Chat Transcript – August 2, 2010

Posted on August 3, 2010

CHARLIE Hey carlton charlie
carletonsheets Hello Mike and everyone!
Mike_Summey Hi Charlie & Carleton
Mike_Summey Hi Grumpy
Grumpy Hi Mike!
Mike_Summey I wasn’t expecting you tonight Carleton, but thanks for joining us.
Mike_Summey What’s up with you charlie?
Mike_Summey Hi Joshua & jneun
carletonsheets Glad to be here, at least for a while.
Joshua Hey Mike
jneun Good evening all
CHARLIE Just working on projects
carletonsheets Where are you Charlie?
Mike_Summey Charlie, are you the charlie from Anderson?
CHARLIE Anderson sc carlton
Mike_Summey Hi djpeterson
carletonsheets A great market (it’s Carleton by the way)
Mike_Summey Charlie, just wanted to be sure.
djpeterson Hi, Mike and all.
Mike_Summey Charlie is my right hand man in SC.
CHARLIE started on the house today mike
carletonsheets Hello DJ
Mike_Summey Charlie, good! I saw the pictures. Looks like a little wood to replace.
Joshua Charlie, do you handle make-readies for Mike as well?
carletonsheets Hello Roger!
Mike_Summey There…….sss Roger Dawson
ROGER DAWSON Hi Everyone: from Sunny California
CHARLIE it has already been addresses mike
CHARLIE welcome roger charlie
ROGER DAWSON Hi Carleton: What a nice surprise!
Mike_Summey anybody got any burning questions tonight?
Mike_Summey Hi mary
carletonsheets Hello mary
Mike_Summey Hi espringer
Mary Hello
carletonsheets …and hello Espringer
espringer hi
djpeterson What are some typical things we might overlook in an inspection – things we should not?
espringer Hi all
Mike_Summey Hi mbroadway
carletonsheets Hello Mbroadway
CHARLIE Carlton how is your finger doing, better i hope
mbroadway Good evening Mike Hello Carleton!!!
carletonsheets Charlie, a little better. How did you know?
CHARLIE I was talking with mike after it happened
ROGER DAWSON It’s big news here on the left coast too!
Mike_Summey djpeterson, many little things get missed, things like doorstops, blinds, smoke detectors, cabinets that the doors won’t open & close propertly, doors that the hardware is broken, etc. If you will print the inspection sheet on this website and use it, it will help you find these things. I use it on every inspection.
carletonsheets LOL
carletonsheets It sure pays to get a good inspector. Be sure to ask around to get recommendations.
djpeterson I will print it and use it.
Grumpy Mike, I’m a newbie and have only read your FAQ book. Are you a fan of rehabbing? It seems to be popular in the Boston area now (my backyard).
Mike_Summey Carleton only got in the chat tonight so he could wait until we had a big crowd and then tell everyone I mashed his finger!!! 😀
espringer Boston here as well
carletonsheets I’ll not say a word….a word!
carletonsheets Hello Kim
Joshua Mike, thoughts on 15 vs 30 yr am? I know you only do 15, but the bank I will be using for my current deal is same interest rate at any am (15, 30, or anywhere in between). Pay off earlier or better cash flow? Thoughts?
kim hi all
Mike_Summey Grumpy, the FAQ book is a companion book to the Weekend Millionaire Secrets to Investing in Real Estate. It answers questions people raised after reading the Real Estate book. Be sure to get the first book.
Mike_Summey Hi kim\
Grumpy Will do Mike!
Mike_Summey Grumpy, I do a lot of rehabbing, but not to sell. I buy the properties, fix them up and then keep them.
ROGER DAWSON Grumpy: We’re not a fan of re-happing to resell at a profit. But if you’ve got a run down property that with some fix up money spent on it would make a good rental, we’re cheer you on.
djpeterson I have the Offer Generator and am using it and find it quite helpful. If I am paying cash and then planning on getting financing, which is the best selection to use on the Generator. If I choose all cash or financing, the offer amount differs. Thoughts?
carletonsheets Joshua, my thoughts are to pay off as quickly as possible. but if you’re young maybe the extra cash would be helpful.
carletonsheets Hello Ted
Grumpy Ok, thanks Mike and Roger on the rehabbing question.
Mike_Summey Joshua, I use 15 yr financing because I like to get the properties paid off as quickly as possible.
Mike_Summey Hi Ted
Ted Hi Mike, Hi Carlton
Mike_Summey djpeterson, I use the cash option and then adjust the rate of return to produce offers I am comfortable making.
Mike_Summey Hi slumlord.
bkwslumlord Hello Mike
ROGER DAWSON The amount of interest you save by paying off in 15 rather than 30 years, is enormous but it doesn’t add much to your payments.
carletonsheets Regarding rehab, even tho I have a lot of experience I like to make an estimate and then add 30-50%. Maybe I over “rehab”.
ROGER DAWSON Carleton: my rule is that everything will cost twice what you hoped and take twice as long!
Grumpy Thanks Carleton on the rehab question.
djpeterson On the 15 yr financing with 5 yr balloon, do you ever get caught at the end of 5 yrs? Some banks won’t refinance. Then what?
mbroadway That’s good to know Mike about the cash option. I tend to do the same thing on calculations. It has already saved me from making a mistake. As you’ve said, there are TONS of good deals out there
carletonsheets Amen, Roger!
Joshua Carleton, Mike, Roger: In my early 30’s. I thought they would give me a lower rate at 15 yr am, but couldn’t get them to budge, so I’m tempted to maximize cash flow with 30 yr am? I don’t know…
Mike_Summey djpeterson, so far I have never failed to get refinancing at the end of the first 5 years.
Mike_Summey Hi reedd
djpeterson I guess that’s why you haven’t sold any! Great job.
carletonsheets Joshua, banks are like peoplesnoses when it come to policy…they all have one and for the most part they are different. Check with more than one bank.
Mike_Summey If any of you want to know how I do business, ask Charlie. I’ve bought about 25 properties from him in the last year plus.
CHARLIE Rehab has alot of unseen work till you get into it and open it up. That is why you have to add for rehab. Doing one now that that is the case
kim I have several properties I would like to make offers on but having trouble entering my info into offer generator. Can even get property address in without backing up several times. Anyone else had this problem?
djpeterson When bidding on the REO properties, under what circumstance would you up your offer when the bank asks for highest and best? Or do you always go in with your highest?
reedd When will the Offer Generator be going on sale again?
Mike_Summey Good suggestion Carleton! I tell people that banks are businesses just like any other and they have their ups and downs too. Don’t get tied up with just one bank because you have to ride thier wave if you do and it may not be going in the direction you want to go. I currently use 10 banks.
ROGER DAWSON Carleton: you’re known for teaching people how to do no money down deals. With low prices, low interest rates and increasing rents that seems very realistic these days.
Mike_Summey kim, I’ve never seen that problem. What operating system are you using?
Grumpy Charlie, thanks for the rehab thought.
kim windows 7 and vista. Have same problem on desktop and laptop
carletonsheets My own experience regarding REO’s is to go in low but set a maximum price you are willing to pay if the bank counteroffers. I’ve bought severl under the banks asking price.
CHARLIE Djpeterson, we have found here in s c go in with highest and best is the best thing. Just keep watching the property. We just closed on one that we made or first offer on 5 months ago.
Joshua Carleton, Mike, good advice, but believe me I have personally contacted 20-25 banks and these guys are my only option (bought cash, refinance). In a market where RE is so depressed that banks don’t want to touch it.
kim Carlton, do you do wraps for no money down financing? Had any issues with them?
Mike_Summey reedd, the Offer Generator has never been on sale other than when combined with the Audio program. The OG is $69.95 alone (which is a steal for what it does) or you save $20 if you buy it with the audio program. ($149.95 instead of $169.95)
carletonsheets Kim, I don’t usually use wraps. Have not had to.
reedd Thanks Mike. It was the $69.95 price that I remembered. Donald.
carletonsheets That certainly is an option tho.
djpeterson How would you recommend starting relationships with local banks? Do you go from bank to bank with a deal or do you start developing the relationship without a deal? Have you used any credit unions?
kim What strategy do you recommend for no money down? Owner financing?
Mike_Summey kim, we’re looking into Windows 7, but haven’t had any problems with Vista. The program is Java based so it should run on all systems.
Joshua djpeterson, definitely start building a relationship before the deal. Miek suggests starting early because I attest that it takes a LONG TIME to build credibility with these guys
carletonsheets Make three contacts. the first personal. The second over the telephone asking (as an excuse for the call) the answer to a question you may already know. The third in person.
Mike_Summey reedd, the OG is available for $69.95 in our online store all the time.
Mike_Summey Hi Dennis
Dennis hello Mike
Mike_Summey djpeterson, I try to always keep at least 6months of my total obligation to a bank on deposit with them. I will often buy for cash (and get a super deal) then after the property is rehabbed, if needed, and rented I will get the financing. I can usually get $5-10K more than what I have in the property when I refinance so I just deposit these excess funds with the bank in a MM account and leave them there.
Joshua Mike, do you use your realtor to oversee your rehabs or your mgmt co?
carletonsheets Where are you located Kim?
kim asheville,nc
carletonsheets I’ve heard of Asheville. (I’m in my summer home in Brevard)
kim also working Johnson City Tn area
Mike_Summey Joshua, Charlie is my buyer’s agent in SC and he has a rehab company that does my work as well. Ask him how I work.
djpeterson Mike, that answers several questions at once. I was wondering how much you pull out and where your initial reserves come from. So I assume you work the extra funds into the OG.
kim found a property up in Brevard I’m considering making an offer on
carletonsheets There are tons of good bys in the area but from what I see they are in SC and Tenn.
Mike_Summey djpeterson, you’re pretty sharp!! 😀
carletonsheets Good for you. I haven’t seen one here altho I have not been spending a lot of time looking.
kim I’m also a real estate agent/broker if anyone is looking in the area and needs comps etc
Mike_Summey Roger, have you gone to sleep?
carletonsheets Mike, it’s cocktail time in California!
mbroadway Charlie, so do you sub out the work for Mike and act as a General contractor too or do you have your own crew? Just curious
ROGER DAWSON No, I’m still here Mike. Taking some incoming calls.
Mike_Summey Carleton and I have been friends for many years. He’s one of the few real estate gurus that actually does what he teaches. He’s a good guy too…most of the time!!
Joshua Mike, missed chat last month but read the transcript. You mentioned you worked 20 yrs and didn’t retire until you had a monthly 6-figure income from RE. Are you referring to cash flow (taking out vacancy factor, maintenance, mgmt, etc) or were you referring to gross rental income? Just trying to see how the expert did it!
djpeterson Some neighborhoods are good rental neighborhoods and some are headed downward into too much crime and won’t be good rental neighborhoods for the long-term. What are some tips for telling the difference? I know it’s not easy, but what are some things you look out for?
Mike_Summey Joshua, I was talking about cash flow I could take out after all expenses.
CHARLIE Mbroadway i have a partner that is a general contractor and i am hands on most of the time, dont mind getting in there with the guys to get it done.
kim anyone in Asheville area available for offer generator lesson since I guess it’s operator error
mbroadway Thanks Charlie!
Joshua Mike, wow, excellent. Must have been a couple hundred properties by then for that to happen
Mike_Summey djpeterson, ask yourself if you can influence the neighborhood if you buy in it. I have two areas where I have single handedly turned things around. I one, I bought several houses and brought them up to a condition better than the homeowners. Whe I did this the homeowners started bringing thier up. In the other area, I bought two city blocks, kicked everyone out and started over.
reedd I am in Ontario, Canada and the government a couple months back raised the minimum acceptable downpayment for rental properties to 30%. Has anyone else commented on how to get around this?
Mike_Summey Joshua, it’s amazing what you can do if you just keep at it and keep adding one property after another.
Grumpy Hey Mike, are you on LinkedIn, and accepting connections?
ROGER DAWSON I hope that ombama doesn’t hear about that!
Mike_Summey Grumpy, no I’m not. Sorry!
djpeterson Have you ever networked with a group of investors and taken over a block?
Grumpy No worries!
ROGER DAWSON Obama: sorry, didn’t mean to dis the pres!
Mike_Summey djpeterson, I’ve never had an investor or a partner. That’s why I don’t own as much as Carleton and Donald Trump.
Mike_Summey I think it is vacation time. We only have about half as many people as last month.
Joshua Mike, up to 9 SFH and 1 4-plex now and closing another SFH next week!
Mike_Summey Charlie, when will you be able to finish the house you’re working on now?
djpeterson How do you handle flooring? How do you avoid replacing carpet with each tenant? I have started using more and more laminate, but I am open to suggestions.
Mike_Summey Joshua, that’s great. You’re well on your way to wealth.
carletonsheets Reedd, sounds like you situation is perfect for a syndication where you bring partners in for the down payment, I know Mike does not like partners (at least male ones) but it may be an answer to the proble. 30%…Whew
CHARLIE Some time next week if weather holds out
ROGER DAWSON Joshua: that’s a good mix. 4 flex for cash flow and sfh for liquidity and appreciation.
ROGER DAWSON Mike, i think carleton just got his finger back into action with that comment!
carletonsheets LOL, Roger
carletonsheets Hello GP
Mike_Summey Roger, he’s doing quite well with three fingers and a thumb.
Joshua Thanks Mike and Roger, wouldn’t been able to do it without your mentoring
Mike_Summey Hi gp
gp better late than…
CHARLIE Mike carlton got your number
reedd Thanks Carleton. I had not thought of that. Donald :o)
djpeterson What are some helpful books you have read lately: business, investing, economics, life, etc.
carletonsheets Reedd, entire course on partnerships is on my website carletonsheets.com
Mike_Summey Carleton likes partners, I don’t, but we’re still friends!
carletonsheets at no charge!
Mike_Summey Hi Genes
GeneS. Hi Mike
kim any suggestions on structuring a syndicate. I can find properties but need down payments
Mike_Summey Carleton, I almost called you to see if you wanted to join us tonight. I guess we were on the wame wavelength. Thanks for getting in with us. I know everyone appreciates it anytime you can join in.
Joshua Mike, what’s your ROI % requirement on the repairs and closing costs when you reduce your NOI when making an offer? Are you in the 12-15% range at this point in your investing career?
djpeterson Do you every buy 2 bedroom homes?
carletonsheets Kim, you saw my response ot Reedd. This is how I got started (I hate to say it) 40 years ago.
Mike_Summey Hi John IL
John IL Hello
djpeterson ever
carletonsheets But Kim, except for my finger, I don’t look a day over 45.
ROGER DAWSON DJ: ON THE SUBJECT OF BOOKS I’D LIKE A PLUG A GREAT WEBSITE. www.AbeBooks.com is an amagamation of thousands of used book sellers around the country. You can find almost any book you’d think of for $2 or $3 dollars plus $3 postage. Don’t tell my publishers that I’m pushing used books but it’s a great resource.
Mike_Summey Joshua, I look for the same ROI on repairs and closing costs that I look for on the purchase. It’s all cash any way you look at it. The rate varies depending on the current conditions and what I feel interest rates are going to do.
kim me either. trying to forget my birthday next week
reedd Thank you again Carleton. I will try your website tomorrow. Donald.
CHARLIE Djpeterson it is hard to rent two bed rooms in some areas but good in others, that would be a question for a local realtor or property manger
carletonsheets I’m August too. How old young Kim?
kim 53 next week
carletonsheets You are yourng!
Joshua Mike, understodd, but can you share a little more detail? In your opinion, what is a fair ROI?
kim good thing since I’m just starting
Mike_Summey Joshua, that’s something that is different for different people. Some ar ehappy with 7-8% now that prime is at 3.25%, but others are still looking for 12-15%. The one happy with 7-8% will find more deals that will work that the one wanting 12-15%, but the latter will make more money when he does find one.
carletonsheets Joshua, you didn’t ask me but here’s what I go by. If the property will rent for “x”, then anything I put into the property over and above what I paid for it and what it will bring, I need to get a 20-25% return on my rehab dollars,
djpeterson Mike, you mentioned interest rates. As a follow up to an earlier question, what if interest rates shoot up and you have to refi at a much higher rate? How do you account for that risk at the front end? Everyone may be wrong, but everyone is calling for higher rates down the road.
reedd Has anyone looked into adding solar power to their rental units? I have a duplex with a flat roof and am looking into it. The company I spoke to, said I would have my full investment back in 8 years. If I did it, wWould tenants care? Should I offer them a discount on the Electricity Generated?
carletonsheets I’m rehabbing one now that I know, left in the original conditon, will bring a base rent of $550 per month. Fixed up by an expenditure of $8000, I can get an additional $200 a month rent or $7200 over three years.
John IL Pardon me for butting in, but wouldn’t the return you accept be based on what you can get on other investments at the time? In other words, it’s hard to find anything paying right now, so a more modest return can be accepted in your RE investment. I’d be happy with 7 or 8 percent for ANYTHING right now. Correct?
Mike_Summey djpeterson, I get fixed payment, floating rate loans. The payment stays the same for 5 years but the breakdown of principal and interest changes as the rates fluxuate. I set the initial payment based on a 15 yr amortization at a rate 1-1.5% above the initial rate on the loan. Currently I can get financing at prime with a 4-5% floor and a 7.55 ceiling. In that case, I set the payment based on about a 5.5% rate. I hope that helps.
Joshua Mike, have you got into apts? If so, what kind and type? Opinions?
Mike_Summey reedd, don’t the tenants pay the electricity?
reedd Hi Mike: Yes the tennants pay their own electricity; but not the water.
djpeterson Yes, that is helpful.
ROGER DAWSON I don’t trust solar power yet. I see those things hanging off roofs everywhere.
Mike_Summey John, good point. That’s what I was talking about, but I didn’t want to discourage anyone who thought they could get 12-15%. Personally, I’m happy with 7-8% right now.
Mike_Summey Hi David
Mike_Summey Joshua, I have many apartment buildings. Mostly 4-20 unit buildings.
reedd I was thinking the Solar would be a profit generator, pardon the pun, because after its installation is paid for, the sale of electricity back to Ontario Hydro would be significant, and every month.
David Hi Mike
gp technically what would that loan be called mike, a 5 year ARM with 15 year amoratization? Just want to know what the banks would refer to it as.
Mike_Summey reedd, I don’t know of anyone who had made money from solar panels on their roof.
Ted On the issue of ROI, if you use some of the creative approaches that Carleton, Mike, Roger and others have written about, you might end up with an infinite ROI.
djpeterson Are there any property locations/placements you won’t buy: down a hill, up a hill, end of road, busy road, far into the neighborhood, etc.
Joshua Mike, how do you handle mgmt on those? Can you still find professional mgmt for 8-10%
ROGER DAWSON Reed, do you really have sunshne in Ontario?
reedd HI Roger:
carletonsheets I look at the crime rate in the area.
Mike_Summey gp, the type financing I use is something I developed and sold to the banks about 25 years ago. I call it a fixed payment, floating rate loan. The payment stays the same, but the amount allocated to principal and interest varies. The fixed payment allows me to be able to paln my cashflow because I know hat the payment will be.
carletonsheets I’m still getting management of 8-9%
reedd , we do; mind you not all day. Donald
ROGER DAWSON DJ: we wrote about that in our book. You have to feel comfortable walking the neighborhood during the day.
Mike_Summey djpeterson, yes I can still get good management in the 8-10% range.
Joshua Have any of you ever bought non-performing notes where you then foreclose on the apt complex and then keep it yourself?
djpeterson What is your current average time a unit is empty?
Mike_Summey djpeterson, I try to do my homework on a neighborhood before buying in it. Occasionally I buy in an area I wish I hadn’t, but not often. I rely on my property managers to tell me where to invest and where not to.
Mike_Summey Joshua, no I haven’t! I’d rather play Russian Roulette.
carletonsheets The hour has gone so quickly. I hope everyone has benefited. I have. Thanks Mike and Roger, for including me. Best to everyone!!
ROGER DAWSON Thanks for joining us Carleton!
ROGER DAWSON Good night everyone!
Mike_Summey djpeterson, that varies from area to area. Where I invest vacancies range from 5-10%.
mbroadway this is the fastest hour of the day
Ted Joshua, not sure if the laws are different in your state, but in NYS buying a non-performing note does not guarantee you can get the property at the auction. You would still need to be the highest bidder and if it’s a good deal then you can bet someone else will be there bidding.
CHARLIE Bankers,property mangers,realtors,contractors is just as important as the purchase of the house, you have to build a team
djpeterson Thanks to all! This was my first month but not my last!
Mike_Summey Thanks for joining us Carleton. Talk to you tomorrow.
Dennis good night
Mike_Summey Wow, an hour has really flown by.
mbroadway Hope everyone has a great month!!!
mbroadway good night to all
Joshua I know a guy that owns ~3000 units all done this way because he says you make more than just a straight purchase. He just bought a 97 unit complex for 800K with 5% occupancy that he will renovate and increase occupancy and rents. Had he not bought the note he would have paid a lot more
Mike_Summey Goodnight all. See you here next month.
Mike_Summey My youngest son is getting married over Labor Day weekend, so we will be moving the chat to September 13th. Mark your calendars.
reedd Hi Mike & Roger: I just wanted to say thank you for your writing WEM. It has made a real difference in my life. Donald.
Ted Joshua, i bought a non-performing note (at a discount) and the borrower cleared up the past due and has been paying ever since. I can’t really complain but I won’t likely get a chance to foreclose on it . . .
CHARLIE Talk to you tomorrow mike good night all
kim good night
Grumpy Bye!
Joshua Ted, very interesting. What kind of property if you don’t mind me asking.
Ted Joshua, that was actually a high-end SFR and I could make a killing if I were able to foreclose. But fortunately I got the note at $0.42 on the dollar so I’m doing OK even with the monthly payments.
Joshua Good for you. How did you buy the note? Online auction or something?
Ted Joshua, I run ads that say “I buy houses” and this guy who had seller financed the deal called me. He had a family problem and needed cash. I wish I could tell you I went looking for it, but sometimes things fall in your lap in this business.
Joshua Good for you. Agreed and best of luck to you

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