In need of some newbie advice

4 Replies

I have am still somewhat in the learning process, but I am really anxious to get started and work on getting my first deal. I have spent a lot of time over the last maybe 5 years reading books and taking courses learning about real estate investing. I just hadn't taken action probably mainly due to fear and just not knowing exactly what type of deals I should go after. My husband and I only have about $10,000 cash to work with and our credit is not great at all. In fact we are thinking about filing bankruptcy. So I am not sure if we would be able to obtain any loans to go along with the money we have. I am wondering is there anything we can do with the amount of money we have to work with and if so what are the type of deals we could possibly start out with? 

Any suggestions?

My advice would be to do everything you could to not file for bankruptcy, and work on building your credit. Once you get your credit score to 580, you could qualify for an FHA 3.5% down loan. $10,000 would be more than enough for a down payment on a duplex or a triplex. I would move into that, and rent out the other units and start saving the cash from the other units as a down payment for future rental properties. That's what I did for my first property. Was I nervous? Definitely. Was it worth it. Totally.

Unless your debt is crazy high and you can't afford to pay them down, filing for bankruptcy will only delay you being able to buy property. 

Bankruptcy shouldn't be an option.  I don't know if you have kids, but either way, buying a duplex or triplex and living in it is a great way to get out of debt and gain an investment at the same time.  If you rent currently you need this all the more.  If you own, you can always rent your current home, even if it's just temporary to allow you to build more equity, build your credit back and kill your debt.

I would look on craigslist and work with a realtor to find Land Contracts.  I bought my first 4 unit with $6,000 down for $30,000.   The seller was motivated and had already moved out of town.  It was a great learning experience.  Next my family bought a three unit that we bought as "owner occupied" and we moved into it.  When we found something better we moved into that and rented the unit we were in.  We actually rented it for more than the mortgage of our new house so we still had no mortgage and positive cash flow.

Deals are out there you just have to look hard and not be afraid to pull the trigger.  If you've been studying 5 years, you know enough to start.  

Try not! Do or Do Not, There is no Try - Yoda

@Monique Howard , you may already know these, but here are five key points that anybody who's considering filing for bankruptcy should take to heart.

1. Not Everybody Can File for Bankruptcy

Not just anybody can file for bankruptcy. Certain criteria, such as a certain debt-to-income ratio, must be met. It is important that you understand that some bankruptcy attorneys are less than scrupulous and will want everybody file for bankruptcy, whether they qualify or not, so that they can collect their fees. I’m not saying that all bankruptcy attorneys are like this, but if you’re toying with the idea of filing for bankruptcy, you should be aware of this.

2. It Doesn't End with the Discharge

If you do go the bankruptcy route, make sure that part of your bankruptcy attorney’s service is to contact all of your creditors after the bankruptcyis discharged to make sure that these creditors’ items on your credit report are reflected as having been discharged in bankruptcy. Very often I’ve seen it where bankruptcy attorneys stop working after the bankruptcy is discharged, riding off into the sunset with his or her fees, while the derogatory items on their client’s credit report are still listed as “delinquent” rather than “discharged in bankruptcy", which is extremely detrimental to their credit report.

3. Bankruptcy Does Not Discharge All Debts

Bankruptcy typically does not discharge the following debts and obligations:

  • Alimony
  • Child support
  • Debts from personal injury while driving intoxicated
  • Debts from willful and malicious injuries to person or property
  • Loans obtained fraudulently
  • Some debts incurred in the six months prior to filing bankruptcy
  • Student loans
  • Taxes

4. Sometimes Bankruptcy Is the Right Choice

Oftentimes bankruptcy truly is the best option for someone to get out of a sticky financial situation.  However, before making this decision that will have lifelong consequences, it is best to seek advice and counsel from a professional.

5. And Sometimes It Isn't

Although bankruptcy will wipe away much, if not all, of your debt, it has lasting consequences and is considered a last resort for good reason. Chapter 7 bankruptcy–the most common–remains on your credit report for 10 years and Chapter 13 for 7 years. There are other options that exist for your financial situation, such as credit repair and restoration.

Thank you all for such great advice! I guess I will think more about filing bankruptcy. The debt is just a little overwhelming and I just wanted to be rid of it altogether. I love the idea about purchasing a duplex and renting out the other side. Again with this though I don't know if we could qualify for a loan to purchase one right away though. We are kind of in a desperate situation and need a bigger place to live asap, (3 kids and baby on the way lol) but figured if we are going to become investors we should just buy as opposed to rent. But we might not have a choice right now. I'm not sure...