have mingled to two together to make business sense. At least that is the hope.
Carol Now the issue isn’t prices, its coming up funding to make the purchases.
Roger Dawson skorway, I don’t want to name names but if you google “No Money Down” you’ll find a slew of them.
Joshua Mike, bottom line question, difficult one, but you have provided a lot of sound advice for me over the yrs. This student rental is essentially a slightly negative cash flow property and has been a thorn in my side babysitting a mgmt co. Have owned it for 7 yrs and has seen significant appreciation (~40K equity). Belief is that next 10-15 yrs will see much more appreciation. Would you wait this one out or sell and take the cash and invest elsewhere?
Mike_Summey Carol, the Weekend Millionaire method works all the time. When you can’t get any reasonable offers accepted, that’s the best indicator of all that the market is over inflated. You just have to keep making offers. When the market turns like it has now, there are more deals than anyone can purchase. It’s anumbers game. Unless the numbers work, leave it alone.
Mike_Summey madmike, it sounds like you have done that.
Roger Dawson Mike tell everyone about out software program.
a.nawehs i’m interested to have one
Mike_Summey Joshua, that’s a decision only you can make. Personally, I’ve never sold a property, but I’ve been very careful to make sure my purchases were done so that I didn’t have negative cash flows.
Mike_Summey Roger is talking about the Offer Generator computer program that is available in our online store. I talk about it in every email notice I send out. It is by far the best tool I own and I use it every day. I can make 10-15 offers in an hour using the program…after I’ve inspected the properties , of course. If anyone else uses the program, please give us your input.
Joshua Thanks Mike, it’s a tough one
Mike_Summey Joshua, I think I’d look at the negative cash flow and see if it exceeds the principal reduction on the loan. That could be a good way of helping you decide what to do.
Mike_Summey to decide.
Joshua good idea, thx Mike
hawkeye775 Mike or Roger, I still have the same issue that I’ve had since December with a contract on a property that has a lien on it (from a 1/3 heir). The IRS still has not released it. It is a good deal on the house, but because I don’t have a lot of cash to invest, I’m hesistant to make other offers because I wouldn’t have the down payment to do this deal and another one. So far every month we’ve renewed the contract, but it is tempting to let it go and start looking for another house, plus soon the bank will require another appraisal to do the loan. Any suggestions?
rgrimsley Roger or Mike, does the Offer Generator only indicate whether or not your proposed deal is a “go” or “no go” or will it also indicate the price or terms that “work”?
madmike Thanks for the chat eveyone, really enjoy these, it is great to talk with other investors
Mike_Summey hawkeye, the next time they want you to extend the contract, why don’ t you do so with the condition that you can withdraw if you find another property that suits you needs.
Roger Dawson rgrunskey: you can put any numbers into the program and it’ll tell you if it will work. It even prints the purchase offer for you. All you have to do is add the postage stamp.
Jason The offer generator is very easy to use and allows you to quickly calculate offers that will work for you…my brother and I have bought several properties in the last few months all with offers straight from the program
Roger Dawson Thanks Madman. Join us next month.
hawkeye775 that would be the best of both worlds if accept it. Thanks
Mike_Summey rgrimsley, the Offer Generator helps you prepare offer that will cash flow if accepted. If you try to prepare and offer that will be a negative cash flow situation, it alerts you to that fact. Why don’t you look at the Offer Generator Tour that is on the website. You’ll find a link to it on the left side of the home page of this website.
Roger Dawson Hawkeye: If the heir agrees with the lien, can’t you buy the property and pay off the lien in escrow?
Roger Dawson Got to run folks. See you next month.
Carol Mike & Roger, thanks for hosting the chat. I appreciate the back and forth between everyone, too. Thanks.
hawkeye775 thanks everyone
Mike_Summey Goodnight Roger
rgrimsley Thanks guys! Have to post a rental on Craig’s List.
a.nawehs thank you
Mike_Summey Thanks Jason.
Penny Headed out as well. Thanks all. See you all next month.
Mike_Summey Goodnight Penny
Penny
Mike_Summey Jason is one of my sons who has been using the Offer Generator to make dozens of offers.
billy Thanks, good info!
Jason which has worked extremely well
Mike_Summey He’s seen first hand just how effective it can be.
Mike_Summey Unless anyone else has a buring question that just won’t wait, I’m going to say goodinght also.
Carol OK, thanks. Mike.
a.nawehs good night, mike
Mike_Summey Our next chat will be Monday, June 1, 2009
Mike_Summey Goodnight all.
Jason just a few days before my birthday goodnight
skorway good night
Mike_Summey I think that was a not so subtle reminder from Jason!!!
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