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Wade Gustofson
  • Springfield, MA
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Second Chance, restarting out

Wade Gustofson
  • Springfield, MA
Posted Oct 10 2011, 10:13

Hi everyone,

Let me take a moment to introduce myself and breifly describe my circumstance. I am in my early 30's, have a good corporate job and have saved about 30k in cash reserves. I am tying to restart my rental property business after a terrible failure due to critical miscalculations and a flawed business plan and property analysis.

I have always had a huge interest in real estate and knew from my late teens and into college that I wanted to build a rental property business as a second job and eventually move to full time when I was able to.

About 5 years ago I had just graduated college and had managed to save up some money. Real estate was expensive but I was determined to buy my first rental property and start my business. I found a nice 3 family in an urban area that I decided to buy using a risky 80/20 loan with high interest rates with the intention of refinancing into a 30 year fixed the following year. I was doomed for failure the second I decided to buy that property at that price and loan terms. The price was too high, expenses would turn out to be too high and cash flow was too low. I really wish I read Mike Rossi's book before I decided to buy, it may have saved my business life. But hindsight is 20/20 and I did not foresee the housing crisis that was ahead.

Over the next 5 years I tried everything to turn the property from negative cash flow to break even or positive. I went through some huge expenses and a predatory tenant and it wasnt long before my capital reserves were gone and I was doing all I could to just make the monthly payment. I spoke to a real estate attorney that advised me to file for chapter 13, he said he could have the principle reduced to marked value which had dropped 50% with the housing meltdown. THat sounded like it would fix my cash flow problems so I took his advice and hired him to do the chapter 13. It turned out that he misrepresented his services and he was not able to reduce the principle of the mortgage. The repayment plan was too expenseive and I eventually ended up falling behind on payments due to additional expenses related to the property and lost the house to forclosure.

Now I have a BK and foreclosure on my credit. This breaks my heart as I have always been very responsible with credit and at one point had 800 credit score. I made some critical mistakes in my original analysis of this property and I have paid dearly for it.

Has anyone been through similar situations or have any insight or advice for me?

My goal right now is to fix my credit, build up my cash reserves which are at 30k now and get back into the rental property business. The lessons I have learned through experience have been painfull by will be valuable in the future.

Is it possible to start again? I know I will have problems getting credit. Any advice? Sorry for the post being so long but I am severly depressed that I failed and I feel like if I dont try to get back on track in regards to my rental property goals I will forever regret not trying again. I am in my early 30's, hold a good corporate job and have been able to save about 30k in cash so far. Is the damage too excesive to restart?


Thank you for any and all advice.

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