Chat Transcript – July 11, 2011

Posted on July 12, 2011

colberttigers I’m a new investor looking for my first rental property. Other that riding around (which I am covering), what is the best way to find owner financed property?
rePDXagent Evening ya’ll
CHARLIE Hey everybody
markl hello all
rePDXagent How was your 4th of July Celebration, Roger?
Roger Dawson Hey Charlie: where is Mike tonight
Mike_Summey Hi everyone. Sorry I’m late.
CHARLIE Roger late as usual
Mike_Summey I was outside and let the time slip up on me.
Jason Hey All. New to this business. Love listening but starting will be interesting.
Mike_Summey Hi Broadway
Broadway Hello Mike, Roger and all!!!
Mike_Summey Jaso, welcome. My son Jason may join us later too.
colberttigers hi everyone
Mike_Summey Hi Trav
rgrimsley Hello Roger and Mike. If you are making offers on short sales, do you put a time limit on your offer?
Mike_Summey Hi Greg
Trav Hey Mike
Greg Hi Mike!
Broadway Mike, quick question on Offer Generator….will there be a patch for those who have purchased OG previously for the Windows 7 fix?
Mike_Summey rgrimsley, you can put a time limit on the offers if you like, but my experience is that the banks will take however long they want. The only purpose I’ve found a time limit serves is to take you off the hook on the offer after a reasonable time.
Mike_Summey Hi kskbuyers
markl Is anyone noticing any increase of foreclosures coming on the market?
Trav Mike, do you invest in modulars homes
rgrimsley Got it, thanks.
Mike_Summey Broadway, right now I would have to say no. The condition of real estate market in most people’s mind is so bad that I don’t see the demand being there right now to put more effort into a fix. I’m sure that will change when the climate dictates.
Roger Dawson Fourth of Jouly was great. we spend it at our second home in Lake Arrowhead, which is in the mountains abouve San Bernadino
Broadway Ok, thanks Mike
Mike_Summey mark, Charlie would be a good one to answer that. He does a lot of the clean up and prep work for the banks.
Mike_Summey Trav, I do have a few modular homes…ones built on permanent foundations.
colberttigers Mike, I’m a new investor looking for my first rental property. Other that riding around (which I have been doing), what is the best way to find owner financed property?
Jason I’ve heard of crazy foreclosure prices but can’t seem to find those. Is there a “best” “better” type of website you look at or are you trolling the newspaper court foreclosure listings?
Trav Ok, so they do appreciate
Mike_Summey colbert, why are you only looking for owner financed properties?
CHARLIE Mark the banks are turning loose of properties at a slow pace in my opion not to flood the market
Mike_Summey Trav, yes they do, just not as much as stick built homes.
rgrimsley markl – I think the forclosure flow depends on the state and the lender. Overall, I read forclosures (transactions) are down from 2010 but we may get another wave in Q4. In PA, Wells Fargo seems to have a steady stream coming on the market but it may vary significantly from one lender to the next.
rePDXagent Mike – do you have a set percentage below the purchase price you go buy when making your first offer on a property? Do they vary from SS to Foreclosure to straight sale?
Roger Dawson Has anybody had a good experience with short sales? My son bought one but didn’t know until the day before it closed whether the bank would accept the offer. Most people tell me that it’s not worth the frustration.
colberttigers I figured that would be my best route since I don’t have alot of money for a down payment, closing costs, etc.
Mike_Summey repdx, I don’t care what the asking price of a property is. I use the Offer Generator to calculate what the property is worth to me as an investment and that’s where I make my offers.
Mike_Summey Hi wai chunng
CHARLIE Colberttigers a good real estate agent or craiglist has owner finance home listed some times
wai chunng hello Mr. Summey
markl Thanks for foreclosure opinions, sure wish banks would “flood” the market.
rePDXagent great
Greg Roger, like you, I have heard that short sales are not exactly a party …
Mike_Summey colbert, have you ever thought of using a small bank loan coupled with a seller second mortgage.
Mike_Summey Hi Boston
Boston1 Hi Mike, sorry I am late!
colberttigers Mike, no I don’t know much about that.
markl mike, do you think prices are stabilizing or continuing downward?
kskbuyers Mike, we need to buy our own home to live in before buying more rental properties. We have looked at (been in) over 100 homes to learn our target market. How do u balance emotion/wants with bargains for a personal purchase?
Mike_Summey Jason, sorry I missed your question earlier. I use realtors to find the foreclosures for me. They have access to all the listings and can tell which ones are bank owned.
CHARLIE Roger short sales are a hard sale and take long time if they even close
Mike_Summey colbert, all the details are in our Secrets to Investing in Real Estate book.
Mike_Summey Hi reggie.
reggiel hello
Trav Mike, I don’t have a whole lot of experience in inspecting properties, how should I go about the inspectors fee? Make the sellers pay for it and agree to something else when I’m sure I’m not getting a bad apple?
colberttigers Thanks Mike
Mike_Summey Trav, have you looked at the inspection form on this website?
Jason Thanks. Makes sense. I should trust those who are in the market.
Broadway Roger, I sold a short sale as an agent a couple of months ago and it went pretty smooth. Only thing the bank did was push the closing date very short. Fortunately, I had the buyers all set for a quick close.
Roger Dawson Marki: Remember that the Weekend Millionaire method is a different way of investing. We don’t care much about the price of the property or whether it will go up or down in value. We care about how quickly the cash flow will pay off the mortgage.
Trav yes
Boston1 Mike: I was thinking about buying a condo for my personal residence, however I am considering buying a 2-4 family and living in 1 unit while renting out the rest. Are there any disadvantages to this approach?
rgrimsley Jason – i have found a lot of bank REO (forclosures) by checking individual bank web sites and searching for bank REO (Real Estate Owned). Then, if you find a property in the area you are targeting, you can call that agent as a place to start. Then, ask them to email you a link of any other 3rd party owned properties in your target area. Once you get to know that broker, you will know if they are going to help you find properties or if you need to start the process over again.
Mike_Summey Trav, you can use that firm to identify most problems you might encounter, but until you get some experience, you might need help estimating the repair costs.
Trav Ok great, any contractors you suggest in the asheville area?
Mike_Summey Boston, many people have done this and been successful. My caution would be getting too close to the tenants and allowing them to transfer their problems to you.
Roger Dawson Boston: if you live in one of the four units you can only depreciate 75% of the purchase price.
Mike_Summey Charlie, why don’t you tell Jason the advantages of finding a good agent to work with.
Mike_Summey Hi Andrew
Greg Should Boston1 get a property mgr, even though he lives in one of the units … to avoid tenant headaches?
Boston1 Thanks Mike. I could always say that “an uncle” or management co owns it. Basically using Roger’s higher authority gambit?0
Mike_Summey Trav, we have some good ones here, but I’d rather not make a recommendation as I know too many of them. Bayshore Company is a property management firm I use and they can give you some names.
Trav Thanks
Andrew in Detroit Hi everyone…I’m curious – does anyone here use a standard banking ACH Program for rent collection within their portfolio? (I’m a self manager of about 7 SFH’s and a 29 Unit in the suburbs of Metro Detroit).
Roger Dawson Boston: that’s a good approach Boston. Tenants always assume that the owner is rich.
markl roger, thanks. have read and understand the method but was just wondering if folks are still noticing price declines to make the cash flows easier. thanks
CHARLIE Jason if you can find a good agent to work with you it is a win win for you and the agent. You can get properties and the agent gets paid. This works for both parties. Just let the agent know your intent up front and what you can do
Boston1 Roger: Thats 75% depreciation is acceptable to me — hopefully the tax advantages will be there as well
Mike_Summey Greg & Boston, if it were me, I’d use a property manager and swear them to secrecy about who owns the property. You don’t want your neighbors knocking on your door at 2:00 AM wanting you to unglog a toilet.
Greg Thanks Mike
Boston1 Good point, Mike!
Mike_Summey HI Penny
Trav Mike have you bought any properties in the asheville area lately
Roger Dawson Wecome back Penny
rgrimsley Mike, I know you indicated you own rentals in Soth Carolina yet after getting into the market there I was astounded to learn of the ultra high tax rate for non-owner occupied properties. I know you just have to plug the higher taxes into the Offer Generator but when your taxes are $3,000/yr instead of $800 on a SFR property, doesn’t the SC tax structure put you behind the 8-ball before you get started?
Penny Hi Mike and Roger, everyone.
Mike_Summey Trav, no I haven’t. I think Asheville is still overpriced and has a long way to come down before it reaches reality. Just my opinion!!
Trav ya me to, do you think asheville will ever come to reality?
Jason Agents can help me I’m sure but I never have approached any for this type of deal. Seems so many want to just show high end property for the commission.
Andrew in Detroit Mike – what purchase price/Taxable value are the properties with 3K in taxes?
Mike_Summey rgrimsley, the taxes are high, but I simply use them and calculate the offers accordingly. If the offers are accepted, fine! If not, I just move on to the next one. So far we’ve bout about 40 properties in SC over the last two years.
Andrew in Detroit In Michigan we have very high non-homestead taxes (my avg. is about 65 mills on the SEV) which runs about 2500-3500/year in taxes BUT, I’m also buying at $40K on the acquisition cost and renting for between $950-$1050/Month so it balances out…
rgrimsley Nice!
Andrew in Detroit Mike – what purchase price point/range are you paying for a standard 3/2/2, etc.?
CHARLIE Jason there are agents in most areas that deal mostly with foreclousers ask around and most agents can tell you who they are. Or if you no a house is a foreclousere find the listing agent
Broadway Jason, in this area, some of the lower end properties are offering bonuses to agents to attract more activity especially when the properties are below $40k. Commissions just don’t work for the lower priced properties.
Mike_Summey Trav, my experience has shown Asheville to go into the downturn well behind the rest of the country and come out of one long after everyone else. People here tend to be stubborn and hang on until they totally exhaust their capital before coming off their prices.
Mike_Summey Andrew, in SC & AL I am finding relatively new properties like that in the $40,000 – $70,000 range.
Andrew in Detroit What type of rent will they bring?
Trav Mike, in SC what is the oldest property you put offers on since they are so many on the market?
rgrimsley Mike, in the 60 -70K, range, are you looking at mostly carpet and paint and maybe a few minor repairs?
Mike_Summey Andrew, they rent from $700 – $1000 per month.
Mike_Summey Trav, I don’t usually look at properties older than about 20 years max.
Trav Ok
Andrew in Detroit Very nice…It’s amazing, I could talk til I’m blue in the face about the quality of the deals that are out there and how this buying opportunity is the best in the past 50 years and yet people STILL don’t get it.
Andrew in Detroit I have friends who’ve been in the business 40+ years and they all admit they’ve never seen anything like this either…
Mike_Summey Everyone, if you can get together enough money to make cash offers, you can get your best purchase deals that way. Then after you buy for cash and get the property rented, you can go get a mortgage based on an appraisal and get your cash out to do it all over again.
Boston1 Mike, up here in New England, our housing stock is older – so does the property not being older than 20 years apply everywhere? I know that maintenance costs are a big concern.
rgrimsley Andrew – are your $45K deals older houses than the 20 yr old ones Mike tries to stick with? The older ones seem to be money pits.
Mike_Summey Andrew, you are so right. I’ve been saying for many months that we are currently in the best time for investors I’ve seen in my lifetime…and that’s been a while.
Roger Dawson I’m put in a commercial for my new book Secrets of Power Problem Solving. Check it out on my website Now back to the program in progress!
Greg Mike, lol …
Mike_Summey Boston, when making offers on older properties, you just have to factor in a larger percentage of the income to go to maintenance reserves.
kskbuyers Hi Mike/Roger, we need to buy our own home before buying more rental properties. How do you purchase your own homes? Do you utilize the same tools/techniques? 😀
Greg Roger, I’ll check out the new book … thanks.
Andrew in Detroit Mike – my experience if people acquire this way is that if it’s been under 12 months you’re going to have to base your refinance price off your original acquisition price, but if you hold cash for 12+ months you can get the higher appraisal. I did it on 2 properties like this this past month. Also, a while back you posted about the importance of local banking relationships…I can’t stress that enough. I’ve got my local bank holding the loans as I’ve exceeded the Fannie/Freddie resell limit and they’re happy as heck.
Jason Thanks guys. I shop for an agent to help find those gems. Gives me more time for other priorities.
Trav Mike, I have excellent credit but not much cash saved, what it the best route for me to get enough cash to make cash offers…invester,bank loan, can I get a line of credit that big?
Boston1 Thanks, Mike — unfortunately, there isn’t much newer construction around here
markl mike, any cities in NC that are priced closer to reality?
Mike_Summey Trav, Boston & others, I use the 20 year rule only because there are so many newer homes on the market. If there were no newer ones, I’d fall back and look at older ones but would calculate my offers based on a higher maintenance reserve.
Roger Dawson On the age of the property, remember that Mike is talking about starter homes that have often been tenant occupied. There’s nothing wrong with a high end owner-occupied home at 30 years.
Andrew in Detroit RGrimsley – Yes. I buy 40 y.o. Brick Bungalo’s/ranches with a basement and a garage in the suburbs of Metro Detroit. Avg. 1100-1200sq. ft. A bit smaller than most and a bit older than most but because the houses are smaller and brick there isn’t TOO MUCH that can go wrong. They all have updated mechanicals/electrical too
Boston1 Roger, thats a good distinction: the wear and tear (so to speak) should be less on owner occupied homes
Mike_Summey ksk, buying a personal residence is a bit different because you can live out part of the value. If you don’t expect the personal residence to be a long term event, I’d use the same techniques we use to find good investment proeprties.
Andrew in Detroit Mike – so here’s a good question…I know it’s a personal thing, but how does a given investor know when “enough is enough” when it comes to homes owned/cashflow amount, etc.
kskbuyers thank you very much, we very much appreciate you having this forum. Please don’t stop it!
Mike_Summey Andrew, sounds like you are on the right track. Good strong banking relations can often overcome the 12 month holding limit.
Greg Andrew: when you can buy the New England Patriots!
Mike_Summey Mark, Charlotte seems to be closer to reality.
Boston1 Greg: Kraft will demand a pretty penny!
Greg 🙂
rgrimsley Mike, are you doing a “take-out” after buying a property for cash and if so, do you find most lenders are receptive to the fixed payment, variable interest rate loan you have described before in this caht or do you have to search to find a lender that will structure a loan that way?
Mike_Summey Andrew, one of my bankers asked me that question about a year ago. My answer was, “When my offers quit being accepted.” That’s also the best indicator that a market is overheated.
Mike_Summey rgrimsley, I currently deal with 12 different banks. All of them make this type loan to me.
rgrimsley Roger, are you still seeing a lot of forclosures in Southern CA?
Mike_Summey ksk & repdx, where are you located?
Andrew in Detroit hahahah, fair enough. Mike – do your bankers still require 20% down on your purchases or no?
kskbuyers Brookfield, WI – suburb of Milwaukee
rgrimsley Roger – Awesome! I guess I need to make a few calls.
rgrimsley Sorry, I meant Mike.
Mike_Summey Andrew, I buy all of my properties for cash and get term loans later. The 20% down payment has never been an issue.
Roger Dawson Yes, California is very high in some places like Stockton and Riverside. I lot of banks are not following through on foreclosures because they are scare of what happens to unnocupied problem. Desirerable places like the coastal communities are nolding their own.
Trav Mike, do you structure your loans with a balloon payment or fixed
Mike_Summey Trav, for 30 years I’ve used the same type financing: Fixed payment, floating rate, balloon in 5 years.
Ned Mike, any disadvantage or risk to the fixed payment, variable rate loan structure?
CHARLIE Hey jason hows family
Roger Dawson Jason, you’re looking more like your Dad every day!
wai chunng Roger, where are you at in Southern California?
Jason Summey They’re great…just got baths and finally laying down
Roger Dawson Wai: La Habra Heights, 10 miles north of Disneyland.
markl they look like twins
Mike_Summey The 5 yr balloon can be a problem if you don’t have credit good enough to move the loans when they mature if the bank holding them gets in trouble and doesn’t want to renew. I am currently experiencing this with Suntrust. They are in trouble with real estate and have asked me to move all my loans as they mature. Fortunately I have no problem doing this.
rgrimsley Mike, for a 5 year variable rate investor loan for someone with a 750 credit rating and 20% down, do you think you are looking at a 5% +/- interest rate?
reggiel Fannie Mae will now let investors cash out after buying all cash w/o the 6 mo. hold period.
Mike_Summey rgrimsley, with few exceptions, what I am currently getting at my banks is a floating rate at prime with a floor of 4.25% and a cap of 7.5%.
Mike_Summey reggie, that’s good to know.
Trav Mike, which banks are working best for you ?
reggiel they just changes their underwriting guidelines
kskbuyers Mike, how does this fixed pmt/floating rate financing work better than an ARM with rates as low as 3.5% +/- right now since you can renew the loans on these too in a few years?
Jason Is the a difference between banks and CU when it comes to real estate investing?
markl mike, i think i get it. does that mean you do not get rates below 4.25%?
rgrimsley Thanks very much, Mike! So the 4.25% floor is well above prime now but the bank gets a rate it is happy with and you have a cushion when rates start to rise. Is that the jist of it?
Mike_Summey Trav, it varies. One will be good for several months and then tighten up while one that didn’t want to do anything will open up to new deals. Keep in mind that banks are businesses too and they have their ups and downs just like any other business. It their portfolio gets out of balance with real estate loans, they will stop making them until things get back in balance. If the don’t have enough real estate loans to properly balance their portfolios, they will get agressive about making real estate loans. It’s just business.
rgrimsley kskbuyers – Is that 3.5% an owner-occupied rate? Seems very low for investment property.
Mike_Summey ksk, I like the fixed payment because all that happens is the breakdown of principle and interest changes as the rate changes. The payment stays the same over the life of the loan which allows you to plan your cash flow better.
kskbuyers yes, sorry, didn’t think about that – owner occupied. Thanks for explaining the reasoning in your financing preference. I can see why you like it too now. 🙂
rgrimsley Anyone – Have you not seen that an investor owned property carries a 1% – 2.5% premium to an owner occupied interest rate?
Mike_Summey ksk, another point I would make is that ARMs often use “teaser rates” to get you hooked. Only after reading the fine print do you see that there may be a substantial prepayment penalty if you should choose to pay early.
kskbuyers good advice!
Trav Mike, so I should start building relationships with a few small banks and a few larger ones?
Mike_Summey Trav, that is a VERY good idea.
Mike_Summey Hi son Jason. I didn’t see you come into the chat. Sorry.
kskbuyers do you prefer large banks or do you use credit unions too?
Broadway Mike and Roger, thanks so much for the chat tonight. Got some mowing to get done before it gets dark here. Hope everyone has a great evening and super July too. Gnite to all!!!
Roger Dawson Goodnight Broadway
Mike_Summey ksk, I use banks of all sizes. I do not use credit unions, but only because they are more consumer oriented and don’t seem to understand my business.
Mike_Summey Hi ralph
ralph88888888 Hi Mike
rgrimsley Mike – to piggy back on Trav’s idea, aren’t they all going to want to run my credit? Every time you go to a new lender to flesh out what they can do, will they not insist on running your report and getting your FICO. Or, do you just take it to them after running it yourself and tell them they can update it priot to actually making a loan when you get to that point?
Jason Gotta interrupt a sibling rivalry. GdNite
Roger Dawson It’s a great time to buy real esate!
Mike_Summey Wow, our hour is almost up. It has passed very quickly tonight. I’m glad veryone has had good questions.
Jason Summey I’m here trying to catch up
Jason Summey Hate I was late but babies don’t bathe themselves unfortunately 🙂
kskbuyers do your lenders require you to have 25% down on investment properties as well as have 6 months PTI on all your other properties to purchase with a loan?
rgrimsley Mike and Roger, you are both very kind to share your time and knowledge. Thanks very much! Bob Grimsley
Mike_Summey rgrimsley, when you are doing business with several banks, they run your credit periodically anyway as part of their annual review. I don’t think credit checks from banks you are doing business with ding your credit the same way applying for credit cards does.
Trav Mike when I was talking about small banks I was thinking of credit unions, can you suggest some small and larger banks to start building relationships with?
Roger Dawson I’m confused. What Matt on the chat in addition to Jason?
Roger Dawson T
Jason Summey Matt should be in the skies over Ft. Hood right now but I made it
Roger Dawson I was wondering about siblling rivalry!
Mike_Summey ksk, I can now make all of my purchases with cash, so I don’t run into that problem. I think down payments are very important to banks at this time if they are loaning money for the purchase.
CHARLIE Roger that was other jason
Roger Dawson OH, I got it! Thanks
rgrimsley Good night everyone. Now, let’s get busy buying some property. ’til next time.
Mike_Summey Roger, Matt is in Ft. Hood preping to go to Iraq. He is probably out hunting jack rabbits with an Apache right now.
Roger Dawson Goodnight everyone! Good investing!
Trav Mike when I was talking about small banks I was thinking of credit unions, can you suggest some small and larger banks to start building relationships with?
Boston1 Thanks Roger and Mike..Have a good night all!
markl good night and thanks
Roger Dawson So that’s whey the military costs a trillion a year!
CHARLIE Jason summey how house coming
Greg I wish I had an Apache …
Jason Summey me too…look like fun to fly
Mike_Summey Trav, you may try First Bank…the bank that took over Bank of Asheville, Hometown Bank in Waynesville, Capital Bank
Penny Goodnight everyone.
Jason Summey house is good finally looking like a home…sort of
Trav Mike thanks so much for your advice
Trav I’ll let you enjoy the rest of your night..till next month
kskbuyers thanks for teaching and sharing!
CHARLIE Goodnight all
Mike_Summey Goodnight Everyone! See you here next month.
Mike_Summey Our August chat will be on August 1st.
Mach78 Good evening, everyone
Mike_Summey Mach78, you’re late. We’re just wrapping up for the night.
Mach78 Really?
Mach78 I must have miscalculated
Mach78 I am from Brazil
Mach78 And thought it was supposed to be at 22 hours my time
Mach78 Sorry for that.
Mach78 you next time
Jason Summey Better late than never!!! come back next month!
Mike_Summey Mach78, please join us next month an hour earlier.
Mach78 Till next time
Mach78 Sounds great
Mach78 you then
Mach78 See you then

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