Chat Transcript – September 14, 2009 – Guest Expert Carleton Sheets
Posted on September 15, 2009
sj Hi mike
Mike_Summey Hi sj
Mike_Summey Hi bamoore
Mike_Summey I just got here from the airport.
bamoore Hello, Mike
Mike_Summey I’ve been flying all afternnon.
Mike_Summey Carleton should be joining us any minute.
sj How’s the weather up there?
Mike_Summey Hi Josh
Josh hey Mike
Mike_Summey sj, weather was great today.
Mike_Summey sj, where are you?
Mike_Summey Is it sj or si
sj Lots of rain and storms in Monroe,LA.
sj sj
Mike_Summey I just got my plane back today from 8 weeks in the shop. A complete avionica upgrade.
Mike_Summey avionics
Mike_Summey Hi Joe
Mike_Summey Hi Steve
sj What did that set you back?
Mike_Summey Hi Trav
Mike_Summey There he is!!!! Hi Carleton
Mike_Summey Hi Lon
Trav hello mike carleton
Josh Mike, what amount do you make your mgmt co carry of each of the following 3? 1) liability insurance 2) E/O insurance 3) fidelity bond for eomployees who handle money?
Lon Hi Mike. Hi Carleton.
sj The Man has arrived!!!!!
REinvestorSteve thanks for your time Mr sheets to educate us
Mike_Summey Josh, $1,000,000 liability, $100,000 E&O, no fidelity bond.
Josh you also have them name you in those polcies right?
Mike_Summey Hi Denis
Dennis Hi Mike
Mike_Summey Josh, that’s right
Mike_Summey Hi Reynolds
Josh do you name them as co-insured on your liability policy?
Carleton_Sheets Hello everyone. It’s been so long since I was in the chat room I had to call Mike to explain how to respond.
Mike_Summey Carleton just called. He was having an operator error.
Mike_Summey Josh, no I don’t. I’m not doing anything to create liability for them.
Mike_Summey Hi Ted
Ted Hi Mike
Mike_Summey Carleton, that’s why we need you to join in more often.
Mike_Summey Hi Gilbert
Carleton_Sheets Mike, not an operator error…and intellectual breakdown!
Carleton_Sheets an not and
Mike_Summey I was being nice! 
Carleton_Sheets Well, how is everyone doing. Taking advantage of this market?
Mike_Summey We’re starting to get a crowd, so let’s get to answering some questions. Who wants to start?
Carleton_Sheets And I’d love to know what parts of the country you live in.
Ted I was having a lot of fun in the market over the winter, but that darn Obama tax credit has made it more difficult to buy this summer.
Mike_Summey Everyone, let us know where you are from please.
Gilbert Hi, Gilbert here, from South Pasadena, CA
sj Carleton, you are the Master of Deal Structuring, is it all in the creative mind or does it just take practice?
Ted Rochester, NY
Trav Mike i’m from asheville nc
REinvestorSteve seattle
Lon Greenville, SC
Dennis Abingdon, Va
Josh Mike, are you ok with the mgmt co mingling all ownr funds together in one trust account as long as it’s not co-mingled with their company funds? Or should I want a separate trust account just for me?
Mike_Summey Dennis, I was born in Abingdon and graduated high school at Abingdon High.
Carleton_Sheets Does anyone know how the tax credit works for a multifamily property if the owner occupies a unit him or her self?
Mike_Summey Hi danko & Penny
Carleton_Sheets ello Penny!!
danko HI Mike, Carleton, everyone
Penny Hi Mike & Carleton!
Josh Carleton, I’m in Houston, TX
Dennis I’ve moved here in 1963 Mike.
Mike_Summey Josh, in most states property managers are require to keep owner funds separate from their funds. As long as they do that and pay out the funds monthly, I’m okay with that.
Lon Carleton, as long as the owner lives in one of the units, and it is 4 units or less, they should be able to get the credit. But don’t quote me on that.
Trav no i don’t could you explain Carleton
Mike_Summey Hi annie
annie hi all!
Lon Hey Danko
Carleton_Sheets SJ, you are very kind. Some practice helps, a creative analytical mind helps and a “cookbook” like Mike and I have written, at your side helps.
Mike_Summey Hi Sean
Trav my biggest problem is the down payment and ideas?
Joe Carleton/Mike, Any advice on how to find great deals?
Mike_Summey Trav, do you have the Offer Generator program?
Trav no not yet
Josh Mike, sorry to bombard you! Got to take advantage of precious time! Do you let your mgmt co. sign leases longer than 1 yr? If so, assume you have a clause that let’s you increase rent?
Mike_Summey Dennis, that’s when I left.
Mike_Summey Hi Jason
jason_seattle hi everyone. hi mike and carleton.
Trav i had bought the no down payment 4 years ago and was looking at getting somethings off the weekend millinaire but didn’t want to buy what i already have
Mike_Summey As far as I know they all sign just 12 month leases, then do an inspection prior to extending the leases.
Trav Mike any suggestions
Carleton_Sheets When I firs started Trav, I din’t have money for a doen payment so I organized partnerships. Few people have $100,000 but you may know a lot of people with $500 – $1,,000 to invest, or even $5000 or more. I have written a book on partnerships that is available at no charge on my website.
jason_seattle josh, as far as 1+ year leases…. check your state law. In washington anything longer than 1 yr that isn’t notarized is a month-to-month
Mike_Summey Trav, I think Carleton can tell you the Weekend Millionaire products are very different from his No Down Payment course.
Ted Trav, during the past year I used the combination of a line of credit on my residence and funds borrowed from friends (paying interest double what they could get in a CD, but still less than a mortgage) to putdown on 4 homes. Getting a combined 50% ROI.
Trav ya i heard partnerships can be risky
jason_seattle mike, how are you finding most of your deals lately?
Carleton_Sheets Ted, good for you!
Trav So Mike should i just get your whole package
Carleton_Sheets Trav, they can be if you don’t stucture them correctly.
Carleton_Sheets Check into my partnership program.
Trav Ok Carleton I sure will
Trav i have your no down payment course that talks about partnerships
Mike_Summey Jason, currently I am having the realtors I work with in the various markets line up 10-15 properties to look at in one day. I do an instection of each one and then use the Offer Generator to make offers on all of them unless there is something very wrong with one. I’ve been averaging about 1 in 10 being accepted. I’ve closed on 15 so far this year.
danko I used my HELOC, too, this past year. I had paid off my own mortgage early. Used the HELOC to pay cash for a single family home and rehabbed it…put in a renter, then refinanced and got all my HELOC back out and paid it back. Now I’m looking for my next house to do it all over again.
Mike_Summey Trav, our package is all about long term investing. Nothing about speculating.
Mike_Summey Hi Michael
MichaelM Hi Mike
Mike_Summey Danko, that’s precisely the way I’m buying everything right now. It allows me to make cash offers and withing a few weeks get a loan and get all of my cash back out.
jason_seattle Mike, so you are mostly looking at properties on the MLS? Are your offers typically cash, subject to, or owner carry finance? Do you pre-screen the owners for equity in the property? i.e. stay out of short-sale range
Carleton_Sheets Jason, drive neighborhoods that you have not been in before. Get to know your area. When ever you see a for sale sign, call the Realtor on your cell. Really really get to know the market. Then start making offesr that you are embarrassed by, using a letter of intent.
Trav whats a heloc?
danko absolutely, Mike. When I walk in with all cash offer, it gives me an edge. I can close fast and have guaranteed money
Alex Hello everyone.
danko HELOC = Home Equity Line of Credit
Trav thanks danko
danko yw
Ted Carleton and Jason, I used to be embarrassed by my low offers . . . now I’m just proud of them because some of them get accepted
Mike_Summey Jason, with the current market conditions, I’m using my lines of credit to make very low cash offers. Many of the properties I make offers on are bank foreclosures, but many are also sellers who just need to get out before they lose everything.
Alex I heard to qualify for an HELOC, the property must not be an investment?
Mike_Summey Hi Alex
Alex Hi there Mike 
Carleton_Sheets Danko, what kind of interest rate are you getting when you refinance an investment property?
Joe Anyone in South Florida looking to partner on some deals?
Alex I would Joe, but I’m in Chicago.
danko I just did a refi for 6.125%
Carleton_Sheets Where are you Joe?
danko But I hesitate to tell you what I am paying for interest on my HELOC. It’s obscene…lol
Mike_Summey Alex, that may be true for a typical HELOC, but a business line of credit can be secured with an investment property.
Ted My heloc is at 2.99%
Carleton_Sheets What is it? It’s a first mortgage so shouldn’t be TOO high.
jason_seattle danko, that heloc rate is great. Private money will put you at 12%
danko yeah…mine is 2.49% interest only payments
Joe Looking to do deals from Stuart down to Miami. I am in the Boca Raton, Ft. Lauderdale areas.
danko no no…my 30 year refi was 6.125…my heloc is 2.49
Carleton_Sheets Do you belong to an investment club in Boca?
Mike_Summey Every loan I currently have is at prime. 3.25%
danko Are you part of David Dweck’s REIA in Boca? I get their listings even though I am up in Minnesota. Would love to find a good property in FLA.
Ted On the private money concept, I have been paying 5 and 6% on short-term (18 months) promisorry notes that I personally guarantee. By the time the 18 months come up I’ll be able to refinance and take them out if they wish. this deal is only with friends and family that understand my signature is good. Just a thought for anyone else to try.
Joe Use to but not anymore. Do you partner on deals?
danko Are you talking to me, Joe?
Mike_Summey One reason I love to have Carleton join us is because we’ve both been very successful in totally different ways. He loves partnerships, I’ve never had one. That’s why we bring such different perspectives to the chats.
jason_seattle Mike, I can assign houses to cash buyers, but don’t have a enough cash or equity to make offers on my own without private money. Do you think its worth the 12% to get into the property and then refinance out? Also, when people here are refinancing are you doing it in a business name and where the property is the only recourse?
Gilbert Is is alright to invest in commercial RE now?
Carleton_Sheets Joe, Google Cameron Dunlap. He has a list of ivestmen tclubs all over the U.S.
Ted Jason, all my homes are owned by my business, but I still have to personally guarantee them to the banks.
Trav so mike how did you get your first rental
Mike_Summey Ted, I’ve used that type private financing many times. I probably have about $1,000,000 at this time.
danko I like doing both, Mike and Carleton. I do my own deals, but I have only so much cash on hand so I can only do one deal at a time right now. But I am also partnered with two other investors to buy rentals. I don’t have to put up all my own money.
Josh Mike, paying prime rate now is spectacular. I bet for new loans now though they set the payment at what? prime plus 3 or 4?
Ted Mike. I’ll get to that level yet:)
Trav where do you find good private financing, that i’ll still have all my fingers when i leave
danko Come here, little Trav…I have money for you…lol
Mike_Summey Trav, I had no money in the beginning so I had to make offers that would work for me if one was accepted. It took a year of making offers to get my first one. That’s one of the problems many people have, they give up before they succeed.
Mike_Summey Hi Trish
Carleton_Sheets Trav, within your own sphere of influence…neighbors, family, Drs. DDS, etc.
Trav so Mike you got owner financing?
Trish Hi Mike.
Carleton_Sheets Amen Mike…re:giving up.
Trav it seems getting the first one is the hardest
Mike_Summey Trav, do you have friends or relatives who have money in CDs? Right now they probably are getting less than 2% interest and might be interested in doubling or tripling that which is still a good deal for you.
Mike_Summey Trav, my first purchase was a loan assumption back when you could still assume loans. I paid the closing cost and assumed the buyer’s loan. They were about to go inot foreclosure.
jason_seattle Is anyone here doing direct mail or are most of you cold calling and looking at listed properties?
Joe Carleton, are you giving seminars or mentoring?
Josh Mike, where are the banks setting new payment amounts for you in current environment?
Trav Mike any trust worthy cpa’s in the asheville area you would recommend that i could talk to
Trav surley they know some people
danko I have to admit, Carleton, that I bought your course and it still took me a few years to “pull the trigger”. The materials are only as valuable as effort you put into them. But I’m glad I did. My first deal had snags, but nothing drastic and I am so looking forward to the next one…and the next…and…and…and.
jason_seattle trav, ask around at your local REIA
Mike_Summey Carleton is a tenacious investor. He doesn’t ever give us…if you don’t believe it, just play golf with him.
Mike_Summey HI Kim
Kim Hi Mike!
Ted Jason, I do some direct mail, but mostly I am working the MLS and watching for any signs of distress (ovegrown lawns, etc).
Carleton_Sheets Joe, my body told me it was time to stop doing seminars and my only mentoring comes via my website at no charge…. www.carletonsheets.com
jason_seattle trav, also you could use my seattle based cpa. http://www.kingmanwinslow.com/ They specialize in real estate and you get a tax attorney to boot
Carleton_Sheets Hard to believe Joe, but come next April, I will have been an investor for 40 years. Please don’t tell Mike. He thinks I’m a young buck.
Mike_Summey Trav, I use Gary Mathes at Dixon Hughes. He totally inderstands what we do and can give you a great deal of advice. I’ve been training him for 20 years since he left the IRS as a fraud investigator.
sj Carlton, do you still have your coaching program?
Trav Thanks a bunch i’m making a note of that right now
Carleton_Sheets Yes, I do. And givne the state of th emarket it is extremely active and busy.
Mike_Summey Josh, the type financing I use is Fixed Payment-Floating Rate. The payments stay the same.
Joe Carleton, looking for any protege’s to carry on your good name?
Trav Mike is he in the asheville area
Carleton_Sheets Joe…..smile.
Carleton_Sheets Yeah, I don’t know dixon Hughes either.
Mike_Summey Trav, yes he is. Look up Dixon-Hughes in the directory. Ask for Gary Mathes and tell him I recommended him.
Josh Mike, yeah you’ve explained that excellentprogram to me. For your new loans how much above prime are they setting them now? 3 or 4 pts above prime for payment calculation?
Trav THANK YOU
Trav
Mike_Summey Josh, the last 5 loans I’ve done the payments were based on 5% rates which is 1.75% above prime
Carleton_Sheets Trish, where are you from?
Trish Mike, how do I fit repair costs into the wholesale formula to make sure it’s a wholesale deal? Page 41 in the manual is the guide I’m using.
Trish I’m from Van Nuys, CA.
Mike_Summey How many of you have the Offer Generator program and use it?
danko I do.
Dennis I have it.
Joe Carleton/Mike, Any pointers on where to get a daily what to do list on finding motivated sellers?
Mike_Summey Trish, use the Offer Generator. It prompts you to factor in that cost.
Mike_Summey How about some of you who use it telling all the rest who don’t what you think of it?
Trish I’ll look into that. I’m not familiar with it. It’s on your website, right?
Lon I have it Mike. I use it on any long term holds I look at.
jason_seattle i have it mike
MichaelM I do not have it, nor am I actively investing
Mike_Summey Trish, that’s correct and you can take a tour of it one the website.
MichaelM (but its probably time again)
Trav Mike i’m going to get the offer generator but real unsure of buying things online is there any number to call or any other route?
Carleton_Sheets I like the newspaper or the narrative used in describing Realtor listed property. But remember this, sellers emotions can change daily or even hourly so don’t be heistant about making an offer even if there is little or no evidence of despiration.
Mike_Summey Michael, you’ll never find a better time to get started than now. It’s the best time I’ve seen in my lifetime. What do you think Carleton?
Carleton_Sheets Makes me want to ask, how may of you have my “Real Estats Toolkit”?
Trav i do
Mike_Summey Trav, that’s it! It is a secure site so you don’t have to worry. Also, we don’t sell our customer list to anyone.
Carleton_Sheets Couldn’t agree more, Mike!
sj What’s in the toolkit?
Trish For my first investment house, how much in repair costs would be “safe”?
Joe Not sure what it is? How do we get it?
MichaelM well, i just sent my first off to college, and my second is 2 yrs behind that, SO, I can’t *afford* to be broke anymore
danko Carleton, I’m starting to steer away from our newspaper, although I still look at it. But a lot of sellers are foregoing the cost of newspaper ads and going to Craigslist
Kim I have the “Real Estate Toolkit”.
MichaelM thats why i’m here
Mike_Summey Hi Ql
Josh Mike, Carleton, everyone, I am in the process of negotiating a management agreement and am looking for any advice/tips from the group. IS there anything you recommend including in this agreement that may not be found in a typical agreement, beyond what Mike mentions in his books/CDs?
Trav ya but hackers can get into anything they want into bad enough
danko Our newspaper RE ad are shrinking
danko But Craigslist is loaded with RE listings
Mike_Summey The Toolkit is available on Carleton’s website or on ours. Same price either place.
Carleton_Sheets Every form you would ever need, Financial calculators. planning tools …I am really impressed with the program. It of course was developed by a professional at my direction.
Carleton_Sheets Josh, I cover this in my management course, available free on my website.
sj Do you get the toolkit with your coaching program?
jason_seattle i have the toolkit as well. The offer generator is good for long term holds where I can manipulate the interest rates and find out what my offer would be.
Mike_Summey I strongly recommend Carleton Toolkit. I use it every week. The Offer Generator is a completely different program.
Dennis Carleton, I have it on 3.5 disk and no disk drive anymore.
Joe Carleton/Mike, will you guys offer any type of discount on your products for the people on this chat tonight??
Carleton_Sheets Oh boy, I’m not sure now. We try to change iwth the times and I’m not sure at the moment. You could ask.
Mike_Summey Joe, there is currently a discount on our products in the online store.
QL Hello all. I just attended an asset protection talk, and was wondering, how many investment houses did you get before you put them into an LLC or trust?
Lon Mike’s prices are way below the competition, and a way better product.
jason_seattle trish, as far as repair costs… make sure you have the cash to fix it up front. Stick to lipstick if you are nervous and remember paint goes a long way on cabinets
Joe Yes, but what about a special one time discount for the people on this chat…tought I’d ask?
Lon QL, I got my LLC before I purchased my first house.
Ted QL, I formed the LLC for my very 1st investment . . .
jason_seattle ql, always do llc. Of course some states are more expensive
danko I got my LLC before investing, too
Trish Jason, so you wouldn’t get a loan for repair costs?
Mike_Summey QL, I waited over 25 years to put my properties in an LLC and then only did it for estate planning purposes. I’m not sure how much asset protection you get if that’s your only reason for doing it. My attorneys tell me not much in NC.
QL Wow…really. I know of someone that have 2 investment houses and just have them in her name. In CA, it costs $800 or so to maintain LLC?
jason_seattle the question with asset protection is really how many properties to hold in one llc. That depends on the equity and the cost of the llc
Mike_Summey Thanks Lon. Better you tell everyone that than me.
Carleton_Sheets My attorney feels that an LLC is not needed, given the hish cost in Florida. I am now down to about 100 properties and the costs would be prohibitive.
jason_seattle california is an expensive state for llcs ql
Josh Mike, do you indemnify your mgmt co in your agreement?
Ted the LLC opened up another opportunity I had not even thought of. With that business unit I have been opening up wholesale accounts at various supply houses and getting deep discounts on parts and supplies. 30% off pool supplies, 45% off appliance parts, etc. That was just a bonus . . .
jason_seattle another point on llcs, you have to run them properly or they offer no protection and are expensive
Mike_Summey Josh, no I do not.
Trish Mike, how do you figure the blended interest rate on page 47 of the manual?
Mike_Summey Be wary of people selling their services to create LLCs for you.
Mike_Summey Hi ftx8
ftx8wnLN evening Mike
jason_seattle trish, factor in the payment on the repair costs when figuring out how much to offer and your rent amount. Always factor repairs into the purchase price as well
Mike_Summey TRish, I let the Offer Generator do it for me, but the way to do it is to take the payment on each loan, total them up and then calculate the rate that wourl provide that payment on the amount of money borrowed for the mumber of years of the loans.
Josh Mike always has the best deals on everything! Do you hold them harmless for damage suits or any injury suffered by an individual onsite? Everyone seems to push for that…
QL Is it possible to create LLC in other states, and have this LLC holds title to properties located in CA? What is the down side if any?
jason_seattle QL, you have to register your out of state llc in california. That has costs as well.
Mike_Summey Josh, I hire the management companies to manage my properties. I don’t do anything to create liability for them. If I refuse to make repairs that they bring to my attention, I am liable. It they don’t bring the repairs to my attention it is their liability.
Trish Jason, so if the asking price of the house is 100,000 and repair costs look like 5000…I should start at $95,000 and factor in all the other stuff to calculate NOI?
MichaelM So, where (pricewise) is the market for workable deals – is it near the area’s median housing price, or way below it -What might a typical property look ( I am in Cary NC)
Mike_Summey Trish, I know you asked Jason, but that is the type thing the Offer Generator program factors in when generating an offer to purchase.
Trish Thanks, Mike. I’m learning how to use a financial calculator. I’ll try it out.
Carleton_Sheets Michael, my own opinion is that it is considerably below the median.
danko Trish, don’t factor the asking price into your calculations. I don’t even pay attention to what they seller is asking. I calculate what I’m willing to pay them for the property
MichaelM Thank you, Carleton.
Carleton_Sheets Good for you Danko!
jason_seattle trish, is the asking price what you are willing to pay? I’m saying that if you decide a property will work for you with at $100k, but needs $5k in repairs you should get it for 95k. If you are taking a loan then you need to make sure the monthly payment works with your numbers. You may need to offer less than $95k if the rent doesn’t work
Trish Danko, yes. I’m with you. I used the wrong term. Thank you.
Josh Mike, well said. Thx. I think you mentioned before you have a clause that allows you to pull a property IMMEDIATELY without cancellation notice if it’s vacant for 60 days or more? Was that a tough sell?
Mike_Summey Michael, I recommend that you always stay with properties that you can buy and rent within the mid range of the market your are in. Stay away from the cheap and the expensive and you will do well.
Lon QL many states offer LLCs that can operate in any state. Look into Series LLCs. They allow you to create “Cells” in which to place properties into, that are considered separate from each other, and you do not have to create a new LLC for each property. Deleware, Nevada and Wyoming are 3 that have them that I know of.
jason_seattle trish, mike is right. The offer generator is the simplest tool
jason_seattle i price houses for assignment differently than my own buy and hold
Josh Mike, well said. Thx. I think you mentioned before you have a clause that allows you to pull a property IMMEDIATELY without cancellation notice if it’s vacant for 60 days or more? Was that a tough sell?
MichaelM Interesting – so the blended answer would be the low side of median – That would also be where my comfort level would be
jason_seattle ok, i’ve got to run. Thanks for the input mike and carleton.
Josh sorry, resent
Mike_Summey Josh, no it wasn’t. I just told the managers that if they wanted to work for me, that was my terms.
Mike_Summey Hi Sharon
Carleton_Sheets I have an acquaintance in Vermont who employed a manager for his apartment building on a straight feebasis rather than a contingency or percentage based on performance. Shame on him.
Trish Mike, please feel free to chime in anytime. I’m grateful. I will definitely investigate the Offer Generator. I appreciate knowing how to work the numbers though.
annie does anyone use the formula – ARV x 70% – rehab = MAO? learned this at my local investors mtg.
danko Thanks for the chat, Mike. It was great to see you in the chat again, Carleton. I have the Real Estate Toolkit, too, and love it. Good night, everyone
Carleton_Sheets Thanks, Danko!
MichaelM So, when I work everything out and get my number from the offer generator (which i do not own yet) Who presents the letter to whom?
Josh Mike, do you actually spell out in your agreement that they will give you min. 3 repair bids for review above a certain amount or is that just a verbal understanding?
REinvestorSteve annie–you need to subtract your profit in that equation
Mike_Summey Wow! This hour has really flown by. Carleton, thanks for helping me tonight while Roger is off to China.
Trav MIke and Carleton Thanks for taking the time to educate us
REinvestorSteve thanks guys
Trav Goodnight
Trish Thank you all.
Mike_Summey Josh, that is correct. It keeps them honest.
annie that comes in by doing the ARV x 70%!
Ted Another very interesting evening. Thanks Mike and Carelton and everyone else.
Carleton_Sheets …and thank you Mike, for inviting. I really enjoyed. And all of you, best of luck in the year ahead!
Mike_Summey Our next chat will be October 5th. I hope you will all join us again at that time.
sj Trish,to solve for blended rate on page 160:PV=chs $90,000:gn=15:pmt=$750: solve for i
Josh Mike, Carleton, thanks for all your advice and help!
MichaelM Thanks
Dennis See you guys next month
Mike_Summey Goodnight all. See you next month.
MichaelM
MichaelM So, when I work everything out and get my number from the offer generator (which i do not own yet) Who presents the letter to whom?
Kim Goodnight all!
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