Chat Transcript – March 7, 2011

Posted on March 8, 2011

txfirefighter how are yall this evening
GP good so far. How’s everything?
txfirefighter going great thanks
CHARLIE Hey everbody
txfirefighter HI
Roger Dawson Good evening everyone
RonW Hi
broadway Hello Charlie and Roger. Hope everyone has had a great Monday
txfirefighter good evening
CHARLIE Hey everybody mike will be with us shortly he is having computer problems
CHARLIE Hey roger dawson
CHARLIE Hey broadway
CHARLIE HEY GREG
Greg Hi charlie!
Roger Dawson Interesting article in the LA times this morning about Stockton CA. Forbes named it the most miserable city in America. Big part of the problem is the highest foreclosures in the nation. Property prices have dropped to one third of their high.

CHARLIE Hey denise & everybody else
Denise Hi
CHARLIE Hey jason did you have good trip to alabama
Jason Great trip…hello to all
Greg Roger, thanks for the note on Stockton, CA.
Roger Dawson Obviously this puts a lot of homeowners into the rental category. Rents stay high and investors can afford to buy the propeties and rent with positive cash flow.
CHARLIE Jason how is house coming
broadway Roger, have you heard the talk about doing away with 30 year mortgages? I’m wondering if you think that would have a significant positive impact on rentals?
Jason looks different every day…ready to have the extra space to say the least
Greg @Roger. In Boston, the rents are stable or going up …
CHARLIE Jason you will need it soon
Joshua Roger, very interesting. What do 3/2/2 1500 sf homes rent for more or less in that area?
Jason indeed…evonshire coming along?
hawkeye775 Good evening everyone
CHARLIE Evonshire is starting top come around, has 5 to 6 weeks to go if help shows up
txfirefighter I am the new guy in here I guess. I just finished the fourth book in the weekend miliionaire series and jst wanted to say thank you for putting out such good books.Very interesting.
Roger Dawson Broadway: I hadn’t heard of that but in Canada nearly all mortgages are due in seven years. People are just used to refinancing every 7 years. Mike and I have always advocated paying loans down in 15 years if you can. You save a fortune in interest which translates into cash flow.
Jason very good
CHARLIE HEY MIKE
hawkeye775 Hi Mike
Jason He has arrived
Roger Dawson Thanks txfirefighter. Appreciate the kind words.
Mike_Summey Well, I finally made it. Had to go to another computer.
Greg Mike, stay away from computers, they’re a fad … 😀
Mike_Summey I think I tried to logon while my computer was doing a security update in the backgrund and the two programs clashed.
CHARLIE Txfirefighter what kind of question you have after reading the books
txfirefighter you are welcome roger
RonW Mike & Roger, Any advice on the best way to start off with limited funds? I would like to grow as fast as possible.
Mike_Summey Hi everyone. Sorry I wasn’t here to welcome you as you entered the chat.
txfirefighter Charlie the first question would be when is the next book coming out? haha
Mike_Summey Ron, basic rule # 1 “Limited funds, limited growth.”
CHARLIE Tere is alot of good information the the 4 books you read, ready to apply what you learned
RonW Mike, Can I buy a house and borrow against it’s equity to get the next house?
Mike_Summey Ron, in today’s times, you are going to have to have some money to invest, but don’t let that deter you. I had virtually no money when I started. I just took it slowly, bought one house the first year, two the second year and gradually built up my portfolio to the point I can now add properties much faster. Be patient.
txfirefighter I bought my first rental this year with $200 monthly positive cash flow. I am a full time firefighter so dont have a ton of money to invest but willing to learn and put everything I have into it but with still having a cash reserve.
Roger Dawson I’ve got to admire firefighters. For some reason, I’ve never had an urge to run into a burning building.
Mike_Summey Ron, if you can get enough to buy one house for cash, you can often get it rented then put a loan on it for enough to buy the next house for cash. As for borrowing against the 10-20% you put down on a purchase, that’s pretty much history.
Mike_Summey Denise, where are you from?
Denise Menifee, CA
Mike_Summey Denise, Jason’s wife’s name is Denise so it caught my eye.
Mike_Summey The Jason in the chat is my son Jason.
Mike_Summey I thought it might be his wife looking in on him.
RonW Mke, If the house is appraised at $100,000 and I buy it for $80,000 with 10-20% down, can I borrow against the $20,000 equity?
Joshua Mike, do you buy home warranties for your rentals? I have had a few over the past year and it has worked quite nicely. Cost $300/yr with a $60 service call usually paid by tenant. I think it saved me on total repair costs with the mgmt co. Your thoughts?
txfirefighter thanks but I love my job. I admire people like you, telling your story so people like me can learn.
Mike_Summey Ron, you probably will not be able to borrow against that equity. The banks are simply not loaning 100% anymore.
Mike_Summey Joshua, I’ve never bought a home warranty so I can’t really advise you.
RonW Mike, So the best way for me to get started is finding a seller that will carry back the financing?
Roger Dawson I found myself unable to type a message so I had to log out and in again.
Greg Mike, maybe Ron should start w/ a quad, and live in one of the units? I think one can still put down on 3.5% w/ good credit?
Greg only 3.5%
Mike_Summey I’m back to my computer now. It finally started working right.
RonW Greg, Just bought a house and moved into it 1 year ago.
Mike_Summey Greg, who is loaning on investment properties with 3.5% down. I haven’t heard that.
txfirefighter Greg, how can you get into a quad with only 3.5%
hawkeye775 I think 3.5% is only if you fall in the USDA or FHA loans.
RonW FHA
Roger Dawson Mike: Are property managers good leads on rentals for sale? Do they have owners who don’t want to be landlords any more?
hawkeye775 And it is for personal not investment.
Greg Mike, I heard Fannie still has a 3.5% down program if it’s owner occupied.
Mike_Summey Roger, I’ve bought several properties that my managers brought to my attention. I have even bought a few from the managers themselves.
Mike_Summey Greg, I’m not a good source of information of Fannie or Freddie loans. I haven’t been able to qualify for one of them in over 30 years. Once you own a certain number of properties you don’t qualify for their loans which will be sold on the secondary market.
Joshua Mike, home warranty may be something you want to consider. $300 a year for repair costs or spending say $600 to $1200 (5-10%) per year from your repair reserve.
txfirefighter Is assuming mortgages a good way to get started?
Greg Mike, thanks for the commentary. Just thinking of ways to get people financed out of the chute …
Mike_Summey Joshua, but that assumes you will spend $600 – $1200 on things covered by the home warranty. It doesn’t cover things like paint, carpet, cleaning, etc., which is where most of the maintenance expense falls.
hawkeye775 I recently purchased two duplexes without much money out of pocket.
Mike_Summey txfirefighter, you can still assume mortgages, but you must qualify to do so. It’s not like it used to be where you could just assume the loan and start making the payments.
Roger Dawson Mike: isn’t it amazing that they won’t give you a loan because you’re a rich investor but they’ll let Wall Street package crap loans and resell them.
hawkeye775 I used hard money to purchase the properties, and refinanced within 3 months. The appraised value was much greater than the purchase price.
Greg hawkeye, interesting …
Mike_Summey Roger, that is so true. In 40+ years I’ve never received a call from a bank about a late payment, yet I can’t qualify for Fannie & Freddie’s loans.
hawkeye775 The short term interest wasn’t cheap, however.
Denise Hawkeye what was the terms of the hardmoney ?
hawkeye775 4% up front, and 1% per month.
hawkeye775 I’d have been better off finding a private lender that would be willing to take 6 or 7% APR. But was in a hurry to close.
Mike_Summey Hawkeye, that’s one way of doing it. Another is to find someone with money in bank CDs and offer them 4-6-8% for the use of their money to buy properties for cash and then when the properties are rented and cash is coming in, go get a bank loan and pay back the person who’s money you used. Many people have family members with money that they never think about asking.
Joshua Mike, good point. Seems that on most properties one would have over $300/yr expense on things like plumbing, appliances, electrical, HVAC, etc which are covered however. At least I have…your properties have less?
hawkeye775 The duplexes have put a bit of a crunch on me. Had to kick 3/4 tenants out, and do a lot of the delayed maintenance up front, but it is working out. More painful than I would have liked in the short term.
Greg Mike, great idea … “friends & family” financing!
Mike_Summey Joshua, I have not found that to be the case on my properties. Remember you have to pay the cost of the home warranty on all your houses and you may only have a large expense on a few of them.
Roger Dawson Joshua: I’m surprised to hear that plumbing and electricity are covered by home warranties.
Mike_Summey Greg,
hawkeye775 I probably won’t be purchasing again for a year unless I can find private money lenders (which I plan on pursuing) or find some kind of seller financing/assumable loan.
Mike_Summey Greg, in the past I have used family money to purchase many homes, paid my family members a nice return, (much more than they were getting at the bank) and still made a nice profit for me.
Greg Mike, I never thought seriously about family money, but will now! Thx …
Mike_Summey One way to buy with little or no money down is to find a seller with a small or no mortgage, take out a 1st mortgage for 25-50% and then get seller financing for the balance.
Joshua Roger, yeah I’ve had an electrical panel problem they fixed as well as a clogged drain, however Mike makes a good point, maybe I’ve just been lucky by having these on a few olders homes I have
Mike_Summey The seller gets money at the closing to pay off the small mortgage or just money to put in his pocket, then get a monthly income stream.
Mike_Summey Joshua, I don’t buy older homes. I try to stay with ones built in the last 15-20 years.
Mike_Summey I’ve bought about 25 homes in the past couple of years using Charlie as my buyer’s agent and I don’t think any of them have been over 15 years old. Most have been 5 years or less.
RonW Mike, How much operating capital should I have to get going with my first purchase?
Mike_Summey Ron, each person has their own comfort level. I try to keep at least 6 months of my total obligations to banks in deposit accounts with the banks I borrow from. It took several years to get to that point, but I used it as a goad from the time I started. It makes a huge difference to the banks.
Mike_Summey goal
Mike_Summey Somebody ask Roger & Jason & Charlie a question or two. You are wearing my fingers out.
Greg Hey Roger, I just bought the latest copy of your negotiating book after someone I highly respect said it was the best book of its kind … 🙂
Joshua Mike, yeah, I wish I had that luxury. Very difficult to get homes 1990 and newer that break even in Houston (especially with 15 yr amortizations!), so I’ve resorted to homes built in the 80’s where you can make the numbers work
Roger Dawson Wow, Greg. Thanks! You made my day!
Mike_Summey Joshua, have you made offers on the newer homes for what you want to pay or are you just assuming you can’t get a deal on them. Ask Charlie about some of the offers I make.
Mike_Summey Hi Richard
txfirefighter Joshua I am about 45 minutes from Austin and I feel your pain. The austin area is abetter market but it is so far to check on properties.
Greg Roger, kudos where kudos is due!
Jason The deals are definitely out there it may just take some patience locating them on your terms
Joshua Charlie, go ahead. Yeah Mike, I still make offers on them, but have never got one after 200-300, so not I tend to not focus on them unless I can get decently close to the REO asking price
txfirefighter Charlie how does one go about finding a agent that is willing to ask lower prices and not be afraid to keep doing it.
Joshua that is 200-300 offers
CHARLIE Joshua you have to make 10 to 15 offers and you may get one or two of them accepted
Mike_Summey Joshua, it may be the way you are making the offers. Are they offers where you are asking the lender to finance them?
CHARLIE Txfirefighter you have to call several agents and intrview them and let them no what you are doing up front and see if they are willing to work with you. That is how me and mike atarted
Mike_Summey Joshua, I’ve made offers that were less than 50% of the asking price on REO properties and gotten some of them accepted.
Joshua Mike, Charlie, no, all cash. Again, I have made hundreds of offers on those newer homes and never once accepted. While on the homes in the 80’s I can maybe get 1 out of every 40 or 50 offers.
txfirefighter charlie what i found is the will do it a couple of times and then say that it will never work in todays market…guess I need to keep looking and just find the right one
txfirefighter Mike wow 50% off REO thats impressive
CHARLIE Joshua are you tracking the properties till they sell that you are making offers on. We have bought several properties 6 months latter
Mike_Summey Charlie, tell everyone how many times we have been rejected only to have the banks come back later and accept much less than our original offer.
Mike_Summey Everyone, I have a policy and Charlie can confirm this. The first offer I make is the best one the bank is going to get. Each subsequent offer is for less.
Roger Dawson Joshua: it’s great that you’re making so many offers. That’s the way to do it. Are you using our Offer Generator software to crank them out?
Mike_Summey Good point Roger.
CHARLIE Mike this has happended several times and one a couple of occasions the banks called us and asked if we were still interested in there properties.
Mike_Summey Hi Wild Billy
txfirefighter Mike is that only on REOS that your first offer is the best or is that on all offers?
wild billy hi
Joshua Charlie, yes, my buyer’s agent keeps track of them all and follows up. Even after properties have been on the market for 180 to 300 days, the bank still won’t accept our original offer. Guess they do things a little differently in TX than in AL and NC.
Mike_Summey txfirefighter, that is on all offers. The longer a property sits on the market the less I am going to offer.
txfirefighter Mike thanks for info
Roger Dawson Mike, reducing your offers like that is the way that Donald Trump bought the Mar-A-Largo Mansion is Palm Beach. His first offer was $25 million and he paid $10 million.
Mike_Summey Joshua, Roger asked if you are using our Offer Generator program. If you are, you should be able to easily show a bank why you can only pay what your are offering. I’ve actually asked bankers to show me how I can pay more than I offer and not put myself in the same position the person was in that they foreclosed on.
Joshua Roger, Mike hasn’t gotten the OG to work on my Windows 7 yet! He knows the story as I’m waiting for him to upgrade so I can use it. I still do it all with Carleton’s software. Sorry guys! Just let me know when you have it ready!
Mike_Summey Roger, over time, banks are beginning to understand that my first offer is the best they are going to do. When they know that they have to make the decision to take the bird in the hand or hope for two in the bush.
RonW Will OG eventually work for Windows 7 64bit?
Roger Dawson I’ve been telling Mike for years that he needs to get a Mac.
Mike_Summey We have encountered some problems with loading the program on Windows 7, that’s why we have the notice on the website in the onlie store.
Mike_Summey online
Roger Dawson You do mean on line store, don’t you!
Joshua Mike, these aren’t lcoal bank listings. these are the major bank REOs,,BOA, Chase, Wells, Fannie, etc. They hire asset mgrs to dispose of them. No one ever speaks with a buyer about the “logic” behind my offers.
Mike_Summey Ron, I am talking with our programmer to try to determine if it can be a simple fix or if the program is going to have to be completely rewritten.
txfirefighter Roger, can you pay and download the og off the website or does it come only on cd?
Mike_Summey txfirefighter, it is only available on CD. Works great on everything except Windows 7.
Roger Dawson I’m off to Warsaw, Poland for a speaking engagement next week, but I’ll be back in time for the April chat. Goodnight everyone!
Joshua Mike, question–do you see any problems with me getting a survey during my cash out refinance instead of at the cash purchase?
broadway Mike quick question, do you get a survey on each property you purchase even if the property is in a platted neighborhood?
Mike_Summey Joshua, the survey is to protect you, not the bank. What if you make the purchase and then when you go to get financing you find out the house is 4′ on the neighbors property or other such problem? You have the problem and the bank won’t loan you the money.
Jason broadway we do get surveys on all properties regardless
Joshua Mike, Jason, do you take mileage and gasoline deductions on your taxes for any time spent doing inspections, meeting with mgmt co, etc?
broadway Jason, thanks!! 🙂
Jason Joshua we deduct everything we can when conducting business…just make sure it can be documented that it is proerty related \
Joshua Mike, great point on the survey. Closing one this Thurs…will get it done before then!
Mike_Summey Everyone, on the matter of surveys, we always get a survey so we can get title insurance without an exception to what a survey might reveal.
Mike_Summey I’ll stay another 5 minutes since I was later getting here. Does anyone have any last minute questions?
RonW Hey Uncle Mike, What was it you said about borrowing money from family members?:D
Joshua Mike, I’ve bombarded you tonight! Thanks for all you do for all of us
txfirefighter Mike thank you for your time and answering all my questions and thanks for everyone else for putting up with the new guy here.
Jason come back!
Mike_Summey Ron, I made a deal with my banks many years ago. I tole them if they would stay out of my business, I’d stay out of theirs. 😀
broadway I agree with Joshua, after reading your books, you have tons offered to all of us.
broadway LOL
RonW Thanks.
wild billy Great Job Mike, glad I tuned in.
Joshua Mike, since you’e sticking around, question about townhomes (I know you’re opposed to condos). If they share the same wall, no HOA, has the land (albeit small ~0.03 acres)–do you offer on these?
broadway Hope everyone has a great evening. Hope to see you all next month!!
Mike_Summey Everyone, this is your opportunity to get answers straight from Roger and me and several others and it doesn’t cost you a penny. Tell you firends about our chats and invite them to get involved too…sepecially any who might have some money they want to make a better return on than what they are getting at the bank.
CHARLIE Jason are you coming on friday
Greg Thx Mike, see you next month!
hawkeye775 Goodnight all
txfirefighter good night thanks everyone
Jason Not sure yet…with Denise as pregnant as she is and delivery coming just any day probably not…plus Mom and Dad are going on to Columbia to see Matt
Mike_Summey Joshua, I just bought 5 townhomes last November and will probably buy 9 more over the next 3-4 months, but they are in an unusual situation. Ther is a total of 15 in the complex and I will own 14 of them and there is no HOA. This is a rare situation.
Mike_Summey Well, goodnight everyone. I’ll see you here next month. Until then…HAPPY INVESTING!!!
RonW Good night. Thank you all for the insight.
Jason Goodnight…good month!! See you next time\
CHARLIE Goodnight everybody

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