Chat Transcript – January 3, 2011

Posted on January 4, 2011

Roger Dawson Hi everyone. Happy New Year!
Roger Dawson Mike Summey will be joining soon I expect.
Greg Happy New Year Roger!
Doug_in_CT We need our fearless Mike Summey leader
broadway Roger, just started reading Millionaire Mindset and really enjoying that. Thanks for your stories in there.
Doug_in_CT Ya know to look at that picture, it does appear that Mike Summey has aged a bit.
Roger Dawson I’m sure that if Mike were here he’d be telling us that this is the best time for buying rental property that he’s ever seen. Even here in California we have generate cash flow with 20 % down, which we’ve never been able to do in the past.
Doug_in_CT So are you buying in SoCal Roger?
Roger Dawson I just spoke to Mike. He’ll be with us in a minute.
CHARLIE Hi everbody
CHARLIE I am mike real estate agent in anderson sc can i answer any questions
Roger Dawson Doug, my son just bought a nice little house on half an acre for $125. It would comfortably rent for $1500. Three years ago the bank loaned over 300K on it.
CHARLIE Hi mike better late than never
Doug_in_CT Yeah times have certainly changed. That is a breathtaking turn of events on that house you son bought Roger.
Mike_Summey Hi everyone! Sorry about being late. I was all engrossed in a project and let the time slip up on me.
Greg Happy New Year Mike!
Mike_Summey I was in the process of perparing several offer to be presented later in the week.
Mike_Summey Hi justin
Mike_Summey What have I missed?
justin hi
CHARLIE Hi roger happy new year
Doug_in_CT I have a feeling that the bank that made the original loan on your son’s new house Roger — the one for $300,00– took a mighty bath. But it’s all good — they probably were “too big to fail.”
Mike_Summey Thanks Roger & Charlie for the calls reminding me to get in the chat. I had been working on preparing several offers and thought it was about 7:30 Eastern
Doug_in_CT Somebody get Roger out of the Revoling Door.
Mike_Summey Hi gtvny
gtvny Hi guys
Mike_Summey Hi Doug, haven’t seen you in the chat for a while.
Roger Dawson I’m back Doug. I found myself where I couldn’t input anything.
Roger Dawson Mike, congratulations on your son Jason’s wedding on New Years Eve.
Doug_in_CT HI Mike, I have been working too hard lately. But New Years is a great time to make some resolutions.
Mike_Summey My resolution is to add at least 20 more properties this year.
cnew Could some of you pros look forward and talk about RE investing in 2011. I’m in central Texas and didn’t see the drops in value, no smoking hot deals and I see lots of rental houses available/empty. Hypothetically it should be a good time to buy low, but not sure the market will come back anytime soon to sell out if you needed to. Thanks
Doug_in_CT A great resolution Mike!
broadway Mike, so tell us more about your prediction in your email today.
Mike_Summey We closed on 6 new properties between Nov 30 and Dec 27.
gp Does anyone have any experience using hard money to buy with cash?
gtvny Mike, do you think we are close to a bottom yet in prices? I read 2 conflicting articles today.
Roger Dawson Cnew, is there exceptionally high unemployment in your part of Texas?
cnew nope
gtvny GP, cash makes no difference on short sales but does with owners with equity.
Joshua Happy New Year Mike and Roger!
Mike_Summey cnew, if you have to sell to make a profit, you are not an investor, you are a speculator and as many speculators have discovered over the last couple of years, sooner or later you will get burned. I’ve been buying properties for nearly 40 years and have never sold one.
Greg Gary Shilling writes prices may drop another 20%:
Roger Dawson Everything points to more and more people renting. Without good credit and a high down payment it’s hard for a blue collar worker to buy. That’s certain to increase rents and hold purchase prices down.
gtvny thanks greg, I saw that. I also read something from another source about ternds indicating a 2011 recovery and rates going higher, over 5%.
Mike_Summey broadway, I think the coming decade will be the best we have ever seen for rentals. All those people losing their homes and their credit will have to live somewhere. They are coming back to the rental market in droves and many have the attitude, “I’m never going to do that again.”
Ned Mike, I have modest cash reserves but enough room on HELOC to purchase a property. What is a reasonable strategy? Is it feasible to use the HELOC to purchase and then refi to get cash back out?
Greg @gtvny … Sure! … actually I should have said, “quoted” …
Doug_in_CT Mike Do you mean, “Buy another house” when they say “I’m never going to do that again?”
Mike_Summey gtvny, I don’t think we will see a bottom until the market can absorb all the inventory currently on the market. Banks are still holding thousands of properties off the market to avoid totally destroying values.
broadway Thanks Mike. I have to agree with you about the credit and ‘never doing that again’. I have a relative exactly in that situation and said exactly that! They’re renters for life now!
Roger Dawson Remember that our style of investing is different. Many investors only want to buy if they are certain that prices are going to go up. Since in our plan you never sell, we don’t need that. We want rents to go up, increasing cash flow.
gp Our best tenants are those that have had that situation.
Mike_Summey Greg, I would be more inclined to believe Shilling than the Realtors who are trying to pump up interest and telling people we are on the way up.
Greg @Mike … Yep, I agree!
Mike_Summey Ned, that is exactly what we are doing during these times. We use lines of credit to buy fro cash, make any needed repairs and then wait until the property is rented to get term loans.
gtvny I have a few leases coming up and they don’t want to sign 12 month leases, 2 renters want month to month with no increase. Do you think that is ok?
CHARLIE Everbody there are thousand of properties just sitting vacant that the bank is hold on to and they are adding to that daily
gtvny meant to say coming up for renewal.
Roger Dawson GP: You asked about hard money lenders. I would be very cautious about doing that. Their rates and terms can be onerous.
broadway Mike, when you refinance, do you bundle them in small bundles to refinance or keep them separate? I know you don’t put them all in one package for sure
KnoxTim Hello
Mike_Summey Doug, thats exactly what I’m saying. Many of our best tenants bought homes when anyone who could fog a mirror could get a loan, but then they found out that owning is more than just making the mortgage payment. These are the people who have been habitual renters and great tenants. Now that they are losing those homes and ruining their credit, they are coming back to the rental market with a resolve to stick to being good tenants rather than go theough the problems they have just endured.
Mike_Summey Hi repteam
Joshua Mike, can you share what your strategy is to acquire the 20 properties in 2011? I bought 4 in 2010 (my highest year!), but certainly kept me busy
repteam Hi Mike!
Mike_Summey gtvny, we never allow tenants to go month-to-month without an increase. If we are willing to hold the rate, we will only allow them to do that with a new lease.
Ned If I’ve purchased with credit line and now approach lender for loan, will I be able to recoup all my outlay, or just a certain percentage of purchase price? or is that going to be dependent upon an appraisal?
Mike_Summey Hi KnoxTim
KnoxTim Hey Mike
Roger Dawson I’ve always thought that leases protect the tenant more than they do the landlord.
Joshua Ned, most lenders will loan up as high as 80% LTV of fixed up, appraised value after you have it leased
Mike_Summey Joshua, the number of purchases you make depends on your situation. You buying 4 homes in a year may be a biger accomplishment for you than me buying 20 with all I own. This is a slow and steady growth process. The more you own, the easier it is to add additional properties. It works like vacancies. If you have two properties and on is vacant you are 50% vacant, but if you own 100 and 1 is vacant than it is no big deal, you are only 1% vacant.
Joshua Mike, amen to that. I just keep making offer after offer…I probably get 1 acceptance for every 100!
Greg @Joshua … Are you using Mike’s Offer Generator?
Mike_Summey Ned, it will be more dependant on what you paid than anything else. If you bought it for 50% of what it will appraise for you may be able to borrow more than what you have in it, but if you paid 95% of appraised value, you will be har pressed to get more than about 70% of the appraised value. That’s why the Offer Generator computer program is so important. It keeps your from paying too much if you follow it’s recommendations.
Doug_in_CT Mike I would like to see a reality Television show where you took some average American people and teach them about the Weekend Millioniare Methods and then we get to see where they are after a year or so. What do you think?
Mike_Summey Joshua, if you only get 1 out of 100, that one will make you money, but if you buy 10 out of 100 and each one has a small negative cash flow, it can kill you.
Mike_Summey Hi Zert
Zert Happy New Year
CHARLIE Doug the process works i have been working with mike for over a year and have sene 25 properties bought fixed up and rented
cnew As a newby, I volunteer for the TV show.
repteam Mike….what is your pronosis for NC real estate in the more major urban areas? Asheville, Charlotte, Raleigh, Fayettevile. Any thoughts?
Mike_Summey Doug, sounds great…want to fund it?
Doug_in_CT No, but I will shop it around for you.
Joshua Greg, I have actually been using Carleton Sheets’ program for years, but my wife just got me the Offer Generator for Christmas! I now need to convert over and hopefully will save me some time.
Mike_Summey repteam, if you use the Offer Generator to prepare your offers the percent you get accepted will be the best indicator of whether or not the market is still too overheated.
Zert Mike, just wanted to log in and say thank you for the support over the past few years. I don’t get the opportunity to log into the chats much but I always read the transcript
CHARLIE Joshua with the offer generator once you have done the inspection you can make 10 offers in 30 min or less with this program
repteam And this can be for anyone to reply to….But in other words, won’t there be an even bigger need for rental property….or are there more people who cannot sell trying to rent their properties and thus there will be more competition than in 2010?
Mike_Summey Joshua, Carleton loves the Offer Generator. It saves him a great deal of time making offers.
Joshua Mike, looking forward to it!
Mike_Summey repteam, both scenarios are probably correct. In some areas people are renting at hugely discounted rates just trying to hang on until the market turns. That’s why I said earlier, until the market can absorb all the unsold inventory, we are goning to continue to be in unsettled times. The conditions vary from market to market.
gp in our neighborhood, most houses that were for sale are now for rent. However that is also a good opportunity to make offers.
Mike_Summey Everyone, if you are using the Offer Generator, be sure to print copies of the “Inspection Form” on the website and use it when inspecting properties. By estimating the cost of repairs you find doing the inspection, it gives you the number to plug into the Offer Generator for repairs when calculating the offer.
Roger Dawson This is the strangest recession I’ve ever seen. We have 12% unemployment in California but the malls and the resteraunts are filled with people spending money.
broadway Roger, that’s credit card money they’re eating there
Mike_Summey gp, many of those people who are now offering their properties for rent are desperate to sell. Just make them an offer that will work for you and let them decide whether or not they want to continue struggling to make the payments or just let the property go and get on with their lives.
Joshua Mike, I’m still submitting offers on short sales as well (however most I do are REOs though), because I don’t think there’s anything to lose (if seller accepts, all you do is wait until bank approves or not). I think you said you don’t mess with these, only REO. What’s to lose with short sales–only time?
repteam I agree Mike. For instance here in Pinehurst, the under $1,500/month rental market is very strong because of low supply. In other areas where jobs have been hit hard (like any area where manufacturing has been killed), values are way down as are the renters. People just move away to where jobs are.
gp yes, sellers forced to lease do not neccessarily desire to be landlords. They have no choice.
Mike_Summey Joshua, I didn’t say don’t make short sale offers, I said your time may be better spent on other offers because the short sales take so much time and more often than not they aren’t successful.
gtvny Joshua same here in Tampa, there are soo many short sales, it’s hard to find non short sales!
CHARLIE Joshua short sales could have title issues that are not found to after you purchase then you are sunk, where reo the title is clean
Mike_Summey Good point Charlie
gtvny Mike, doesn’t Title Insurance cover that?
repteam Face it….the big banks are not at all friendly to investors on short sales….especially flips.
Zert Doug_in_CT how have things been with you in Conn ? are you seeing any changes ?
Mike_Summey Everyone, I’ve had several banks offer to sell me their notes at big discounts. DON’T DO IT! There are so many problems you can inherit that it’s not worth the risk. Let them foreclose and clean up the title then buy it from them.
Joshua Charlie, if there’s title issues that the title company doesn’t find before closing, that’s why there’s title insurance.
Mike_Summey repteam, just remember, flippers are not investors, they are speculators.
gp title issues.. meaning 2nds and 3rds?
broadway Mike, AMEN
CHARLIE The title insurance only cover the purchase price in most cases anything over that is your loss
Doug_in_CT Hi Zert — The value of the properties have taken a beating like everywhere else but I have notice the rental market improve. I used to spend a lot of money advertizing vacancies in the local papers. Now I just put up a sign in the yard and my phone rings non-stop.
broadway I can attest to title issues and they are not at all fun. It’s expensive, your money is tied up and you don’t get anything out of it while your fighting.
Joshua Mike, please tell us more about issues with buying notes. I’ve become aware of some opportunities as well. What are your concerns? Has your attorney looked at the note paperwork?
CHARLIE Joshua we have also had the banks say the title is clean when the property is a reo and our closing attorney has found problems, always use your attorney not the banks
broadway Mike is 100% right!!! Don’t buy notes
Mike_Summey Everyone, Charlie finds properties for me and does a lot of the maintenance and upfits to the properties I buy. He has seen first had how I operate and how I do exactly what I recommend each of you do. I use the inspection form and the Offer Generator on every transaction. In fact Charlie is getting pretty good at it himself. He is buying properties too.
gtvny Charlie or Mike, can you give us an example of a Title issue you have dealt with that Title insurance does not cover?
Zert Doug , everything seems to be about the same here, no major swings on values, however I have noticed rent rates increasing. Proper Tenant selection is always a challange everywhere I would imagine
Doug_in_CT Zert, and that was in upstate NY?
Zert yes
Roger Dawson Remember that title insurance does not include a physical inspection of the property. If a neighbor claimed that your building encroached on their property, you would not be covered.
gtvny ok good one Roger. Thanks.
Mike_Summey Joshua, when you buy a note, especially a note that is in default, you only option is to foreclose and take the property back. Foreclosure takes time and money and there’s not guarantee that the person you foreclose on won’t destroy the property before they move out. Charlie and I looked at a property where the owner had taken everything out, the kitchin appliances, cabinets, all bathroom fixtures, lights and even the electrical plucg, switches and main electrical panel.
CHARLIE Joshua a avg. Property can cost you around 10k to foreclose on it
Mike_Summey gtvny, I always get a new survey on every property I purchase. That way the title company will insure the purchase without making an exception for what a survey might reveal. Most investors think they are saving money by not getting a new survey…big mistake. It only takes one bad deal to wipe out the profit from several good ones.
Mike_Summey gtvny, title insurance only insures the dirt, not the structure. If the structure is not on the dirt and you didn’t get a survey…too bad!
repteam Great advice on the survey Mike. My dad’s detached garage DID actually lie on an adjoining neighbor’s lot after that neighbor split his lot; the sale of the split lot caught that…and the survety was what did it. It ended-up being a hassle for sure.
CHARLIE Mike lets go buy 5 house this month
Penny goodnight all.. thanks for all great info.
Mike_Summey Charlie, you know we can do it, you also know that I only buy at the rate the properties can be put into service. Get the property managers to rent them and we’ll buy 10 next month.
Mike_Summey justin, where are you from?
CHARLIE Mike i do my best to kept property mangers on there toes
Mike_Summey Charlie, I will be making offers on 3 bank owned propertie sin NC tomorrow. We’ll get to yours later in the week or next week.
Joshua Mike, Charlie, thanks. I am possibly interested in non-performing notes in the small apts, but not SFH. Notes come available from time to time at 25-30 cents on the dollar. Buying a note for $45,000 for a 15 unit complex that needs another $50-$60K in rehab and has 5-10% occupancy anyway, spending even another $40-$45K to foreclose still seems like a solid deal (obviously assuming cash flow checks out).
repteam Mike…can I ask what areas do you buy in right now?
Mike_Summey repteam, NC, SC & AL
Mike_Summey Joshua, just be careful. Remember if a deal looks too good to be true, it probably is.
Roger Dawson Good night everyone. Good investing!
gp Happy New Year all.
Joshua Mike, do you get the survey at your first closing when you buy it cash, or do you do it when you cash out refinance closing with your bank a couple months later?
broadway Mike, and all, thanks for the chat tonight. Hope everyone has a very successful 2011. Talk to you next month!!
Mike_Summey Wow, it is after 9:00 my time. I’ve got a ball game to watch. Goodnight all. See you here next month and be sure to buy something between now and then.
Doug_in_CT Happy New Year! Thanks Mike.
CHARLIE Joshua the survey is done on the first cash closing
Mike_Summey Joshua, I get the survey when I first purchase it.
Mike_Summey Goodnight all! See you next month.
Joshua Thanks Mike and Charlie, Happy New Year!
locktofer Is the chat still going?
wild billy Hello

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